By Greg Peel

The Dow closed down 5 points while the S&P lost 0.2% to 1074 and the Nasdaq lost 0.1%.

Perhaps it is the thought of a summer break approaching, perhaps Wall Street is waiting for the second quarter earnings season to begin in a couple of weeks, perhaps it's waiting for Friday's jobs report, or perhaps the market is just happy to ride out to the end of the quarter on Wednesday. But at present, there is little conviction from either the buyers or the sellers.

The S&P 500 is currently sitting around the same level it was after the initial Greek scare in January, and about where it had reached in November in the rally from last March. If you consider that markets move in three stages – first in is the risk money which buys at the lows; next in is the institutional money which is now convinced the rally is on; and last in are the Johnny-come-lately small investors who dithered for too long – then one might conclude that in the period from November to now we have simply seen the Johnny-come-latelies panic buy into April and panic sell into May. Everyone else is content with their positions and currently seeing no reason to change them.

Since the bear market hit its lows there has always been talk of the “cash on the sidelines” - money being held in cash management trusts or fixed interest for safety's sake which must eventually find its way back into stocks when things improve. The bulls have put a lot of faith in cash on the sidelines. But for the time being, on the sidelines appears to be where that cash is staying.

Wall Street had its first opportunity last night to respond to the G20 consensus that further stimulus measures were not sensible when the world, and Europe in particular, is already carrying so much debt. The alternative is spending cuts and hence deliberately slower economic growth. Wall Street was uninspired. While stocks meandered, the benchmark ten-year bond rate fell another 9 basis points to 3.02%, meaning the bulk of the market is happy just to take fixed interest yield for now rather than risk another big push into stocks.

The Dow was down 40 points from the open and up 60 by noon, but volume was thin and neither the downside or the upside could gain any momentum. The indices drifted back toward the close.

The release of May personal income and spending data showed incomes rose 0.3% when 0.5% was expected and spending rose 0.2% when 0.1% was expected. A was a bit of a mixed bag, but a bull could take a higher spending rate as a positive. What is not so positive for the stock market, nevertheless, is that the savings rate rose to 4% - three times its level from before the GFC. You could call this consumer cash on the sidelines.

The Chicago national activity index showed a drop to plus 0.21 in May from plus 0.25 in April. It's a drop, but it still shows a positive trend. The Dallas Fed manufacturing index nevertheless fell from plus 21 in May to minus 2 in June – a big turnaround after seven months of positive numbers.

There were also a couple of positive court rulings for different market sectors, but they were US-centric in their nature and not something to much worry about. So all up it was a session lacking any impetus.

The euro slipped back in response to European austerity affirmed at the G20 meeting, leading the US dollar index to tick up 0.5% to 85.70. The Aussie pulled back slightly to US$0.8713.

I suggested yesterday that gold had rallied US$12 on Friday in anticipation the G20 would endorse further stimulus (money printing) and that disappointment would meet the opposite result. Gold fell US$17.10 overnight to US$1238.60/oz.

Tropical Storm Alex may yet become a hurricane but it appears to be veering away from Gulf oil operations, so oil fell US61c to US$78.25/bbl after its big jump on Friday.

Base metals were relatively strong, with traders suggesting positions are being squared ahead of the end of the quarter and ahead of the quieter summer season in which “real” demand goes to the beach. Aluminium and copper rose around 1.5% while nickel jumped 4%.

Further RSPT concession talk from the new prime minister failed to inspire the local resource sector yesterday, suggesting the market has already priced in a less negative outcome. With ongoing talk of a slower global economy, and a growing number of earnings forecast downgrades from stock analysts, the local market remains lacklustre. The SPI Overnight was down 15 points or 0.3%.

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