Dip buyers bolsters the Nasdaq on the tech recovery. Fed Chair Jerome Powell testified before the Senate Banking Committee in a renomination hearing & pledged to curb hot inflation. ASX fell for 2nd day shrugging off record retail sales while trade surplus falls. Looking ahead, energy, miners, and technology stocks are looking to roar.
The Australian sharemarket is set to rise on track to snap its 2-day losing streak following technology and energy stocks lighting up Wall St.
Tech gains for 2nd day on tech rebound
US stocks saw a reversal with gains across the board after we saw a steep sell-off in the past sessions. Higher interest rates weighed down on Wall St’s sentiment with treasury yields hitting 1.8 per cent yesterday pulling down the Nasdaq to almost three per cent to then close higher, a move which shows how volatility continues to define the market.
The gains on Wall St came after Fed Chair Jerome Powell testified before the Senate Banking Committee in a renomination hearing. Powell told lawmakers that the Fed is prepared to raise interest rates in order to help the economy, while allowing the balance-sheet to run-off later this year.
In the wake of this, dip buyers emerged again with the S&P 500 snapping its five-day losing streak, and the Nasdaq outperformed the major indexes. Market participants now have more clarity on how the Fed could normalize policy. Powell also said that policymakers are still mulling on the approach and said it could take up to four meetings for a decision.
Fed’s Powell pledges to curb inflation in renomination hearing
Fed Chair Powell also expects inflation will ease due to supply chain issues, though they do have a complex job on their hands. The midterm elections are coming up and the Fed is treading carefully by not removing its support too aggressively, but also the need to combat the surge in inflation.
Elsewhere, the price of crude rose amid this as energy traders concluded that a path to normal will take some time which is supportive of oil prices. Analysts are forecasting that crude prices will rise between the range of US$80 to US$100 a barrel as we get closer to moving from a pandemic to an endemic phase.
Wall St numbers
At the closing bell, the Dow Jones gained 0.5 per cent to 36,252, the S&P 500 gained 0.9 per cent to 4,713 while the Nasdaq closed 1.4 per cent higher at 15,153.
Across the S&P 500 sectors, gains almost across the board except but three. Energy soared as the best performer, up 3.4 per cent followed by technology, and materials. Worst performers were your defensives, utilities, consumers staples, and real estate.
The yield on the 10-year treasury note dipped 2 basis points helping these tech stocks, the flavour of the day to 1.74 per cent, gold rose on a weaker greenback.
European markets rise as tech dip buyers emerge
Across the Atlantic, European markets closed higher as dip buyers bought into tech stocks. Paris added almost 1 per cent, Frankfurt added 1.1 per cent and London’s FTSE added 0.6 per cent.
Broader market, HelloFresh shares rose 0.6 per cent after the meal-kit provider announced a share buyback of up to $394 million (€250 million), meanwhile German food delivery business Delivery Hero surged 4.8 per cent saying it expects its food delivery business to break-even halfway through 2022.
Asian markets falls on rate hike concerns
Asian markets closed lower as China’s tougher Covid-19 restrictions weighed as market participants waited for cues from the Fed. Tokyo’s Nikkei fell 0.9 per cent, Hong Kong’s Hang Seng fell 0.03 per cent and China’s Shanghai Composite closed 0.7 per cent lower.
ASX 200 falls for 2nd day
Yesterday, the Australian sharemarket closed 0.8 per cent lower at 7,390 falling for a 2nd day, with all sectors losing ground except miners. The materials sector was the best performer eking out a gain while consumer staples was the worst.
BHP (ASX:BHP) lost 0.3 per cent, while Rio Tinto (ASX:RIO) added 0.4 per cent and Fortescue Metals (ASX:FMG) surged 2.3 per cent. In the broader resources space, Santos (ASX:STO) tumbled 1.5 per cent while Woodside Petroleum (ASX:WPL) rallied 0.7 per cent.
Banks fell as Commonwealth Bank (ASX:CBA) closed 1.5 per cent lower and Macquarie (ASX:MQG) fell 1.4 per cent with ANZ (ASX:ANZ) not far behind, closing 1.3 per cent lower. Westpac (ASX:WBC) dipped 0.7 per cent, while NAB Bank (ASX:NAB) closed 0.5 per cent lower.
Gold stocks rallied after investors sought refuge in the precious metal as an inflation hedge. Evolution Mining (ASX:EVN) jumped 2.7 per cent, St Barbara (ASX:SBM) added 1.9 per cent and Newcrest Mining (ASX:NCM) closed 0.8 per cent higher.
Traders shrugged off record high retail sales numbers for November while watching the nation’s trade surplus fall. Imports grew more than exports indicating less demand which puts pressure on valuations.
This could be the reason why consumer discretionary stocks saw big declines. City Chic Collective (ASX:CCX) dived 8.4 per cent to $4.47, Lovisa Holdings (ASX:LOV) fell 4.9 per cent to $17.47 while Michael Hill (ASX:MHJ) closed 5.6 per cent lower to $1.38.
Outside of this, group sales in biotech giant PolyNovo (ASX:PNV) surged 45 per cent to $16.3 million from a year ago, led by encouraging sales in the US. The company is set to focus on initiatives in other markets after describing its sales performance as “patchy”. They were the best-performing stock, closing 25.2 per cent higher at $1.79, followed by shares in Alumina (ASX:AWC), and Regis Resources (ASX:RRL).
The worst-performing stock was ARB Corporation (ASX:ARB) closing 12.3 per cent lower at $46.32 amid a broker downgrade projecting margin pressure set slated to slow growth, followed by shares in Novonix (ASX:NVX) as traders mull on its intention to list on its intent to list on the Nasdaq, and Inghams Group (ASX:ING).
Chicken producer Inghams (ASX:ING) felt the pain from the Omicron wave across the east side of the country with staff shortages putting downward pressure on its sales performance. Shares closed 6 per cent lower at $3.32.
Liontown Resources (ASX:LTR) are in trading halt pending an announcement. The move comes after they inked a deal yesterday for a contract worth $10 million for its Kathleen Valley Lithium Project in WA. Shares last traded at $1.55.
Online wagering giant PointsBet (ASX:PBH) has joined the NHL Alumni Association (NHLAA) as their exclusive sports betting partner in Canada and official partner in the US. Shares closed 3.5 per cent higher at $6.43.
NHS England has extended its deal with Ramsay Health Care (ASX:RHC) on a new volume-based agreement to meet ongoing demands due to the Covid-19 pandemic. Shares closed 0.5 per cent higher at $65.57.
Vulcan Energy (ASX:VUL) has signed an agreement with European chemical producer Nobian for the development of a lithium plant. Shares closed 0.7 per cent lower at $10.03.
Taking all of this into the equation, the SPI futures are pointing to a 0.9 per cent rise.
Local economic news
The Australian Bureau of Statistics is set to release the November quarter figures on job vacancies. It’s a backward looking indicator prior to the emergence of the Omicron variant but still a good touch point on the labour market here.
Iron ore has risen 2.5 per cent to US$128.60. Its futures are pointing to a rise of 1.3 per cent.
Gold added $23.80 or 1.3 per cent to US$1882.60 an ounce. Silver was up $0.36 or 1.6 per cent to US$22.83 an ounce.
Oil rose $3.23 or 4.1 per cent to US$81.46 a barrel.
One Australian Dollar at 8:15 AM has strengthened since yesterday, buying 72.12 US cents, 52.90 Pence Sterling, 83.15 Yen and 63.43 Euro cents.