Wall St fell attempting to rebound after Wednesday’s slump. Fed meeting minutes triggered a sell-off around the globe after the central bank flagged that they are ready to act more aggressively than anticipated. ASX slumped to its worst day in 16-months. No local economic news today.
The Australian sharemarket is ready to roar, helped by mild rebound in technology stocks after what has been a choppy start to 2022.
Nasdaq falls for 3rd day as stocks close lower
US stocks closed lower with the Nasdaq tumbling for its third day. We saw a broad sell-off on Wednesday amid concerns about higher interest rates slated to lift-off this year.
Yesterday the Fed released minutes from its December meeting flagging that the central bank is prepared to act more aggressively than previously anticipated, which sparked the sell-off in the final two hours of trade. Treasury yields rallied as bonds were sold-off, a weak spot for tech names as market participants readjust for the Fed opening the door to trimming the balance sheet after rate hikes kick-off.
The Dow Jones led the declines as we saw a rebound in tech names after traders saw value in the battered sector after the Nasdaq tumbled more than 3 per cent.
Weekly jobless claims rise as job market remains tight
We did receive those jobless claims numbers coming in higher than expected at 207,000 for the week ending January 1, up 7,000 from the week before as per the Labor Department. Still, claims are below pre-pandemic levels and we are seeing an improvement in the labour market.
These numbers dovetail to the private jobs numbers this week which came in better than expected, while job vacancies fell as Americans landed roles, all this ahead of the non farm payroll jobs report which I’ll cover on Monday when the figures are released tonight.
Now the Fed does closely watch the jobs numbers as part of their mandate, as a touch point on the economic recovery. Markets are readjusting to a change in tone given that in September last year, policymakers were evenly divided, waiting for full employment before a rate hike would be considered. Now they have shifted attention unanimously, to combat persistent and hot inflation amid supply chain disruptions, versus waiting for full employment to now hike rates. They are next in line after the Bank of England raised rates three weeks ago from pandemic-lows.
Meanwhile, the demand for services grew at a slower pace as companies continued amid hot inflation, supply chain disruptions, and shortage in skilled labour and materials. The ISM Services PMI fell to 62 in December from a record high of 69.1 in November, well below market forecasts of 66.9.
Covid-19 testing & vaccines inject Walgreens higher
Retail giant Walgreens beat expectations for the latest quarter but flagged challenges in keeping up with demand. Stocks closed almost 3 per cent lower. The pharmacy chain has seen a big push in business throughout the pandemic due to surge in demand for vaccines, and Covid-19 testing. The company also raised its forecast for the year.
Bed Bath & Beyond weighed by supply chain woes
Elsewhere, Bed Bath and Beyond missed estimates in the latest quarter. Shares initially tumbled more than 9 per cent on the news but closed 8 per cent higher. Talk about a swing there however this company has been part of the meme stock play, so that could have had something to do with it. The retailer blamed the poor numbers on supply chain bottlenecks saying that it cost the company around US$100 million. They’ve lowered its guidance for this year.
Now traders may have been a little cautious today as we wait for the big jobs report and assess the outlook for 2022.
Wall St numbers
At the closing bell, the Dow Jones lost 0.5 per cent to 36,236, the S&P 500 fell 0.1 per cent to 4,696 while the Nasdaq closed 0.1 per cent lower at 15,081.
Across the S&P 500 sectors, we saw a mixed performance. Energy bounced back as the best performer up 2.3 per cent after growing unrest in Kazakhstan as oil supply came under pressure, followed by financials adding 1.6 per cent, and industrials. Materials and healthcare led the declines by 1.2 per cent, followed by utilities and technology.
The yield on the 10-year treasury note rose 2 basis points to 1.72 per cent, while gold dipped on a firmer greenback.
European markets tumble while Asia mixes
Across the Atlantic, European markets closed lower tracking losses on Wall St. Paris closed 1.7 per cent lower, Frankfurt closed 1.4 per cent lower and London’s FTSE fell 0.9 per cent.
Asian markets closed mixed in tandem to the same reaction from stateside. Tokyo’s Nikkei tumbled 2.9 per cent, Hong Kong’s Hang Seng bucked the trend adding 0.7 per cent, while China’s Shanghai Composite closed 0.3 per cent lower.
ASX 200 slumps to worst day in 16-months
Yesterday, the Australian sharemarket slumped 2.7 per cent lower at 7,358, its biggest one-day decline since September 2020 erasing all its gains from Tuesday’s blockbuster session spooked by the minutes from the Fed.
All sectors closed in negative territory as the technology sector took it on the chin to be the worst performer of the session while materials shed the least.
Buy now, pay later darling Afterpay (ASX:APT) sunk 10.8 per cent to $71.85, its lowest level since August 2020, tracking performance from US payments giant Block slated to complete its acquisition this month.
Zip Co (ASX:Z1P) dived 6.1 per cent to $3.85, Xero (ASX:XRO) fell 6.5 per cent to $131.50, while other tech players fell in the order of five to seven per cent.
Financials fell with Commonwealth Bank (ASX:CBA) led the declines falling 3.3 per cent, Macquarie Bank (ASX:MQG) lost 3 per cent, National Australia Bank (ASX:NAB) down 2.2 per cent, Westpac (ASX:WBC) dipped 1.7 per cent while ANZ (ASX:ANZ) closed 1.4 per cent lower.
However, there were some bright spots in the sea of red with iron ore miners supported by the rising price in iron ore. Rio Tinto (ASX:RIO) rose 0.7 per cent, BHP (ASX:BHP) added 0.1 per cent while Fortescue Metals (ASX:FMG) bucked the trend to close over 1 per cent lower.
In terms of the best and worst performing stocks of the session, Paladin Energy (ASX:PDN) closing 1.6 per cent higher at $0.94 as the winner, followed by shares in Rio Tinto (ASX:RIO), and OZ Minerals (ASX:OZL).
The worst-performing stock in the S&P/ASX 200 was Pinnacle Investment (ASX:PNI) closing 13.1 per cent lower at $13.68, followed by shares in Afterpay (ASX:APT), and Life360 Inc. (ASX:360).
In company news, digital payments giant Latitude (ASX:LFS) unveiled its plans to buy the consumer finance division of Humm for $335 million. The proposed transaction “will cement Latitude’s position as the leading instalments and consumer lending business in Australia and New Zealand”. Shares closed 1.8 per cent higher at $2.
In other M&A news, Life360 (ASX:360) has completed its $283 million takeover of bluetooth-tracking device company Tile. Shares closed 8 per cent lower at $8.39.
Poker machines giant Aristocrat Leisure (ASX:ALL) has hit a roadblock in its $3.9 billion bid for Playtech as the British gambling software company continues talks with a rival bidder. Shares closed 4.5 per cent lower at $43.25.
Meanwhile, a Nickel Mines (ASX:NIC) project in Indonesia has received corporate tax relief from the Jakarta government. The tax concessions include waiving income tax for a decade, followed by a 50 per cent discount for the following two years. Shares closed 1.4 per cent lower at $1.415.
Insurer IAG (ASX:IAG) has maintained its $10 billion catastrophe reinsurance protection cover, the same level as 2021. Shares closed 0.6 per cent lower at $4.36.
Looking ahead, the SPI futures are pointing to a 1.1 per cent rise.
Iron ore has gained 2.7 per cent to US$120.91. Its futures are pointing to a rise of 0.3 per cent.
Gold has lost $37.10 or 2 per cent to US$1788 an ounce, silver is down $1.00 or 4.3 per cent to US$22.17 an ounce.
Oil has risen $1.64 or 2.1 per cent to US$79.49 a barrel.
One Australian Dollar at 8:15 AM has weakened since yesterday, buying 71.62 US cents (YP:71.72), 52.93 Pence Sterling, 83.02 Yen and 63.44 Euro cents.