US equities were higher in Wednesday trading, ending just off best levels.
US stocks clawed back losses from earlier in the week, as traders cheered better-than-expected economic data that helped negate recession fears.
Multiple data points regarding employment in the first half of the year haven’t reconciled with what usually happens during recessions, according to research by CNBC. For one, payrolls usually decline during downturns, when they actually rose in the first of the year. Personal consumption also grew at a solid pace in the first six months, in contrast with historical recession trends.
Overnight the Dow Jones Industrial Average rose 1.29 per cent The S&P 500 gained 1.56 per cent to 4,155.17, hitting its highest level since June while the Nasdaq Composite increased 2.59 per cent. The Nasdaq finished at its highest level since 4 May, and the S&P 500 since 2 June.
The earnings season is continuing, giving investors hope that the market can recover and potentially start a new bull market as opposed to a bear rally. The S&P 500 is up about 14 per cent from its recent intraday low in June, and the Nasdaq is at levels not seen since May.
The top mover among major Nasdaq stocks was Moderna, which surged 16 per cent on the back of a blowout earnings report. That move boosted other biotech stocks.
Overnight best-performing industries included metaverse and AR, finance, internet and retail stocks. Weaker industries included lithium and social media stocks.
The only negative sector was energy, with the oil price down 3.98 per cent. Interestingly, while the oil price has been falling, oil stocks are up. One reason is that the aggregate per-share earnings for energy companies in the the second quarter have beaten expectations by 12 per cent, according to Credit Suisse.
Refiners, producers and big multinational names like Exxon Mobil are likely to post their best earnings results in more than a decade, if not the best ever.
One metric that investors have been particularly focused on is free cash flow, which includes the cash a company brings in after paying for capital and operating expenses.
Most oil producers are returning the majority of their free cash flow to shareholders via dividends and share buybacks, so the total cash return yield against the price of oil stocks is fairly high, keeping investor money flowing into these names.
Following free cash flow is certainly a thematic playing out on the ASX with coal stocks at the moment with capital management initiatives on the agenda as free cash flow drives share prices higher and investors see dividend potential.
On the ASX today the SPI futures are pointing to a 0.5 per cent rise.
Iron ore is 4.6 per cent lower at US108.10 per tonne.
Iron ore futures are pointing to a 2.8 per cent fall.
Gold has lost 0.74 per cent to US$1776.40 an ounce.
Silver is down $0.24 or 1.22 per cent to US$19.89 an ounce.
Copper is down 1.46 per cent to US$346.70 a pound.
Currencies were all relatively flat overnight. One Australian dollar at 7:10 AM has strengthened slightly compared to the US dollar yesterday, buying 69.54 US cents (Wed: 69.22 US cents), 57.25 Pence Sterling, 93.13 Yen and 68.37 Euro cents.
Over the past 24 hours, Bitcoin gained 1.5 per cent to US$23,338.17.
Across the Atlantic, European markets closed higher. Paris gained almost 1 per cent, Frankfurt rose 1 per cent and London’s FTSE closed 0.5 per cent higher.
Asian markets closed mixed. Tokyo’s Nikkei gained 0.5 per cent, Hong Kong’s Hang Seng rose 0.4 per cent and China’s Shanghai Composite closed 0.7 per cent lower.
Yesterday, the Australian sharemarket closed 0.3 per cent lower at 6.976.
There are three companies set to pay eligible shareholders today.
Arena REIT No 1 (ASX:ARF)
Prospect Resources (ASX:PSC)
Uniti Group (ASX:UWL)
Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.