Softer $US drives tech stocks higher: ECB raises rates in Europe

US equities were higher in fairly choppy Wednesday trading, finishing slightly off their best levels. The Nasdaq Composite rose Thursday as Tesla shares surged on the back of better-than-expected earnings results. Tech stocks also got a boost from a softer U.S. dollar.

The tech-heavy Nasdaq gained 1.36 per cent to close at 12,059.61. The S&P 500 added 0.99 per cent to finish at 3,998.95. Meanwhile, the Dow Jones Industrial Average gained 162.06 points, or 0.51 per cent, in a choppy session. The blue-chip index ended at 32,036.90.

The Nasdaq is set for a gain this week, up about 5.3 per cent. Meanwhile, the Dow is nearly 2.4 per cent higher for the week, while the S&P 500 climbed 3.5 per cent.

Investors continued to pivot into tech stocks, which have fueled this week’s rally, as some strong corporate results had Wall Street on the hunt for beaten-down assets.

Consumer discretionary stocks led gains in the S&P 500, up more than 2 per cent on the back of Tesla shares. The automaker surged about 9.8 per cent after it reported stronger-than-expected results despite shrinking automotive gross margins. Shares are still down nearly 23 per cent this year.

Growth outpaced value stocks by over 125bp. Best performing industries included software, semis, streaming, casinos, apparel and accessories, autos and, exchanges. Oil services, pharma, food and beverage, airlines, metals and mining were some of the laggards.

More than 90 companies in the S&P 500 have now reported earnings to date for the second quarter, and 78 per cent reported above analyst expectations.

Despite the tech stocks strong support this week year to date the sector remains the worst performing sector within the S&P500.

Meanwhile, the $US dollar declined following a surprise interest rate hike from the European Central Bank, which raised rates for the first time in 11 years. The central bank increased benchmark rates by 50 basis points. Today’s move is the crucial next step in ending the E.C.B.’s era of ultra-loose monetary policy. The bank has already ended its multitrillion-euro programs to buy bonds, and after eight years, the end of its policy of negative interest rates – aimed at prompting banks to lend generously – is in sight.

Consumer prices are soaring at their fastest rate in a generation in Europe, climbing 8.6 percent in June from a year earlier in the face of rising energy and food costs. Policymakers must now walk a fine line between easing price pressures and courting a recession.

The $US Dollar pullback was mentioned as another tailwind for equity markets given its heightened presence as an earnings drag. Also some dampened concerns that Russia will meaningfully cut gas flows to Europe.

One Australian dollar at 7:10 AM has strengthened compared to the US dollar yesterday, buying 69.33 US cents (Thu: 68.91 US cents), 57.82 Pence Sterling, 95.24 Yen and 67.77 Euro cents.

Commodities

Iron ore is 1.2 per cent lower at US$96.40 a tonne. Iron ore futures are pointing to a 0.6 per cent fall.

Gold bounced off a one-year low, gaining over 0.8 per cent on Thursday, benefiting from some safe-haven interest amid economic concerns as the dollar eased.

Silver was up $0.11 or 0.6 per cent to US$18.78 an ounce.

Copper was down $1.90 or 0.6 per cent to US$330.60 a pound.

Bitcoin futures up 0.9 per cent, off best levels.

Oil lost $3.30 or 3.3 per cent to US$96.58 a barrell on Thursday on higher U.S. gasoline stockpiles and after a European Central Bank (ECB) rate hike stoked demand worries, while returning oil supply from Libya and the resumption of Russia’s gas flows to Europe eased supply concerns.

The SPI futures are pointing to a 0.2 per cent gain.

Figures around the globe

Across the Atlantic, European markets closed mixed. Paris added 0.3 per cent, Frankfurt lost 0.3 per cent and London’s FTSE closed 0.1 per cent higher.

Asian markets closed mixed. Tokyo’s Nikkei gained 0.4 per cent, Hong Kong’s Hang Seng lost 1.5 while China’s Shanghai Composite closed almost 1 per cent lower.

Yesterday, the Australian sharemarket added 0.5 per cent to 6,794.

Ex-dividends

There is one company set to trade without the right to a dividend.

Uniti Group (ASX:UWL) is paying 10.5 cents fully franked

Dividends payable

There are three companies set to pay eligible shareholders today.

Eildon Capital Group (ASX:EDC)
Pengana Private Equity Trust (ASX:PE1)
Partners Group Global Income Fund (ASX:PGG)

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.