Wall St gains, Goldman rates Westpac, Appen, Yancoal, Adore Beauty on watch: ASX to jump

Wall St advances for a 2nd day on better than expected outlook, putting the bears to sleep. Goldman Sachs has reaffirmed its neutral rating on Westpac Banking Corp. April retail sales data due today.

Good morning. I’m Melissa Darmawan for Finance News. This is your market outlook.

The Australian sharemarket is set to jump after an optimistic finish on Wall St.

Robust retail earnings sends Wall St higher

US shares were in rally mode as investors bought in on the news that the strength of the consumer is still strong. The optimism continued after investors read the no-surprise Fed meeting minutes and its path forward around raising rates. The 30-year mortgage rate fell for a second week, providing hope on a cooling housing market while the weekly jobless claims improved. Investors also received a better-than-expected outlook from retailers signalling, the consumer is still willing to spend and that the US economy can avoid a recession.

At the closing bell, the Dow Jones gained 1.6 per cent to 32,637, the S&P 500 added almost 2 per cent to 4,058 and the Nasdaq jumped 2.7 per cent to 11,741.

What happened?

What a risk on appetite today.

Today is a great example of what happens when high quality companies are oversold. Long term investors came in to pick up beaten down stocks. The selling has been relentless and you can say that it’s been a rolling bottom, or a rolling bear market.

It started with the stay-at-home stocks like Peloton. Then it became growth stocks in general, then the FANG stocks like Meta, Amazon, and Alphabet. Then we just saw retailers, in particular, Target and Walmart. What we have seen is a sell-off where each sector gets punished as the market tries to find its bottom.

Then yesterday, if you read between the lines of the Fed meeting minutes now that investors had the time to read it, it said the US economy is “very strong”, and the labor market as “extremely tight”. That means from the central bank’s view, they don’t see an imminent recession. Yes, there is the war in Ukraine and the lockdowns in China. China will eventually come out of a lockdown.

The bond market is telling us something as well. The yields have retreated from over 3 per cent to now 2.75 per cent, providing some relief and certainty to buy into equities for now.

In after hours, Dell, the laptop maker jumped 5 per cent after reporting a revenue beat in the first quarter. Ulta Beauty rallied 6 per cent as the beauty retailer beat both the top and bottom lines.

While Gap shares tumbled 15 per cent, joining what happened with Target and Walmart. The clothing retailer slashed its profit outlook for the year after Gap chief executive officer Sonia Syngal told CNBC that the lower-income consumer, which is Old Navy’s target customer, is starting to feel pinched by inflation. Deep discount stores Dollar Tree and Dollar General Corp shares jumped after raising their projects. You can see the interplay on how these retailers are being punished or rewarded, depending on how inflation plays a role.

Figures around the globe

Across the Atlantic, European markets closed higher. Paris gained 1.8 per cent, Frankfurt rose 1.6 per cent while London’s FTSE added 0.6 per cent.

On the London Stock Exchange, Rio lost 0.3 per cent, BP rose 1.7 per cent and Shell added 1.1 per cent.

Asian markets closed mixed, Tokyo’s Nikkei lost 0.3 per cent, Hong Kong’s Hang Seng fell 0.3 per cent while China’s Shanghai Composite added 0.5 per cent.

Yesterday, the Australian sharemarket closed 0.7 per cent lower at 7,106.

SPI futures

Taking all of this into the equation, the SPI futures are pointing to almost a 1 per cent gain.

What to look out for today

The Australian Bureau of Statistics is set to release its retail sales data which is expected to come in at 1 per cent for April. The final data point this week before our GDP figures next Wednesday. The input data this week has been mixed. We will touch on it next week as to what to expect.

Goldman Sachs has reaffirmed its neutral rating on Westpac Banking Corp (ASX:WBC), raising its price target to $27.29, following the bank’s super fund merger and asset management sale.

In company news, Telus International abandoned the $1.2 deal with Appen (ASX:APN). The stock was the best performer yesterday so we might see investors give that back today. They also have their annual meeting today. This will be very interesting to see if they will provide any colour on this deal and what happened.

Endeavour Group (ASX:EDV) also have their investor day after the company said yesterday that they are looking to spend up to $260 million versus their $230 million growth pipeline.

Yancoal (ASX:YAN) could come off its trading halt today after its biggest shareholder is looking to takeover the company.

Adore Beauty (ASX:ABY) and natural beauty business BWX (ASX:BWX) could be in the spotlight today, following Ulta’s results.

And there is more talk on Ramsay Healthcare (ASX:RHC).

Ex-dividend

There are two companies set to trade without the right to its dividend.

CSR (ASX:CSR) is paying 18 cents fully franked
Whitefield (ASX:WHF) is paying 10.25 cents fully franked

Dividend-pay

There are four companies set to pay eligible shareholders today

Acrow Formwork and Construction Services (ASX:ACF)
Future Generation Global Investment Company (ASX:FGG)
WAM Active (ASX:WAA)
WAM Global (ASX:WGB)

Commodities

Iron ore futures point to a 2.6 per cent gain.

Gold has gained $2.90 or 0.2 per cent to US$1855 an ounce. Silver was up $0.17 or 0.8 per cent to US$22.04 an ounce.

Oil has added $3.95 or 3.6 per cent to US$114.28 a barrel.

Currencies

One Australian Dollar at 7:00 AM has strengthened since yesterday, buying 70.99 US cents (Thu: 70.90 US cents), 56.34 Pence Sterling, 90.29 Yen and 66.24 Euro cents.

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