Resourceful
Following a mixed session on Wall Street on Wednesday night, featuring technology versus the rest, the local market again shrugged off troubles in US Big Tech Land and concentrated more on higher commodity prices.
With the US dollar falling on Wednesday night and a growing feeling across the globe central banks will now begin easing the pace of rate hikes, metals and oil prices surged.
The materials sector closed up 1.7% and energy 2.4%.
The top five index winners were all miners, dominated by gold. Fourteen of the top twenty ASX300 gainers were miners.
Sticking with the big-end of capitalisation, the other point of focus yesterday were the banks. ANZ Bank (ASX:ANZ) reported a 16% profit increase on last year and increased its dividend, and fell -3.3%.
The stock had been up 18% since mid-June. Movements in the other banks were mixed, and the sector closed down -0.4%. Macquarie Group (ASX:MQG) reports today.
The only other sectors to close in the red yesterday were communication services (-0.7%) and utilities (-0.1%). All other sectors rose by modest amounts. The ASX200 muddled its way to a 60 point gain by midday but faded thereafter.
Perhaps the most pleasing result was a 0.6% gain for technology, when the Nasdaq had fallen -2% on Wednesday night. Has the tech sector finally let go of the Nasdaq’s apron? We did see further -9 point falls in the Aussie two- and ten-year yields yesterday.
US yields fell on Wednesday night as well, but Wall Street was dominated by big plunges in Big Tech on earnings results.
It did not get any better last night.
On the economic front, there is a growing shift towards forecasting a 50 point rate hike from the RBA next week, and to lower 2023 GDP forecasts.
Economists were caught out by this month’s 25 point hike when 50 was heavily backed, with Philip Lowe now worried about the economic impact of too hard, too fast. That would suggest going back up to a 50 point hike would be a Truss-flip.
But as Barrenjoey puts it, “the facts have changed,” in reference to the CPI.
The CPI came in at 7.4% and the RBA is forecasting 7.75% by year-end. Personally, my tip on Cup Day is to back 25.
Oh the Pain
Following on from a -9% fall for Google (NASDAQ:GOOG) on result and -7% for Microsoft (NASDAQ:MSFT), Meta (NASDAQ:META) reported in Wednesday night’s aftermarket and initially fell -15%. Last night that became -25% in the day-session.
In this morning’s aftermarket, Amazon (NASDAQ:AMZN) has reported and is down -17%. I sense a pattern. With each successive result release, the other Mega-Techs, which themselves had already fallen, fall further.
Is there any saviour? Apple (NASDAQ:AAPL) has reported this morning and is only down -1.5%, having fallen -3% in the day-session.
We recall the Dow closed flat on Wednesday night despite a -125 point drag from Microsoft, with Google (NASDAQ:GOOGL) not a Dow stock. Last night the Dow rose 194 because Meta is not a Dow stock. Over in the real world, earnings results continue be net positive.
Last night Caterpillar (NYSE:CAT) rose 7.7% on result, Honeywell (NASDAQ:HON) 3.3%, McDonald’s (NYSE:MCD) 3.3% and Merck (NYSE:MRK) 1.4% — Dow stocks all. As is Intel (NASDAQ:INTC), which has reported in the aftermarket and is up 6%.
Thus while the S&P500 was again lower last night, it’s on the drag of 20% of the market cap being Big Tech.
And US bond yields fell again last night, with the ten-year falling -8 point to below 4% and the two-year falling -6 points.
This despite the first estimate of US September quarter GDP coming in at 2.6% when 2.3% was forecast. The US dollar index rose 0.8%.
Despite the “beat”, which followed two quarters of negative growth, the consumer spending component saw a slowing to 1.4% growth from 2.0% in June, while the price component (inflation) slowed to 4.1% from 9.1%.
Tonight brings the September PCE inflation numbers. Recent history suggests economist forecasts of inflation have been off the mark, so anything could happen.
Next week the Fed meets, and currently a 75 point hike is being afforded 88% probability by the markets.
Last night the ECB hiked by 75 points, for the second time. So no easing of the pace there. However, Christine Lagarde said she was nevertheless concerned by a looming recession across the eurozone, sending a strong signal, the market assumes, that future rate rises would be muted.
Another 75 only takes the cash rate to 1.50%.
Commodities
The 0.8% jump-back in the US dollar on the GDP result has stifled metal prices for now.
The oils keep ticking quietly upward.
The Aussie is down -0.6% at US$0.6453.
Today
The SPI Overnight closed down -26 points or -0.4%.
We’ll see the September quarter PPI numbers today.
The Bank of Japan holds a policy meeting.
The US sees PCE inflation and consumer sentiment.
Today’s list of AGMs and quarterlies is mercifully smaller. AGM highlights include those of ARB Corp (ASX:ARB) and Carsales (ASX:CAR).
Macquarie (ASX:MQG) reports interim earnings, and Resmed (ASX:RMD) quarterly earnings.