Wall St falls on tech rout again, Corporate Travel to resume trade & Macquarie's view: ASX to lift

Wall St falls on tech rout in the wake of the Fed decision. CDC panel supports Pfizer, Moderna over J&J vaccine. European markets mixed on ECB and BoE outcome. Corporate Travel Management (ASX:CTD) is slated to resume trading this morning.

US stocks fall on tech rout again

The Australian sharemarket is set to open higher as US stocks closed lower after a choppy session amid the wake of that Fed decision.

Yesterday, we did see the major indexes close at session highs with the Nasdaq outperforming by over two per cent after the Federal Reserve announced that it would accelerate the tapering of its bond buying program. The Fed also projected raising interest rates as soon as next year, which was in line with market expectations. That's why we saw a rally yesterday in the wake of that decision and after the press conference from Fed Chair Jerome Powell. This also set the tone for the other central banks that were due to meet, like the European central bank and the Bank of England, which we will talk about shortly.

However, today it was a volatile market, the Nasdaq wiped off its gains from yesterday and then some. As we’ve talked about how it’s going to be a rocky ride this month. It will continue to be like this until we await new data that could give us more insight on the path forward for rates.

Tech stocks have taken it on the chin as they’ve led the losses a number of times this week, and again today. What is interesting is that the 10-year treasury yield is down today. It’s not even at its highest level in the past few months, so market participants are trying to work out what to do after yesterday's taper timeline, amid a week of central banks meeting. There were 19 of them slated this week with the major ones meeting in the last 24 hours as they reviewed a raft of economic data which included inflation. Despite this, with a falling 10-year yield, tech stocks tumbled and financials were an outperformer. 

Jobless claims inches higher, more than expected

We also got some fresh economic data with state unemployment claims coming a tad higher than expected. Weekly jobless claims came in above estimates at 206,000 an increase of 18,000 from the week before. It's still a low number but it is above recent pandemic lows. The four week moving average fell to a new pandemic era low which just smoothed out the volatility.

Meanwhile, homebuilding in the US rose last month to the highest level since March. Housing starts increased 11.8 per cent with a seasonally adjusted annual rate of 1.7 million units in September. The rise comes even as the industry continues to struggle with higher material prices and a labor shortage.

CDC panel supports Pfizer, Moderna over J&J vaccine

Taking a look at some stocks. Johnson & Johnson shares closed 1.1 per cent higher after we got some news towards market close. The subcommittee of CDC panel of advisers said that they support Moderna and Pfizer vaccines over Johnson & Johnson. It is due to data that the J&J vaccine can lead to rare but serious blood clots. The panel is planning to vote on whether those vaccines are preferred over J&J for those over 18 years of age.

Apple tumbles as Delta fails to take-off on profit outlook

Apple shares dropped 3.9 per cent after reportedly delaying its full return to the office indefinitely as Covid-19 cases rose. The tech titan is helping staff improve their offices at home, a nice perk after CEO Tim Cook sent an email to employees saying that the return date hasn't been determined. He also added that workers will receive a US$1,000 bonus to be used for anything they may need to work from home. It applies to all staff including at store locations. Apple staff was initially slated to return to the office on February 1 in a plan that was already delayed.

We have talked so much about these technology companies, as they are at the forefront. They have the capacity to make changes as they wish when it comes to staff, such as in office staffing versus hybrid work. Earlier this week, I said “so goes apple, so goes the market”. Not only do I refer to this in terms of markets but also when it comes to return to office. They're often times when it comes to this that other companies will look at Apple as a lead when they'll bring their employees back to the office. If others do follow, the concern is what will happen to neighbouring businesses that rely on the people in the office to spend at nearby shops, and cafes and what impact that will have to small businesses who have been hurt during this pandemic.

Let's take a look at shares of Delta Airlines after the airline boosted its outlook for the fourth quarter on rising travel demand. The shares fell 2.3 per cent on news that they expect pre-tax profit of US$200 million for the fourth quarter. The carrier said back in October that it did expect higher fuel costs to impact its profitability this quarter, but Delta expects to see a profit in the year ahead and says it may even see profits above pre pandemic levels. Other travel and cruise line stocks fell up to 3 per cent.

Looking ahead, next year’s outlook is slated to look buoyant despite this bumpiness we are seeing. Market participants are changing gears and rotating back into cyclical stocks you’ll see in the S&P 500 sector breakdown shortly. Energy stocks have bounced back from yesterday’s decline with oil prices rallying for a second day as risk appetite grows.

Wall St fell as bond yield dips

At the closing bell, the Dow Jones lost 0.1 per cent to 35,898, the S&P 500 fell 0.9 per cent to 4,669 while the Nasdaq closed 2.5 per cent lower at 15,180.

Across the S&P 500, there were three losers to eight winners. Technology sunk 2.9 per cent with communication services in the red. Financials were the best performer, up 1.2 per cent, followed by materials, then energy, up 0.7 per cent.

The yield on the US treasury note dipped 3 basis points at 1.43 per cent, while gold rose on a weaker greenback.

European markets mixed on ECB and BoE outcome

Across the Atlantic, European markets closed mixed after the European Central Bank kept rates unchanged and is set to reduce its bond buying program. The ECB raised its inflation forecast for next year from 1.7 per cent in September to 3.2 per cent. The ECB will wind down its Pandemic Emergency Purchase Programme by March, but will instead increase bond buying in its Asset Purchase Programme to provide continued support.

Paris added 1.1 per cent, Frankfurt gained over 1 per cent and London’s FTSE added 1.3 per cent after the Bank of England raised its interest rates to 0.25 per cent from 0.1 per cent to combat high inflation.

Resources leapt with the standouts being Rio climbed 2.9 per cent while BP closed 2.4 per cent higher.

Asian markets rally taking earlier Wall St lead

Asian markets closed higher after playing catch up. Tokyo’s Nikkei added 2.1 per cent, Hong Kong’s Hang Seng gained 0.2 per cent, while China’s Shanghai Composite closed 0.8 per cent higher.

ASX 200 falls for 3rd day

Yesterday, the Australian sharemarket closed 0.4 per cent lower at 7,296 for its third day despite stronger than expected jobs numbers for November. Market participants started the session off with two RBA officials speaking online after we heard from the Federal Reserve.

The local bourse was already weighed down by CSL (ASX:CSL) diving 8.3 per cent to $273.00 after the biotech resumed trading. The company raised $6.3 billion to fund its $17.2 billion deal to buy Swiss pharma Vifor at the discount of $273, which was the ballpark difference of its losses today.

QE could end in February

Compounding the pain, the speech from Governor Philip Lowe said the bond purchases program could end in February depending on the situation.

“The first option discussed was to further taper the bond purchases from the current rate of $4 billion a week, with an expectation that the purchases would come to an end in May. The second was to taper further and then review the situation again in May. The third option was to cease bond purchases altogether in February,” he said.

“If better-than-expected progress towards the Board’s goals was made, then the case to cease bond purchases in February would be stronger. Alternatively, if progress is slower than expected, or if the outlook becomes more uncertain, the case for retaining flexibility and reviewing again in May would be stronger,” he said.

“In deciding between these options, the Board will use the same three criteria that it has used since the outset: the actions of other central banks, how the Australian bond market is functioning, and most importantly, the actual and expected progress towards the goals of full employment and inflation consistent with the target”

The employment figures then broke at 11.30am AEST which came in better than expected. The nation’s unemployment declined to 4.6 per cent in November from 5.2 per cent a month earlier as Covid-19 lockdowns eased. The participation rate rose 1.4 points to 66.1 per cent, beating estimates of 65.5. Meanwhile, employment increased 366,100 to a record high of 13.17 million, beating forecasts of a 205,000 gain, with part-time employment increasing by 237,800, and full-time employment lifting by 128,300.

The next RBA board meeting is in February next year and Dr Lowe said that “much will depend upon the news we receive between now and when we meet in February”. The jobs report is a sign that the labour market is moving in the right direction, however it was before Omicron came into the picture.

Nevertheless, the tech bulls were reignited after two days of declines and were the best performer of the session, emulating the outperformance for the Nasdaq on Wall St. WiseTech (ASX:WTC) added 6.9 per cent to $59.38, Xero (ASX:XRO) gained 2.1 per cent to $140.88, while Afterpay (ASX:APT) closed 1.7 per cent higher to $89.50.

On the other spectrum, after healthcare’s drag, energy was the second worst performer, down 1.2 per cent despite a rise in the Nymex crude price. While materials declined after shedding 0.3 per cent. Fortescue Metals (ASX:FMG) rose 0.9 per cent to $18.80 but BHP (ASX:BHP) lost 1 per cent at $40.52 and Rio Tinto (ASX:RIO) closed 0.4 per cent lower at $98.

The major lenders were mixed. ANZ (ASX:ANZ) lost 0.6 per cent to $27.43, Commonwealth Bank (ASX:CBA) shed 0.1 per cent to $96.79, while Westpac (ASX:WBC) also slid 0.1 per cent to $20.96. NAB (ASX:NAB) bucked the trend closing 0.6 per cent higher to $28.75.

In other news, Mesoblast (ASX:MSB) soared 10.9 per cent to $1.48 after saying it would conduct another phase three trial of its rexlemestrocel-L in patients with chronic low back pain after feedback from the FDA.

IGO (ASX:IGO) added 1.4 per cent to $10.78 after confirming its $1.1 billion spending spree to buy Western Areas (ASX:WSA) via a scheme of arrangement. The deal is still subject to a shareholder vote with the board unanimously recommending it. Western Areas shareholder Perpetual (ASX:PPT) said it intended to vote its 14.7 per cent holding in favour of the deal. Western Areas shares rose 5.6 per cent to $3.42. Shares in Western Areas (ASX:WSA) closed 5.5 per cent higher at $3.42.

The best-performing stock in the S&P/ASX 200 was Mesoblast (ASX:MSB) closing 10.9 per cent higher at $1.48, followed by shares in WiseTech Global (ASX:WTC), and Lifestyle Community. (ASX:LIC).

The worst-performing stock in the S&P/ASX 200 was CSL (ASX:CSL) closing 8.2 per cent lower at $273, followed by shares in Champion Iron (ASX:CIA), and Life360 Inc. (ASX:360).

SPI futures

Looking at the SPI futures after all this, it's pointing to a mild 0.1 per cent gain.

Company news

Corporate Travel Management (ASX:CTD) is slated to resume trading this morning. Shares were in a trading halt to raise $100 million through a $75 million institutional placement and a $25 million share purchase plan. The funds will be used to buy Helloworld Travel (ASX:HLO). Let's take a look at what Macquarie thinks of this move.

Broker moves

Macquarie rates Corporate Travel Management (ASX:CTD) as an upgrade to outperform from neutral with a price target of $24.70. Macquarie considers the acquisition complimentary, and notes Helloworld's customers include blue-chip clients, and that Corporate Travel's trading update met the broker's estimates. The broker expects a strong recovery in the financial year 2022 and raises EPS forecasts 5 per cent, 7 per cent and 10 per cent for financial year 2022, financial year 2023 and financial year 2024. Target price rises 3 per cent to $24.70. Shares in Corporate Travel Management (ASX:CTD) were placed on a trading halt on Wednesday and last traded at $22.29.

Dividend-pay

There are nine companies set to pay eligible shareholders today.

ALS (ASX:ALQ)
Aristocrat Leisure (ASX:ALL)
Australian Vintage (ASX:AVG)
Civmec (ASX:CVL)
Elders (ASX:ELD)
James Hardie Industries Plc (ASX:JHX)
Nufarm (ASX:NUF)
Technology One (ASX:TNE)
United Malt Group (ASX:UMG)

AGMs

There are eleven companies set to meet with shareholders.

Adavale Resources (ASX:ADD)
Australian Mines (ASX:AUZ)
Chase Mining Corporation (ASX:CML)
FYI Resources (ASX:FYI)
Golden Mile Resources (ASX:G88)
Incitec Pivot (ASX:IPL)
MMJ Group Holdings (ASX:MMJ)
Naos Emerging Opportunities Company (ASX:NCC)
National Australia Bank (ASX:NAB)
Nufarm (ASX:NUF)
Sensen Networks (ASX:SNS)

Annual reports

Aristocrat Leisure (ASX:ALL)
Euro Manganese (ASX:EMN)
Gentrack Group (ASX:GTK)

IPOs

There are three companies set to make their debut today. IPD Group (ASX:IPG), an electrical equipment distributor and service provider after raising $40 million. SHAPE Australia Corporation (ASX:SHA), they are a specialist building contractor and construction manager, and Winton Land (ASX:WTN), a property developer after raising $350 million.

Commodities

Iron ore has gained 4.6 per cent to US$114.70. Its futures point to a 4.1 per cent gain.

Gold gained $35.00 or almost 2 per cent to US$1800 an ounce, silver was up $0.94 or 4.4 per cent to US$22.49 an ounce.

Oil added $1.18 or 1.7 per cent to US$72.05 a barrel.

Currencies

One Australian Dollar at 8:15 AM has strengthened since yesterday, buying 71.82 US cents (Thu: 71.77), 53.91 Pence Sterling, 81.64 Yen and 63.40 Euro cents.