Wall St falls on inflation & supply chain woes, JB Hi-Fi rated as a buy: ASX to fall

Market Reports

by Melissa Darmawan

Global stocks retreated on supply chain woes and mixed economic data unsettling investors. September ended on a sour note after its worst performance of the year. China buys up on energy at all costs. 

The Australian sharemarket is set to tumble, with the SPI futures pointing to a fall of 1.6 per cent.

September slump as Wall St pulls back from record highs

Stocks have pulled back from all-time highs, capping off September as one of the worst months for the year.

Supply chain issues weighed on investors’ minds, with an energy crisis dragging worries lower. Treasury yields have spiked to three month highs, the Fed signalling a taper this year. Amid this, inflation concerns, persistent labour shortages, market participants are concerned if stellar earnings can continue on the upward trajectory.

Let alone, investors are concerned on the lowered consumer confidence, hampering consumer stocks, as a slowdown in foot traffic creates headwinds for brick and mortar stores.

Congress passes bill averts government shutdown

Investors also had a sigh of relief after lawmakers averted a government shutdown. The Congress passed a bill extending government funding through to December. The legislation was placed on President Biden’s desk hours before the current funding expired.

Jobless claims rise ahead of October jobs report

On the data front, Americans filing for the first time unemployment benefits rose for a third straight week at 362,000. The increase in jobless claims was largely contributed by the people of California and those from the auto vehicle industry. The chip shortage had a role to play around Americans being laid off.

The figures come ahead of the October jobs report, one of the Fed’s closely watched figures.

Wall St falls, yields fall as gold gains

At the close, the Dow Jones dropped 1.6 per cent to 33,844, the S&P 500 lost 1.2 per cent to 4,308 and the Nasdaq closed 0.4 per cent lower at 14,449.

The yield on the 10-year treasury note fell 3 basis points to 1.50 per cent. Gold rose against a slightly weaker greenback.

Across the S&P 500, all sectors closed in the red. Industrials fell the most, over 2 per cent followed by consumer staples and financials. Communication services and technology shed the least, down over 0.4 per cent.

Inflation and supply chain disruptions drags consumer stocks

Consumer discretionary stocks felt the squeeze today. Bed Bath & Beyond tumbled over 22 per cent on weaker than expected earnings. They slashed full-year output as sales didn’t eventuate as anticipated on supply chain and inflation problems.

Kohl sunk over 12 per cent on the back of a broker downgrade also on supply chain concerns.

We have seen other stocks like Nike, Adidas and Under Armour experience the same headwinds. Next quarter’s earnings results are set to look quite interesting.

European markets on supply disruption woes

Across the Atlantic, European markets closed lower as stocks fall on supply chain woes.

Paris fell 0.6 per cent, Frankfurt lost 0.7 per cent. London’s FTSE fell 0.3 per cent despite the U.K.’s gross domestic product expanding more than expected.

Clothing retailer H&M tumbled over 3 per cent after saying supply chain disruptions hindered sales.

Retailer Boohoo dived over 15 per cent after they warned that inflation and higher wages would squeeze profit margins.

In U.K. trade, miners and oil giants rose. Rio Tinto rose by 1.9 per cent and BHP closed 1.4 per cent higher. Shell rose 0.9 per cent while BP rose 0.6 per cent.

Asian markets mixed ahead of public holiday

Asian markets closed mixed as China shows a contraction in manufacturing against strong services growth. While concerns on power shortages and rising material costs continued to weigh.

Tokyo’s Nikkei fell 0.3 per cent, Hong Kong’s Hang Seng lost 0.4 per cent after Evergrande missed a bond interest payment, and China’s Shanghai Composite added 0.9 per cent.

ASX 200 snaps winning streak after its best performance for the year

Yesterday, Australian sharemarket had a stellar day closing 1.9 per cent or 136 points higher at 7,332. Investors shrugged off inflation concerns, the debt ceiling debate, and a slowdown in China’s economy.

Investors piled back into stocks in a bid to offset the losses from the past few days. Despite the concerted efforts, the local bourse snapped its 11-month winning streak, closing 2.6 per cent lower for the month.

The gains were across the board with consumer staples loving the limelight, as the best performing sector closing 2.7 per cent higher. Materials, healthcare, energy, and financials closed over 2 per cent higher. Not a shade of red was seen with utilities adding the least, up 0.3 per cent.

The best-performing stock in the ASX 200 was Orica (ASX:ORI), closing 14.5 per cent higher at $13.79 on the back of a broker upgrade. It was followed by shares in Beach Energy (ASX:BPT) and Codan (ASX:CDA).

The worst-performing stock in the S&P/ASX 200 was Pinnacle Investment (ASX:PNI), closing 3.5 per cent lower at $15.72, falling for a second day. It was followed by shares in AusNet Services (ASX:AST) and AGL Energy (ASX:AGL).

To find out which companies went on the move yesterday, join me on Stocks of the Hour where I cover Zip Co (ASX:Z1P), Integral Diagnostics (ASX:IDX) and South32 (ASX:S32).

Local economic news

Today CoreLogic is set to issue home value data for September which is expected to increase by 1.5 per cent as per Commonwealth Bank group economists.

AiGroup and IHS Markit have pencilled in purchasing managers' indexes figures for the manufacturing industry today.

Meanwhile, the Australian Bureau of Statistics is set to release lending indicators for August, with the value of home lending expected to fall by around 3 per cent.

Broker moves

Citi upgrades JB HiFi (ASX:JBH) as a buy with a target price of $53. The broker’s upgrade is due to its recent share price underperformance. While Citi makes no changes to forecast earnings, the target price falls to $53 from $55 on changes to peer valuations.

Shares in JB HiFi (ASX:JBH) closed over 3 per cent higher at $45.52 yesterday.

IPOs

Keep an eye out for two companies pencilled in to make their debut on the ASX today. C29 Metals (ASX:C29) and West Cobar Metals (ASX:WC1).

Ex-dividend

Eildon Capital (ASX:EDC) is paying 2 cents unfranked.
NB Global Corporate Income Trust (ASX:NBI) is paying 0.8049 cents unfranked.
Nick Scali Limited (ASX:NCK) is paying 25 cents fully franked.
Steamships Trading Company (ASX:SST) is paying 11.6946 cents unfranked.

Dividend-pay

There are 16 companies slated to pay eligible shareholders dividends today.

Argo Global Listed Infrastructure (ASX:ALI)
Home Consortium (ASX:HMC)
Joyce Corporation (ASX:JYC)
Kina Securities (ASX:KSL)
L1 Long Short Fund (ASX:LSF)
MLG OZ (ASX:MLG)
Monadelphous Group (ASX:MND)
Origin Energy (ASX:ORG)
Prime Financial Group (ASX:PFG)
Paragon Care (ASX:PGC)
Pro Medicus (ASX:PME)
People Infrastructure (ASX:PPE)
Supply Network (ASX:SNL)
Spark New Zealand (ASX:SPK)
Southern Cross Media Group (ASX:SXL)
Treasury Wine Estates (ASX:TWE)

Commodities

Iron ore continues to rise, it has gained 4.5 cent to US$119.23. Its futures are pointing to 5.4 per cent gain.

Gold has gained $34.10 or almost 2 per cent to US$1757 an ounce while silver has added $0.56 or 2.6 per cent to US$22.05 an ounce.

Oil was up $0.20 or 0.3 per cent to US$75.03 a barrel after reports that China ordered energy officials to secure supplies at all costs. If this is the case, and they are happy to pay any price, this could really put pressure on the energy crisis in Europe.

Currencies

One Australian Dollar at 7:10 AM has strengthened from yesterday, buying 72.30 US cents, 53.69 Pence Sterling, 80.47 Yen and 62.42 Euro cents.

Public holiday weekend (for some States)

On Monday, there will only be a text report for the day. See you on Tuesday morning!

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