Dow resets record high on tech rout, OPEC+ agree to boost output: ASX to slip


Wall St closed mixed as the Dow reset a record high. Technology shares underperformed as market participants rotated back into value stocks. European markets play catch up as travel stocks take-off. Japanese stocks outperformed led by gains from auto vehicle players like Toyota. Lithium stocks took the spotlight on the ASX

Our second trading day of 2022 is underway and the Australian sharemarket is set to slip after a mixed close with major indexes around the globe.

Tech rout as Dow hits fresh record high

On Wall St, Dow hit another record close, as investors rotate into value stocks and out of tech shares ahead of the Fed meeting minutes. Market participants are also monitoring the climb in new cases from the Omicron variant, and the impact to the economy with the US recording over one million new cases alone, setting a new record.

The Nasdaq underperformed today as that 10-year treasury yield rose again after yesterday’s leap. This puts downward pressure on some of these growth stocks like tech names. The reason why there is a revaluation is that market participants are reviewing fundamentals like the price to earnings ratio. That is the company’s share price to the company’s earnings per share.

Right now a third of the companies in the Nasdaq have a price to earnings ratio of 50 times according to Bloomberg, that’s a lot when you compare it to a range of 13 to 25 times earnings.

So you might be wondering why buy into these stocks in the first place. Well, based on expectations, traders expect higher growth when compared to its market peers, and are willing to buy the stock at a higher price in hope for future returns.

Then when we compare this to the relationship to the US treasury yield. When yields rise, bond prices fall and this impacts the interest rate outlook. Great for financial stocks like your banks who lend money, not great for those who borrow. It also means that companies and consumers have less to spend when interest rates are higher, so that can also impact the company’s bottom line. The question is also if these growth names, these riskier stocks, can stand in the face of inflation, economic growth, so it then ties back to fundamentals, which is one of the reasons why tech names took it on the chin.

Official end of Santa Claus rally

Meanwhile, today marks the official end of the Santa Claus rally, a period which consists of the last five trading sessions of the year and the first two trading days of the new year. It’s a belated gift to market participants after booking a gain.

4.5m Americans quit their jobs in November

Elsewhere, we received fresh economic data on the jobs market. Four and a half million Americans quit their jobs in November, this is a new record. There were 10.6 million job openings in November, down from the revised October number of 11.1 million, but that was still high, with employers hiring 6.7 million people that month. These numbers don't include the latest we've seen in the jobs market with the spread of the Omicron variant, so we will see how that unfolds in due course. Meanwhile, the ISM manufacturing index fell from 61.1 to 58.7 in December.

AT&T, Verizon delays 5G rollout

Let's take a look at some stocks, Verizon and AT&T reversed their decision to activate all 5G networks tomorrow. These companies said that they will delay the rollout so aviation officials can look at minimizing the potential interference with aircraft electronics. Shares rose 2 and 0.9 per cent respectively.

A few movers in the automotive space, after Tesla’s record quarterly vehicle deliveries. Ford is planning to nearly double production of its F150 Lightning pickups after initially under estimating demand for the truck. Shares drove higher by 11.7 per cent.

Apple’s worth combined greater than 5 majors

Turning to shares in Apple closing 1.3 per cent lower after it became the first US company ever to hit a US$3 trillion market cap intraday. So the stocks pulled back today, and down with the broad tech sector. Apple is now worth more than Walmart, Disney, Netflix, Boeing, and McDonald's combined. It did take 42 years for Apple to reach US$1 trillion in market value, and its valuation has tripled since 2018.

CDC reduces booster shot timeframe

Looking at Pfizer shares, they closed 3.8 per cent lower after the CDC reduced its timeline for Covid-19 booster shots. Today, the agency recommended people get a Pfizer booster shot five months after their initial two dose series. The original guidance was six months.

Meanwhile, looking in the energy space, oil prices rallied again after the OPEC+ meeting. The alliance agreed to continue to boost output by 400,000 barrels per day, next month. They have pledged to continue with planned increases as mentioned in their last meeting, and may consider making adjustments if Omicron weighs on demand.

Wall St numbers

At the closing bell, the Dow Jones gained 0.6 per cent to 36,800, the S&P 500 fell 0.1 per cent to 4,794 while the Nasdaq closed 1.3 per cent lower at 15,623.

Across the S&P 500 sectors we have another mixed finish. Energy stocks soared again as the best performer adding 3.5 per cent, financials was second best given that bump in the treasury yield, up 2.6 per cent, followed by industrials, and materials. Healthcare was the worst performer down 1.4 per cent, followed by information technology.

The yield on the 10-year treasury note rose 2 basis points to 1.65 per cent, gold rose on a weaker greenback.

European markets plays catch up as travel stocks take-off

Across the Atlantic, European markets closed higher as the travel sector outperformed, UK traders played catch-up following Monday’s holiday.

Paris rose 1.4 per cent and Frankfurt added 0.8 per cent as German retail sales in rose 0.6 per cent in November, surprising markets that were expecting a fall of 0.5 per cent while
London's FTSE closed 1.6 per cent higher as airline stocks rallied.

British Airways owner IAG, Ryanair Holdings Plc and Wizz Air Holdings Plc took-off between 10 to 12 per cent higher amid signs of growing demand for travel.

Asian markets mixed as Japan outperforms

Asian markets closed mixed. Japanese stocks outperformed led by gains from auto vehicle players like Toyota rising over 6 per cent. Investors also mulled over prime minister Fumio Kishida’s vows in his New Year’s address to take all necessary measures to curb the spread of Covid-19.

Meanwhile, the People Bank of China cut its net injection of short-term cash which triggered concerns over support for the financial system.

Japan’s Nikkei jumped 1.8 per cent, Hong Kong’s Hang Seng eked out a 0.06 per cent gain, while Shanghai Composite closed 0.2 per cent lower.

ASX 200 surges 2 per cent on lithium spark

Yesterday, the Australian sharemarket closed 2 per cent higher at 7,590, starting the year with a bang propelling to a four month high, its daily best surge in over a year.

The advance was across the board led by energy stocks, consumer discretionary, materials, and technology stocks. Consumer staples added the least out of the sectors.

The local bourse’s performance was the best out of the eight sessions after it dipped on the last day of 2021. The moves pushed the XJO close to the last peak seen in August last year.

Lithium players charged the spotlight amid news from Tesla after the EV-maker smashed its deliveries for the quarter. Shares in Tesla galloped after they posted 308,600 vehicles delivered in the fourth quarter, exceeding expectations for 263,000, and surpassing the company’s previous record of 241,300 from the prior quarter.

Local lithium players were the best performers of the session, Novonix (ASX:NVX) surged 14.5 per cent higher at $10.52, followed by shares in Pilbara Minerals (ASX:PLS), and Lynas Rare Earths (ASX:LYC). The worst-performing stock was Chalice Mining (ASX:CHN) closing 7.1 per cent lower at $8.92, followed by shares in St Barbara (ASX:SBM), and Ramelius Resources (ASX:RMS).

Continuing along the EV lines, battery materials maker GreenTech Metals (ASX:GRE) surged in its debut session on the ASX yesterday after raising $5 million. They opened at 20 cents a share and closed at 27.5 cents. The company currently owns projects focused on nickel, copper and cobalt in the West Pilbara, the Fraser Range and the Windimurra igneous complex in Western Australia.

Iron ore miners closed mixed . Whitehaven Coal (ASX:WHC) surged 5 per cent at $2.76 as coal prices climbed amid Indonesia banning coal exports due to its concern on its ability to meet its own power demands.Rio Tinto (ASX:RIO) closed 0.4 per cent lower. BHP (ASX:BHP) jumped 2.1 per cent, while Fortescue Metals (ASX:FMG) skyrocketed 3.3 per cent after a slow start. 

The major contributors to the energy sector leading the market was Santos (ASX:STO) soared 4.8 per cent, Beach Energy (ASX:BPT) galloped 3.6 per cent, while Woodside Petroleum (ASX:WPL) closed 3.4 per cent higher.

The major banks were lifted with strong gains led by National Australia Bank (ASX:NAB) surged 1.9 per cent, ANZ (ASX:ANZ) added 1.8 per cent, Commonwealth Bank (ASX:CBA) gained 1.5 per cent followed by Westpac (ASX:WBC) closing 1.5 per cent higher. However, the standout was from Macquarie Group (ASX:MQG) after hitting a record high of $211.73, surging almost 3 per cent. The bank is now the third largest in the nation behind Commonwealth Bank (ASX:CBA), and National Australia Bank (ASX:NAB).

Gold players firmed up with Evolution Mining (ASX:EVN) adding 0.5 per cent, Northern Star (ASX:NST) rose 0.1 per cent while Newcrest Mining (ASX:NCM) eked out a 0.04 per cent gain.

In other news, Australian listed radio broadcaster Here There & Everywhere (ASX:HT1) completed the $307.5 million acquisition of Grant Broadcasters. HT&E owns the Australian Radio Network who manages iconic stations such as KIIS, where The Kyle and Jackie O show lives. Shares closed 1.4 per cent lower at $2.07.

Asset manager Pacific Current Group (ASX:PAC) has snapped up a 35 per cent stake in US-private equity real estate player Banner Oak for $48.2 million. Shares closed 1.9 per cent higher at $7.45.

Artificial intelligence technology pioneer Brainchip (ASX:BRN) welcomes Pia Turcinov as non-executive director who started yesterday. Shares surged 15.4 per cent at 78.5 cents.

Imricor Medical System (ASX:IMR) has expanded its footprint to Greece. They have inked a deal with the Henry Dunant Hospital Centre to outfit an existing facility for cardiac imaging procedures. Shares closed 7 per cent higher at $1.07.

SPI futures

Looking ahead, the SPI futures are pointing to a 0.3 per cent fall.

Local economic news

Today ANZ is set to release the job advertisements data for December.

Ex-dividend

There are two companies going ex-dividend.

Clime Capital (ASX:CAM) is paying 1.28 cents fully franked.
Premier Investments (ASX:PMV) is paying 46 cents fully franked.

Dividend-pay

A number of ETFs from iShares are set to pay dividends.

iShares Asia 50 ETF (ASX:IAA)
iShares MSCI Emerging Markets ETF (ASX:IEM)
iShares Europe ETF (ASX:IEU)
iShares S&P Mid-Cap ETF (ASX:IJH)
iShares MSCI Japan ETF (ASX:IJP)
iShares S&P Small-Cap ETF (ASX:IJR)
iShares Global 100 ETF (ASX:IOO)
iShares MSCI EAFE ETF (ASX:IVE)
iShares S&P 500 ETF (ASX:IVV)
iShares Global Consumer Staples ETF (ASX:IXI)
iShares Global Healthcare ETF (ASX:IXJ)
iShares China Large-Cap ETF (ASX:IZZ)

Commodities

Iron ore rose by US$3.40 or 2.8 per cent to US$122.90 a tonne. Its futures are pointing to a rise of 2.1 per cent.

Gold added $14.50 or 0.8 per cent to US$1,814.60 an ounce. Silver added 28 cents or 1.2 per cent to US$23.09 an ounce.

Oil added 98 cents or 1.3 per cent to US$77.06 a barrel.

Currencies

One Australian Dollar at 8:15 AM has strengthened since yesterday buying 72.41 US cents (Tues 72.15), 53.54 Pence Sterling, 84.1 Yen and 64.18 Euro cents.

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