Nasdaq hits correction territory as Wall St falls, Debut by new kid on the Block: ASX to lift


Wall St erased its early gains closing at session lows as strong earnings failed to boost optimism. Nasdaq entered correction territory from its November 2021 high. The European market rose thanks to a rally in luxury goods while Asian markets were mixed. Block (ASX:SQ2) to trade today at 11am. Jobs data out today. Commodities rallied, Aussie dollar punches above 72 cents.

The Australian sharemarket is set to open higher after a choppy session on Wall St.

Tech led losses on rate-hike concerns

The major indexes closed at session lows as the Dow fell for its fourth straight day, while the Nasdaq is now in correction territory from its November record high in 2021.

US stocks fluctuated between gains and losses throughout the session as trepidation crept in. Investors bought into the safety-zone of the market, with utilities and consumer staples edging higher. The inflation tune continued to sing amid the interest rate hike expectations, driven by the story of monetary policy, which has led to a broader market rotation this year.

On the backdrop, market participants received more inflation data, with Canada and the UK hitting record highs in three decades. All this comes ahead of the central banks that are set to meet in the coming weeks. Economists expect the Bank of Canada to hike interest rates next week, while bets are on for the Bank of England to deliver its second rate hike at their February meeting.

Q4 results for Morgan Stanley & BoA beat expectations

Meanwhile, it's a wrap for big banks reporting, after Morgan Stanley and Bank of America unveiled their earnings results. These stocks rallied as earnings came in above expectations, bucking the trend of disappointing results from Goldman Sachs, Citigroup, and JPMorgan Chase, which all closed lower today.

Elsewhere Sony shares tumbled almost 13 per cent on news that its gaming rival Microsoft is set to acquire Activision Blizzard. This deal is not expected to close until at least June of 2023 pending regulatory approval, and this process is a big one. The hurdles that Microsoft will need to go through are far and wide, and it is not only isolated to the US, they also need to look to other countries like Japan for example. Sony is currently the second biggest gaming company in Japan, second to China's Tencent. If this deal does go through, it would put Microsoft in the third biggest gaming position in the world.

Oil soars on supply disruptions

On the commodity front, crude prices rose as oil supplies remained tight amid the growing list of supply disruptions. The latest is an explosion along the Ceyhan pipeline, which carries crude oil from Northern Iraq to the Mediterranean Sea. They join Libya, the US, Peru, Kazakhstan, UAE, and Iraq to Turkey. As companies look to focus on reducing its carbon footprint, and the lack of capital investments on the horizon, this bodes well for oil prices to continue to rally.

Numbers on Wall St

At the closing bell, the Dow Jones almost 1 per cent to 35,029, the S&P 500 fell almost 1 per cent to 4,533 while the Nasdaq closed 1.2 per cent lower at 14,340.

Across the S&P 500 sectors, there were only two sectors closing higher. Consumer staples was the best performer, up 0.7 per cent, followed by utilities. Consumer discretionary was the worst performer, down 1.8 per cent, followed by financials, and information technology.

The yield on the 10-year treasury note fell 2 points to 1.84 per cent, gold rose on a weaker greenback.

European stocks rose while Asian markets mixed

Across the Atlantic, European markets closed higher. Paris added 0.6 per cent, Frankfurt added 0.2 per cent and London’s FTSE added 0.4 per cent as inflation worries offset strong company earnings. British consumer price inflation jumped 5.4 per cent in December to a 30-year high.

On the London Stock Exchange, BHP rose 2.4 per cent, Rio added 3.9 per cent, BP lost 0.4 per cent and Shell closed 0.1 per cent lower.

Asian markets closed mixed. Tokyo’s Nikkei fell 2.8 per cent to a five-month low dragged down by Sony Group and Toyota Motor, tumbling 12.8 and 5 per cent respectively.

Hong Kong’s Hang Seng added 0.1 per cent and China’s Shanghai Composite closed 0.3 per cent lower.

ASX sinks for 2nd-day led by tech

Yesterday, the Australian sharemarket sunk 1 per cent at 7,333 extending losses for a second straight day. Given it was Afterpay’s (ASX:APT) last day of trade, investors sold out of their positions which contributed to higher than expected volumes. Shares in the buy-now pay-later darling lost 2.2 per cent at $66.47.

The losses were almost across the board with technology leading the declines, while energy and utilities bucked the trend closing marginally higher.

The technology sector was heavily weighed down by Megaport (ASX:MP1) after the company reported a quarter on quarter increase of 7 per cent in its monthly recurring revenue to $9.2 million. This led to an 8 per cent jump in its second quarter revenue to $26.6 million along with a 5 per cent increase in new customers. They were the worst performer of the session, closing 16.2 per cent lower at $15.32, followed by shares in Novonix (ASX:NVX), and Allkem (ASX:AKE).

The best-performing stock was Appen (ASX:APX), closing 3.9 per cent higher at $10.47, followed by shares in Harvey Norman Holdings (ASX:HVN), and Premier Investments (ASX:PMV).

In the financial space, major banks fell as Macquarie Bank (ASX:MQG) dropped 3.7 per cent, Commonwealth (ASX:CBA) declined 1.5 per cent, National Australia Bank (ASX:NAB) fell 1.2 per cent, Westpac (ASX:WBC) was down 0.8 per cent and ANZ Bank (ASX:ANZ) closed 0.7 per cent lower.

BHP (ASX:BHP) shed 0.3 per cent at $46.56 after the miner unveiled its December quarter production report. The miner had strong output in its iron ore division, but weak performances from its copper and coking coal operations. Iron ore production for the quarter came in at 74 million tonnes marginally above expectations, copper production fell 10 per cent short of expectations, while guidance for financial year’s 2022 output of 278 to 288 million tonnes was maintained. Also cost guidance rose by US$4 to US$84 to 94 per tonne citing the impact of bad weather and pandemic-led challenges.

Shares in Fortescue Metals Group (ASX:FMG) lost 1.5 per cent at $20.44 after US-based global investment management giant Capital Group became a substantial shareholder with a 5 per cent bite. Rio Tinto (ASX:RIO) bucked the trend of its peers and added 0.2 per cent at $109.91.

HUB24 (ASX:HUB) added 2.1 per cent at $27.42 after the wealth platform provider posted a strong December quarter update. Net fund inflows were $3.6 billion in the second quarter of financial year 2022, while total platform funds under administration rose 10.2 per cent from the previous quarter to $50 billion.

Brainchip (ASX:BRN) rallied 14.4 per cent to $2.13 on news that the artificial intelligence innovator was granted a new US patent.

In other company news, Seek (ASX:SEK) added 1.1 per cent at $30.29 amid a broker upgrade from Ord Minnett. The broker upgraded the company to an accumulate from a hold with a target price of $34 from $31. Ords expect job listings volumes to remain elevated this year given the so-called ‘Great Resignation' impact, despite the possibility of pandemic-related restrictions weighing on job ads in the near term.
 
SPI futures

Now, taking all of this into the equation, the SPI futures are pointing to a 0.1 per cent rise.

Local economic news

To continue the theme around the jobs market, today the Australian Bureau of Statistics (ABS) is set to release the labour force figures for December.

Economists are expecting the unemployment rate to fall from 4.6 to 4.5 per cent, and the range of 30,000 to 60,000 new jobs is expected after looking at a few reports.

This is despite yesterday’s figures showing a small dip in payroll jobs and a modest fall in job advertising in the month.

Payroll jobs fell 0.5 per cent in the fortnight to December 18, but were still 2.9 per cent higher than in December 2020 as per the ABS, while the National Skills Commission released its final report for December, confirming its preliminary findings of a 2.5 per cent decline in online job ads, although they were still 37.4 per cent higher from the year before.

Let’s also keep an eye out of the Aussie dollar today, it punched through the 72 cents mark ahead of this jobs data.

Block to debut on ASX

Also keep an eye out for Block (ASX:SQ2) set to make its debut today at 11am following Afterpay (ASX:APT) being removed from the ASX yesterday.

Commodities

Iron ore has gained 2.3 per cent to US$130.20. Its futures are pointing to a rise of 0.8 per cent.

Gold added $29.10 or 1.6 per cent to US$1,842 an ounce. Silver was up $0.72 or 3.1 per cent to US$24.21 an ounce.

Oil gained $1.25 or 1.5 per cent to US$86.68 a barrel.

Currencies

One Australian Dollar at 8:15 AM has strengthened since yesterday buying 72.17 US cents (Wed: 71.86 US cents), 52.99 Pence Sterling, 82.45 Yen and 63.60 Euro cents.

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