Nasdaq craters 5% on Wall St slide, Macquarie, Adbri, APA, Whitehaven Coal on watch: ASX to dive

Market Reports

by Melissa Darmawan

Wall St tumbled over 3 per cent with the Nasdaq cratering 5 per cent as investors reassess the Fed's comments. OPEC+ agrees to modest increase to output. The Bank of England raised rates and slashed its growth outlook. 

Good morning. A market meltdown. I’m Melissa Darmawan for Finance News. This is your market outlook.

The Australian sharemarket’s reprieve is looking short-lived with the index, aiming to tumble at the open.

Nasdaq leads steep market dive for worst day of year

Wall St melted across the board for the worst day of the year since 2020 as volatility ticks higher. Investors learned that worker productivity fell to its lowest level since 1947, falling 7.5 per cent in the first quarter, according to the Bureau of Labor Statistics with the short buying spree, after investor’s fears accelerated, overshadowing the reassurance from the Fed as recession fears loomed.

At the closing bell, the Dow Jones dropped 3.1 per cent to 32,998, the S&P 500 fell 3.6 per cent to 4,147 for its second worst day since June 2020 and the Nasdaq saw its worst day since that month, plunged almost 5 per cent to 12,318.

The sell off was across the board on the S&P 500 led by consumer discretionary by 5.9 per cent, followed by information tech by 4.9 per cent, communication services at 4 per cent, materials by 3.1 per cent. Utilities shed the least by 1.1 per cent with the sell-off moving between the range from here.

The sell-off in treasuries also intensified, the yield on the 10-year treasury note climbing 10 basis points as prices fell to settle at 3.10 per cent, its highest level since 2018, set to put borrowing costs higher and put downward pressure on the equities market. Gold rose on a stronger greenback.

What happened?

A variety of factors are investor’s minds, sending stocks slower. The Covid-19 virus is still at play, the fear of a possible recession, and higher borrowing costs. Of course, what is also weighing is the Russian war in Ukraine and China’s Covid-19 lockdown amid the already strained supply chains which could send prices even higher.

As we have chatted about recently, investors are looking at the guidance over the backward looking results. The rally we saw yesterday was on the guidance from the Fed on reassurance that the central bank doesn’t appear to raise rates higher than 50 basis points in the foreseeable future, however this was just not enough to keep nerves at bay.

Another note to consider is that we are in the heat of the quarterly earnings season in the US and also back home. Earnings have been quite strong with a few surprises, however what is also spooking investors is the language used to communicate the outlook. That means that even though the numbers are presented, the commentary doesn’t give much insight as to what’s ahead.

Why? With so much uncertainty, investors are listening in and reading into what's going on when a company is not giving conviction. That doesn't mean that there's not going to be strong earnings in the future, it’s just challenging when inflation is sitting at multi-year highs muddying up the figures.

Due to this, it makes it hard for the company to confidently and accurately forecast their future and as result, they are getting punished. Look at Netflix, they forecasted subscriber growth in the millions which then came in at a negative. At one point, the assumptions they used gave the company confidence to provide that outlook. Either way, the results destabilised the market.

OPEC+ agrees to modest increase to output

Meanwhile, OPEC + has agreed to raise production targets by 432,000 barrels a day next month. It's a small boost to production as the group looks to slowly roll back supply cuts. The move comes amid an oil supply crunch due to the war in Ukraine with sanctions from the west on Russia with several countries planning to tap into emergency reserves. Oil price rose 0.4 per cent. 

Figures around the globe

European markets closed mixed. Paris lost 0.4 per cent, Frankfurt fell 0.5 per cent while London’s FTSE added 0.1 per cent.

On the London Stock Exchange, Rio lost 0.2 per cent, BP added 0.7 per cent and Shell jumped 3.1 per cent.

Asian markets, Hong Kong’s Hang Seng lost 0.4 per cent and China’s Shanghai Composite gained 0.7 per cent while Tokyo’s Nikkei.

Yesterday, the Australian sharemarket closed 0.8 per cent higher at 7,365.

SPI futures

Taking all of this into the equation, the SPI futures are pointing to a 1.5 per cent drop.

What to look out for today

The RBA statement on monetary policy is due out today with investors keeping a close eye on the updated forecasts.

It’s set to be a painful day today with technology stocks set to lead the declines.

In earnings, Macquarie Group (ASX:ASX:MQG), News Corp. (ASX:NWS), REA Group (ASX:REA), and APA Group (ASX:APA).

Broker moves, Citi cut Corporate Travel (ASX:CTD) to neutral with a price target of $25.49, Goldman Sachs raised ARB Corp (ASX:ARB) to a buy from neutral, and Jefferies cut National Australia Bank (ASX:NAB) to a hold.

A company to watch is APA Group (ASX:APA) amid The Australian reporting that the gas pipeline owner has been weighing an acquisition of a $4 billion electricity transmission company in the US.

Adbri (ASX:ABC) has confirmed interest in the $1 billion building materials empire BGC in WA, according to The Australian.

If you have been watching Whitehaven Coal (ASX:WHC), the share price is up 83.7 per cent for the calendar year. Newcastle coal prices were up almost 4 per cent. It could be on the move today.

IPO

There is one company set to make its debut on the ASX today. Keep an eye out for mining technology company Chrysos Corporation (ASX:C79) after raising $183.5 million at $6.50 per share.

Dividend-pay

There are six companies set to pay eligible shareholders today

Elanor Commercial Property Fund (ASX:ECF)
OM Holdings (ASX:OMH)
Perpetual Credit Income Trust (ASX:PCI)
Spheria Emerging Companies (ASX:SEC)
Seven Group Holdings (ASX:SVW)
360 Capital Enhanced Income Fund (ASX:TCF)

Commodities

Iron ore has gained 2 per cent to US$145.80. Its futures point to a 1 per cent fall.

Gold has gained $6.90 or 0.4 per cent to US$1876 an ounce. Silver was up $0.04 or 0.2 per cent to US$22.44 an ounce.

Oil has gained $0.45 or 0.4 per cent to US$108.26 a barrel.

Currencies

One Australian Dollar at 7:35 AM has weakened from yesterday, buying 71.14 US cents (Thu: 72.55 US cents), 57.56 Pence Sterling, 92.63 Yen and 67.44 Euro cents.

That’s all for the outlook. I’m Melissa Darmawan for Finance News. Have a great day and stay safe.
 
Source: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics

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