Daily Market Reports | Jan 27 2021
This story features AMPOL, and other companies. For more info SHARE ANALYSIS: ALD
|SPI Overnight (Mar)||6748.00||– 22.00||– 0.32%|
|S&P ASX 200||6824.70||+ 24.30||0.36%|
|S&P500||3849.62||– 5.74||– 0.15%|
|Nasdaq Comp||13626.06||– 9.93||– 0.07%|
|DJIA||30937.04||– 22.96||– 0.07%|
|S&P500 VIX||23.41||+ 0.22||0.95%|
|US 10-year yield||1.04||0.00||0.00%|
|USD Index||90.15||+ 0.08||0.09%|
By Greg Peel
Greetings. The Overnight Report is back for 2021 after a bit of a rest, kicking off this morning with coverage of Monday’s trade on the ASX and two sessions on Wall Street.
Nothing much happened in the interim, did it? I note the ASX200 has managed to gain around 100 points since Christmas on a choppy trajectory, while Wall Street, other than one profit-taking session at year’s end, has continued to grind higher in the face of a bit of kerfuffle in Washington, I heard, translating into around 500 points for the Dow.
The bad news, of course, is we haven’t yet rid ourselves of the damned plague.
Monday’s was a lacklustre session on the ASX, given Australia’s patriotic duty to take a cheeky long weekend when on offer. Volumes were low but sentiment was to the upside, leading to a 24 point gain for the index.
All sectors closed in the green bar two, being energy (-1.2%) and industrials (-0.9%).
Energy’s dip was led by a -4.9% for oil refiner Ampol ((ALD)) following news the company had now completed its $300m off-market buyback. No more freebies. Industrials appear to have been led lower by Transurban ((TCL)), which fell -2.0%.
I’m told the consumer discretionary sector has been doing rather well of late, regardless of a dip in retail sales in December after a rather astonishing November. Discretionary again led the field on Monday (+1.2%), with some help from a 5.7% gain for IDP Education ((IEL)).
UBS put out a positive note on IDP and retained its Buy rating, and indeed all of the five FNArena database brokers covering the stock have Buy or equivalent ratings.
The banks also decided to take a long weekend it seems (+0.1%), having had a good run of late, while elsewhere sector gains ranged between 0.5-1%.
Given the interrupted week, a few punters yet to return to work, Wall Street now trading sideways and the local results season beginning next week, the rest of this week may remain fairly quiet.
But you never know.
A correction is coming, say the pundits on Wall Street, but it’s just a matter of when. We recall many a highly respected billionaire investor suggesting, as long ago as mid last year, that Wall Street was vastly overvalued.
All talk on Wall Street on Monday night was of hedge funds being caught short – scrambling to cover short positions in high-flying, covid-winning stocks that have flown to the moon and beyond and well past even the most optimistic of valuations. But as we are reminded: “Markets can remain irrational a lot longer than you and I can remain solvent” – which is attributed, either directly or indirectly, to John Maynard Keynes.
Wall Street is in the midst of its December quarter reporting season and to date results have been solid, but this week is a big week for Big Tech, and the numbers will have to match the hype.
Otherwise keeping a lid on Wall Street for now is the question of whether Biden can actually get his US$1.9trn stimulus package through the Senate, despite officially having the numbers if Kamala gets involved. Talk is that not all Democrats, let alone Republicans, are comfortable with the size of the package.
And of course there’s the virus. The surge in cases and deaths since the election has Wall Street back in stay-at-home mode, but can Biden make good on his vaccine rollout promise?
The Nasdaq gained 0.7% on Monday night to the S&P500’s 0.4%, with the Dow slipping -0.1%.
Talk on Wall Street continues to focus on aforementioned short-selling, and in particular a US company by the name of GameStop, which sells gaming software and hardware, new and old, and has a presence in Australia. GameStop rose 90% last night, is up 275% in a week and 500% this year.
The bubble is being fuelled by social media chat, incited by new, younger players in the market targeting stocks that had been heavily short-sold by hedge funds due to aforementioned questionable valuations. The young’uns buy call options, which are cheaper than buying stock, forcing those selling the options to buy shares to cover their risk, forcing the share price up.
They then chatter constantly on social media, creating a frenzy, and forcing short-sellers to cover their positions lest they be completely blown away, which forces the share price up…
Note that if you short-sell a stock for $100 you can only ever make $100. There is no limit to what you can lose.
It is this sort of activity – not so much in larger names, as no one is silly enough to go heavily short in, say, Amazon, but in smaller stay-at-home beneficiaries – that is causing bubble concerns among market watchers. GameStop cannot rally forever, and when it stops…
Meanwhile back in the real world, earnings results continue to roll out in this, the biggest earnings week of the season on Wall Street. While Microsoft (Dow) may not be among those heavily shorted names, it did hit a new all-time high in last night’s session ahead of its after-the-bell earnings report.
As I write, Microsoft is up another 5% post result.
At the close of trade, all three major US indices posted negligible falls.
The Fed has begun its first policy meeting of the year, with a statement due out tomorrow morning our time. No one expects any change to a policy which is being credited for providing the backstop that allows rampant stock market speculation.
Otherwise, vaccine distribution excitement and fiscal stimulus hopes are putting a floor under stock indices, which currently has Wall Street seemingly not keen to go down right now but neither is it keen to go up much. Except for Microsoft. More Big Tech results are due this week.
Stimulus hopes – ain’t that a broken record, first released around July 2020.
|Spot Metals,Minerals & Energy Futures|
|Gold (oz)||1852.50||– 17.80||– 0.95%|
|Silver (oz)||25.46||– 0.49||– 1.89%|
|Copper (lb)||3.59||– 0.05||– 1.44%|
|Aluminium (lb)||0.91||+ 0.02||1.85%|
|Lead (lb)||0.93||+ 0.01||0.85%|
|Nickel (lb)||8.14||– 0.14||– 1.71%|
|Zinc (lb)||1.19||– 0.03||– 2.47%|
|West Texas Crude||52.51||– 0.49||– 0.92%|
|Brent Crude||55.83||– 0.18||– 0.32%|
|Iron Ore (t)||164.65||– 3.85||– 2.28%|
Commodity prices on the FNArena website are up to date to last night, with changes reflecting overnight movement. A particular observation from a month ago is that copper and nickel continue to be well supported.
Not so gold, which seems to have hit the doldrums and is likely now being considered an old world asset, overtaken by bitcoin and friends. To understand the new rally in cryptos, one need only refer back to the above – another US$1.9trn in stimulus.
That, too, is helping to keep a cap on the US dollar, hence the Aussie is US2c higher than before Christmas.
There was good news yesterday – Xi Jinping declared that larger economies should not bully smaller economies.
Thanks God that’s all over then.
The SPI Overnight closed down -22 points or -0.4%, noting the ASX200 rose 24 points on Monday.
Australia’s December quarter CPI numbers are due today.
NAB’s business confidence survey for December is also due.
The US will see December durable goods orders tonight as the Fed meeting continues.
The Australian share market over the past thirty days…
|BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS|
|CQR||Charter Hall Retail||Upgrade to Accumulate from Hold||Ord Minnett|
|CRN||Coronado Global Resources||Downgrade to Hold from Add||Morgans|
|CWY||Cleanaway Waste Management||Downgrade to Neutral from Outperform||Credit Suisse|
|Downgrade to Neutral from Outperform||Macquarie|
|IAG||Insurance Australia||Downgrade to Neutral from Outperform||Macquarie|
|IPL||Incitec Pivot||Downgrade to Neutral from Outperform||Credit Suisse|
|MGR||Mirvac||Downgrade to Hold from Accumulate||Ord Minnett|
|MGX||Mount Gibson Iron||Downgrade to Neutral from Buy||Citi|
|PNV||Polynovo||Downgrade to Neutral from Outperform||Macquarie|
|REH||Reece||Downgrade to Reduce from Hold||Morgans|
|S32||South32||Upgrade to Neutral from Underperform||Macquarie|
|Downgrade to Hold from Add||Morgans|
|SCP||Shopping Centres Aus||Downgrade to Hold from Accumulate||Ord Minnett|
|SGR||Star Entertainment||Downgrade to Neutral from Outperform||Credit Suisse|
|SYR||Syrah Resources||Downgrade to Neutral from Outperform||Credit Suisse|
For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.
All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available on the FNArena website. Click here. (Subscribers can access prices on the website.)
(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author's and not by association FNArena's – see disclaimer on the website)
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