The Overnight Report: Shop Till You Drop

This story features COLES GROUP LIMITED, and other companies. For more info SHARE ANALYSIS: COL

By Greg Peel

Ups and Downs

The first big day of the local results season brought some big moves in individual reporting stocks amid further sizeable moves unrelated to earnings. The net result was negative, with only the resource sectors gaining on the day while banks stood still.

The biggest contributor to the net -0.5% fall for the ASX200 was the consumer staples sector, down -3.5%. It was not Coles’ ((COL)) result that sent that stock down -4.8% but a subdued outlook. The same outlook was extrapolated for Woolworths ((WOW)), which fell -4.6%.

Evolution Mining ((EVN)) dropped by -10.0% on both a fall in the gold price and a poorly received result. The materials sector nonetheless was the star of the day with a 1.5% gain, led by the big iron ore miners, no doubt anticipating what Rio Tinto ((RIO)) might come up with in its aftermarket result release.

You guessed it – another big dividend payout.

Gold miner Northern Star Resources ((NST)) had another weak session, falling -7.6% as its merger with Saracen Minerals, now de-listed, has been completed.

Lynas Rare Earths ((LYC)) shot up 13.4% on news Beijing is considering limiting exports of rare earth minerals. Lynas is currently the only producer of rare earths outside China.

More was clearly expected from funds management platform Netwealth ((NWL)). It fell -9.1%. The financial sector closed flat in a trade-off between a solid quarterly update from Westpac ((WBC)), worth 4.6%, and post-dividend selling in Commonwealth bank ((CBA)), down -1.9%.

EML Payments’ ((EML)) result was worth 16.4%.

Domino’s Pizza ((DMP)) loves a good pandemic. It rose 7.6% on result.

Nearmap ((NEA)) continues to battle back against the shorters, up 6.9%, while initial selling in ARB Corp ((ARB)) on Tuesday on result swung to a 5.8% gain on broker assessments.

Speaking of broker assessments, Macquarie double-downgraded Appen ((APX)) to Underperform yesterday citing too much competition in AI. It fell -9.2%.

The game stopped for Zip Co ((Z1P)) yesterday. Having surged over the past few days to the point of receiving a speeding ticket from the ASX, yesterday Zip fell -14.0%, dragging the rest of the BNPL sector down with it and the technology sector down -2.0%.

Elsewhere, it seems the big jump up in the Australian ten-year bond yield – up again yesterday to 1.39% — has finally clicked with investors. Utilities fell -1.5% yesterday, industrials -1.6%, property -2.2% and telcos -0.9%.

Today is another very big day in the season, and next week it gets worse. Wall Street saw yet another flat session overnight, but our futures are down -19 this morning.

Buffetted

US retail sales leapt 5.2% in January after falling -1% in December when covid cases were spiking. One might point to several possible reasons for the surge.

Vaccine rollout is an obvious one, but we recall that December saw an eleventh hour agreement in Congress to provide a stop-gap stimulus package to prevent the expiry of America’s JobKeeper. Democratic victory in the Georgia run-offs in early January assured Biden could ram thought his new, much larger package.

US savings rates remain elevated after months of fiscal support for workers and households, so time to spend!

Which only plays into the inflation fear camp, alongside ever-rising oil prices. And to top it off, the US producer price index leapt 1.3% in January when economists had forecast 0.5%, to mark the biggest move since 2009 when wholesale services costs were included in the index. Wholesale inflation hit an annual rate of 1.7% — not far from the 2.0% level pre-pandemic.

Wall Street was looking weak in morning trade last night, with the S&P500 down -0.8%. But the Fed saved the day.

Following the release of the Fed minutes, the S&P500 clawed its way back to close another flat session. This left many perplexed, as the minutes informed of absolutely nothing new. But the fact the Fed remains squarely in the “no inflation concerns” camp, perhaps just a little reminding was required.

The Nasdaq nevertheless had another weak session as the gradual selling off of Big Tech continued. It is of little surprise considering widespread calls of overvaluation as we headed into 2021, but rising US bond yields do undermine growth stock forward earnings valuations.

The US ten-year dropped back a tad last night nonetheless.

The Dow went the other way, but was flattered by big moves in telco giant Verizon (+5.2%) and oil giant Chevron (+3.0%) after latest disclosures revealed Warren Buffett has thrown billions into both companies.

Who’ll be left to support old world companies when the old world value investor finally shuffles off? The guy’s 90 in the shade.

Commodities

China is back in and iron ore is back up.

Oil prices just keep on keeping on.

On Tuesday night gold fell on a jump in bond yields and with yields steady last night, it fell on a 0.4% gain for the US dollar. Bitcoin hit another high.

The Aussie is only off -0.1% thanks to commodity prices, at US$0.7754.

Today

The SPI Overnight closed down -19 points or -0.3%.

More of the same today – loads and loads of earnings reports. Earlier reporters are now beginning to go ex-dividend, which is a trend that will accelerate through the month and into March. Check the FNArena Calendar.

Australia’s January jobs numbers are out today.

United Malt Group ((UMG)) holds its AGM.

FNArena's Corporate Results Monitor is updated daily throughout the month: https://www.fnarena.com/index.php/reporting_season/

The Australian share market over the past thirty days…

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.)

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