The Overnight Report: Fight The Fed

Daily Market Reports | Aug 04 2022

This story features PINNACLE INVESTMENT MANAGEMENT GROUP LIMITED, and other companies. For more info SHARE ANALYSIS: PNI

World Overnight
SPI Overnight 6910.00 + 32.00 0.47%
S&P ASX 200 6975.90 – 22.20 – 0.32%
S&P500 4155.17 + 63.98 1.56%
Nasdaq Comp 12668.16 + 319.40 2.59%
DJIA 32812.50 + 416.33 1.29%
S&P500 VIX 21.95 – 1.98 – 8.27%
US 10-year yield 2.75 + 0.01 0.26%
USD Index 106.38 + 0.05 0.05%
FTSE100 7445.68 + 36.57 0.49%
DAX30 13587.56 + 138.36 1.03%

By Greg Peel

Uncertain Times

Despite the S&P500 falling -0.7% on Tuesday night our futures suggested only an -11 point drop yesterday, yet the ASX200 plunged -80 points or -1.1% in the first 40 minutes. By midday it was only down around -20 points and that’s where we closed.

The Nasdaq fell -0.2% on Tuesday night and yesterday our tech sector rose 2.2%, to be one of only two sectors to close in the green. The Aussie ten-year yield jumped 10 points to 3.07%, following US rates.

Materials was the only other sector to close in the green (+0.4%) despite iron ore prices falling. Market-wide selling elsewhere reflected an apparent change in tone on Wall Street, on fears the Fed hadn’t actually become a little more dovish after all.

Consumer discretionary was the best performing sector on Tuesday (+1.5%) and the worst yesterday (-1.2%). Staples rose 1.2% on Tuesday and fell -0.9% yesterday.

Banks rose 0.8% on Tuesday and fell -0.9% yesterday.

Get the picture? No, clearly no one does.

But fear not, Wall Street has bounced back again last night and our futures are up 32 points this morning.

Pinnacle Investment Management ((PNI)) was the best performing index stock yesterday (+12.2%) after reporting that while lower, its funds flows were actually positive, in stark contrast to most every other listed funds manager.

Otherwise the usual suspects filled out the top five. Tyro Payments ((TYR)), Zip Co ((ZIP)), Novonix ((NVX)) and Polynovo ((PNV)).

Polynovo is on one or other side of the ledger almost every day while being largely flat year to date.

On the losers’ board, Centuria Industrial REIT ((CIP)) reported earnings and fell -4.0% to be the worst performer. The chart-topping -4% move underscores the fact it was just a bit of mild selling overall yesterday.

So presumably we go back up today. One drag will be energy, with oil prices down -4% last night. But when the oils fell -5% a couple of days ago, energy only fell -0.9%.

Who doesn’t love a lower oil price?

At your service

The story so far…

Post the Fed rate hike and press conference last week Wall Street detected a less hawkish tone from Jerome Powell, and rallied hard. On Tuesday night a number of Fedheads came out to say don’t be ridiculous, and Wall Street retreated.

Last night St Louis Fed president James Bullard – the most hawkish among Fedheads last year with regard inflation, and thus right – warned rates will have to remain high for a long time to get inflation down. Wall Street rallied.

Aside from some more earnings beats, and the fact Pelosi got in and out of Taiwan in one piece, the change of heart is attributed to last night’s US services PMI for July. It showed an increase (expansion) to 56.7 from 55.3 in July when economists had forecast a fall to 54.0.

While that in itself is positive, what really caught Wall Street’s eye were some of the constituent numbers. New orders rose to 59.9. Production rose to 59.9. And prices paid – a measure of inflation – fell to 73.9 from 81.7 in June to the lowest level since February 2021.

Earnings-wise, Moderna reported a beat and jumped 16%. You may have heard of them.

Starbucks lost a massive amount of business during China’s lockdowns, but still beat and rose 4.3%.

The men in tights, Robinhood, rose 12%, but this included an announcement it was cutting -23% of its workforce.

PayPal had reported in Tuesday night’s aftermarket, and it rose 9%.

A couple of takeaways from the above is that all-services-related companies are enjoying a post-lockdown honeymoon, including travel and accommodation, entertainment, and anything exhibiting pent-up demand. Last night MGM Resorts reported record profits in Las Vegas.

Honeymoons do end.

Online broker Robinhood is just the most recent in a string of tech companies, large or small, either firing, not hiring or slowing the hiring of new staff.

The expectation is that US unemployment will begin to creep back up, which is actually what the Fed wants.

July non-farm payrolls tomorrow tonight.


Spot Metals,Minerals & Energy Futures
Gold (oz) 1765.60 + 5.40 0.31%
Silver (oz) 20.04 + 0.08 0.40%
Copper (lb) 3.54 + 0.04 1.28%
Aluminium (lb) 1.18 – 0.02 – 1.90%
Lead (lb) 0.92 – 0.01 – 0.84%
Nickel (lb) 10.15 + 0.09 0.87%
Zinc (lb) 1.53 – 0.01 – 0.72%
West Texas Crude 90.66 – 3.76 – 3.98%
Brent Crude 96.91 – 3.05 – 3.05%
Iron Ore (t) 110.38 – 4.36 – 3.80%

Iron ore had been clawing its way back but has slipped again.

Last night’s oil price fall was attributed to the usual higher than expected US weekly inventories.

Forex cowboys must have again become too short the Aussie, as it has bounced 0.5% to US$0.6954 with the US dollar flat.


The SPI Overnight closed up 32 points or 0.5%.

We’ll see June trade numbers today, as will the US tonight.

The Bank of England meets tonight.

The Australian share market over the past thirty days…

APX Appen Downgrade to Underperform from Neutral Macquarie
FMG Fortescue Metals Downgrade to Sell from Neutral UBS
PNI Pinnacle Investment Management Downgrade to Hold from Accumulate Ord Minnett
PX1 Plexure Group Upgrade to Buy from Speculative Buy Ord Minnett
SDR SiteMinder Upgrade to Buy from Neutral Citi
SWP Swoop Holdings Downgrade to Hold from Speculative Buy Morgans
TCL Transurban Group Downgrade to Hold from Add Morgans
VUK Virgin Money UK Upgrade to Outperform from Neutral Macquarie
ZIP Zip Co Downgrade to Sell from Neutral Citi

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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