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The Monday Report – 30 January 2023

Daily Market Reports | Jan 30 2023

This story features NEW HOPE CORPORATION LIMITED, and other companies. For more info SHARE ANALYSIS: NHC

World Overnight
SPI Overnight 7450.00 + 12.00 0.16%
S&P ASX 200 7493.80 + 25.50 0.34%
S&P500 4070.56 + 10.13 0.25%
Nasdaq Comp 11621.71 + 109.30 0.95%
DJIA 33978.08 + 28.67 0.08%
S&P500 VIX 18.51 – 0.22 – 1.17%
US 10-year yield 3.52 + 0.03 0.72%
USD Index 101.93 + 0.10 0.10%
FTSE100 7765.15 + 4.04 0.05%
DAX30 15150.03 + 17.18 0.11%

By Greg Peel

Still Happy New Year

Both of the traders who were forced to turn up to work on Friday, when no one else did, decided to keep the New Year momentum going. While the ASX200 banged around in a 40 point range on low volume, the eventual 25 point gain was basically the mean.

The bottom line was a case of just about all sectors up, again, with energy down -1.8%. Energy’s fall was all about thermal coal prices, which may be showing signs of peaking (although it wouldn’t be the first time), following an unseasonably warm European winter. At least until now.

New Hope Corp ((NHC)) fell -9.0%, Whitehaven Coal ((WHC)) -6.6% and Coronado Resources ((CRN)) -2.4%. The top five losers included a couple of gold miners and a lithium miner, but materials netted out to a flat close.

The only other weak sectors were healthcare (-0.3%) and utilities (-0.1%). We could argue that defensives had their run last year and following the lead from Wall Street, cyclicals and growth are back in fashion. True enough, except that staples rose 1.2% on Friday to be the best performing sector. So go figure.

I’d suggest that Wednesday’s CPI data, which showed a dip in food inflation, probably helped. Grocers typically like food inflation, but not so much that we all switch to gruel.

The comeback kids continue to be technology (+1.2%) and real estate (+1.1%), despite the two saps who turned up to trade bonds on Friday pushing the ten-year yield up 5 points to 3.55%.

The banks were the biggest winners on the day in index points terms in rising 1.0%. The chorus is nevertheless beginning to grow that the banks will post excellent results to their March year-ends (and Commonwealth Bank ((CBA)) when it reports next month) and then it will all be over.

Friday marked the fourth positive weekly close for the index this month (and this year!), following the same performance on Wall Street. Friday night on Wall Street saw some fairly definitive late selling, on the last Friday of a very solid month, ahead of a Fed meeting.

While our futures were up 12 points on Saturday morning, a bit of end-of-month profit-taking over the next two sessions would be of little surprise.

Don’t Leave Home

The Dow was up 200 points heading into the last hour of trade on Friday night and then closed largely flat. The S&P500 lost half of the day’s gains and the Nasdaq pulled back. No biggie on a Friday ahead of month-end, a stellar January, and a Fed meeting this week.

The Nasdaq is up 11% for the month.

The underlying positive mood still prevails. Friday night was a mix of macro and micro factors.

The US December personal consumption & expenditure (PCE) measure of inflation rose 5.0% at the headline, right in line with expectation, down from 5.5% in November. The core (ex food & energy) PCE, which is the Fed’s preferred inflation gauge, rose by 4.4%, down from 4.7%.

The data further underscore Wall Street’s expectations that the US economy can indeed come in for a soft landing. I don’t know what was in the champagne this past New Year’s Eve, but such a view is a stark turnaround from the hell-in-a-handcart fears pervading around Christmas.

No one expects anything other than a 25 point rate hike from the Fed this week – which would be the first 25-pointer since the Fed made its initial move in March last year — so it will come down to Jerome Powell’s press conference rhetoric. And whether the market actually believes what he says (it hasn’t so far this year).

Then on Friday we’ll see the January jobs numbers. The US labour market was stubbornly resilient all through 2022, and continues to lead to a scratching of heads. Yet one by one the companies reporting earnings to date have been announcing lay-offs. Tech has been the hardest hit, but jobs are being lost elsewhere across the economy as well.

When will all these lay-offs show up in the data?

Tesla rose another 11% on Friday night to match its Thursday night move post earnings results and guidance.

The star of Friday night was American Express (Dow), which missed on both the top and bottom lines and also rose 11%. It was all about guidance. Amex is not seeing any drop-off in consumer spending as had been feared, largely because those who don’t leave home without it tend to be higher-end earners.

Intel (Dow), on the other hand, fell -7% after posting what was largely seen as a shocker after the bell on Thursday. While there are rumours of the death of the PC abounding, the truth is other PC chip-makers such as Nvidia and Micron actually rose on the day – no guilt by association. Intel is singularly now facing a rebasing and recalibrating that may take years.

This week brings results from all of the Mega Tech names – those which can individually move the market by a measure.

January rallies are not uncommon on Wall Street. Rallying into a Fed meeting is also a more often than not affair. With the bulk of earnings results still to come, and the Fed ready to pour more cold water, can Wall Street keep this up?

Having broken 4000, and the downtrend line, the next challenge for the S&P500 is 4100 – another solid barrier that was glimpsed in late November-early December, before a hasty retreat.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz) 1927.50 – 3.00 – 0.16%
Silver (oz) 23.60 – 0.31 – 1.30%
Copper (lb) 4.25 + 0.05 1.18%
Aluminium (lb) 1.29 – 0.00 – 0.19%
Lead (lb) 0.99 + 0.01 0.75%
Nickel (lb) 13.08 – 0.07 – 0.52%
Zinc (lb) 1.58 + 0.01 0.79%
West Texas Crude 79.68 – 1.50 – 1.85%
Brent Crude 86.66 – 0.92 – 1.05%
Iron Ore (t) 122.70 + 0.21 0.17%

China’s back today so we should start to see a bit more movement in metals.

Indications of increased oil supply out of Russia, being sold to those happy to buy it, were blamed for weaker oil prices on Friday night.

The Aussie is down slightly at US$0.7101.

The SPI Overnight closed up 12 points on Saturday morning.

The Week Ahead

The Fed delivers its decision on Wednesday night. Wednesday night also brings numbers for US private sector jobs, construction spending and house prices, and global manufacturing PMIs.

US non-farm payroll data are due on Friday.

China reports its January PMIs tomorrow.

The eurozone reports December quarter GDP tomorrow.

The Bank of England meets on Thursday.

Locally we’ll see private sector credit and retail sales tomorrow, house prices on Wednesday and building approvals on Thursday.

Today and tomorrow bring the last of the quarterly updates, mostly from the resource sector, and then the local earnings season kicks off immediately the clock turns February.

This week brings results from Amcor ((AMC)), Janus Henderson ((JHG)), REA Group ((REA)) and News Corp ((NWS)), among others.

BHP Group ((BHP)) prey OZ Minerals ((OZL)) provides a quarterly update today.

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
29M 29Metals Downgrade to Hold from Accumulate Ord Minnett
AX1 Accent Group Downgrade to Hold from Add Morgans
BWP BWP Trust Downgrade to Sell from Neutral UBS
CLW Charter Hall Long WALE REIT Downgrade to Sell from Neutral UBS
CPU Computershare Downgrade to Equal-weight from Overweight Morgan Stanley
EVN Evolution Mining Downgrade to Hold from Accumulate Ord Minnett
GMG Goodman Group Upgrade to Buy from Neutral UBS
JBH JB Hi-Fi Downgrade to Sell from Lighten Ord Minnett
MFG Magellan Financial Upgrade to Accumulate from Lighten Ord Minnett
MGR Mirvac Group Downgrade to Neutral from Buy UBS
MP1 Megaport Upgrade to Add from Hold Morgans
RHC Ramsay Health Care Downgrade to Neutral from Outperform Macquarie
SCG Scentre Group Downgrade to Neutral from Buy UBS
TLS Telstra Group Upgrade to Outperform from Neutral Macquarie
VCX Vicinity Centres Downgrade to Sell from Neutral UBS
WDS Woodside Energy Downgrade to Neutral from Buy Citi

For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.

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CHARTS

AMC BHP CBA CRN JHG NHC NWS OZL REA WHC

For more info SHARE ANALYSIS: AMC - AMCOR PLC

For more info SHARE ANALYSIS: BHP - BHP GROUP LIMITED

For more info SHARE ANALYSIS: CBA - COMMONWEALTH BANK OF AUSTRALIA

For more info SHARE ANALYSIS: CRN - CORONADO GLOBAL RESOURCES INC

For more info SHARE ANALYSIS: JHG - JANUS HENDERSON GROUP PLC

For more info SHARE ANALYSIS: NHC - NEW HOPE CORPORATION LIMITED

For more info SHARE ANALYSIS: NWS - NEWS CORPORATION

For more info SHARE ANALYSIS: OZL - OZ MINERALS LIMITED

For more info SHARE ANALYSIS: REA - REA GROUP LIMITED

For more info SHARE ANALYSIS: WHC - WHITEHAVEN COAL LIMITED