Tech rout resumes on Wall St tumble, Qantas cuts flight capacity: ASX to fall

 

Nasdaq snaps three-day winning streak as tech tumble as inflation data raises prospects of accelerated interest rate hikes. European & Asian mixed climbing Covid wall of worries. ASX gains for 2nd day on Thursday. Commodities market retreats today, Qantas (ASX:QAN) cuts flight capacity. 

The Australian sharemarket is set to fall following Wall St taking a turn, closing at session lows. The Nasdaq snapped its three day winning streak as the Fed prepares to raise rates to combat a surge in inflation.

Nasdaq snaps 3-day winning streak

The tech rally has taken more than a big breather today, a big tumble. It seems like we are repeating what happened at the start of the week – a huge dip, then we saw a big rally, snapping that for a steep fall today. These moves continue to be the tune for 2022 so far as volatility continues to play out.

Yesterday, there was an increased appetite to buy into stocks after receiving the consumer price figures, but we’ve also had a choir of commentary from Fed officials, which saw traders be a bit more cautious around big tech names like Apple, and Microsoft in today’s session.

Investors digested new economic data on inflation and the jobs front. Adding to the consumer price index yesterday, CPI. Today we received the producer price figures, so the price paid to US producers.

Producer prices show signs of cooling

In December it decelerated by 0.4 per cent from the month before, but on an annual basis it soared 9.7 per cent last year, to the biggest jump for a calendar year since records had been kept, in 2010 as per the US Bureau of Labor Statistics.

This could be a sign that inflation is cooling on the producer front, however, any change in the data for one month is nice, but if we look at the trend, it’s been climbing, and we saw that yesterday and inflation is expected to peak. Why? There is still a lot of demand out there, and production hasn’t ramped up to create the necessary supply. One sector that stands out is the semiconductor chips space, chips are used in almost every electronic device, and even in EV vehicles.

TMSC to spend US$40b to ramp up chip production

I won’t have a chance to cover this story, but look up TMSC, Taiwan Semiconductor Manufacturing Company. They posted a record quarterly profit and are looking to spend US$40 billion to address the chip shortage. Shows the scale, incredible.

Jobless claims rises as insured unemployment rate improves

Now to other economic data, weekly jobless claims came in higher than expected with 230,000 Americans filing first time claims. But today, I’m going to talk about a metric which I find very interesting which I haven’t talked about before. In the weekly jobless claims data, they have a metric called the insured unemployment rate.

So this is the number of people who are receiving unemployment benefits as a percentage of the labour force. It was 1.1 per cent for the week ending January 1, a decrease of 0.2 percentage points from the previous week. So what does this tell us? On the trend piece, it’s been declining, and it is a leading indicator that we are going to hit the Fed’s unemployment rate of 3.5 per cent pretty soon. Analysts expect this to happen mid this year, so something to keep an eye on.

The big unknown is how long will inflation last and what does that mean for the Federal Reserve's policy? We will continue to monitor any developments between now and the March meeting. Let’s look at the numbers to see what sectors to keep an eye out for today.

Wall St’s numbers

At the closing bell, the Dow Jones lost 0.5 per cent to 36,114, the S&P 500 fell 1.4 per cent to 4,659 while the Nasdaq closed 2.5 per cent lower at 14,807.

Across the S&P 500 sectors, technology tumbled 2.7 per cent as the worst performer among the eight sectors that closed lower today. Consumer discretionary, and health care were the second and third worst performers. On a brighter note, utilities was the best performer, followed by consumer staples, and industrials as the only three sectors that closed higher.

The yield on the 10-year treasury note dipped 3 basis points to 1.70 per cent, gold fell on a firmer greenback.

European & Asian mixed climbing Covid-19 wall of worries

Across the Atlantic, European markets closed mixed after digesting US inflation data. Paris lose 0.5 per cent, Frankfurt added 0.1 per cent and London’s FTSE gained 0.2 per cent.

Asian markets closed mixed as China looks to contain the virus ahead of the Winter Olympics. Tokyo’s Nikkei fell almost 1 per cent, Hong Kong’s Hang Seng added 0.1 per cent and China’s Shanghai Composite closed 1.2 per cent lower.

ASX gains for 2nd day on resources rally

Yesterday, the Australian sharemarket closed 0.5 per cent higher at 7,474, rising for its 2nd day wiping out the losses from this week, as resources stocks rallied supported by stronger commodity prices.

The demand for the steel-making ingredient continues as the world’s largest iron ore exporter, Brazil experiences torrential rainfall disrupting mining operations. Despite the Winter Olympics in February and China’s aim to curb carbon emissions prior, the rise in steel mill margins and the recovery in Chinese steel production from December 2021 has contributed to the strength of the iron ore price according to S&P Global Platts.

This helped materials come in as the best performing sector, energy also powered up, while healthcare was the worst with technology stocks lagging.

Rio Tinto (ASX:RIO) up 4.1 per cent to $111.70, BHP (ASX:BHP) added 3.8 per cent to $46.85, while Fortescue Metals (ASX:FMG) gained 2.5 per cent to $21.40. South32 (ASX:S32) closed 3.7 per cent higher to $4.24.

Energy stocks rallied after the Energy Information Administration posted a stockpile shortage amid OPEC+ and its quota widening, as economies remain open amid the havoc of Omicron. Woodside (ASX:WPL) rose 2.3 per cent to $24.90, Santos (ASX:STO) gained 1.6 per cent to $7.09, while Beach Energy (ASX:BPT) closed 2.2 per cent higher to $1.41.

Nickel and copper miners also took the spotlight as the base metal prices rallied. The nickel price hit its highest level in a decade by 1.1 per cent, this supported IGO (ASX:IGO) up 3.8 per cent to $12.45, Chalice Mining (ASX:CHN) added 3.6 per cent to $8.72, while Nickel Mines rallied again (ASX:NIC) closed 5.2 per cent higher to $1.63 coming in as the second best performer.

The company that took the lead for the session was Crown (ASX:CWN) adding 8.8 per cent to $12.65 after US private equity giant Blackstone increased its takeover bid by 60 cents to $13.10 valuing the offer at $8.9 billion. The new deal is subject to Blackstone completing due diligence, with the interim offer already having approval from Crown's board. The sweetened proposal comes after the embattled casino operator was investigated into organised crime by the royal commission, with the share price at $8.60 half a year ago.

They took home the jewel as the best-performing stock closing 8.8 per cent higher at $12.65. It was followed by shares in Nickel Mines (ASX:NIC), and Champion Iron (ASX:CIA). The worst-performing stock was PolyNovo (ASX:PNV), closing 10.1 per cent lower at $1.65, followed by shares in PointsBet Holdings (ASX:PBH), and Sonic Healthcare (ASX:SHL).

Elsewhere, artificial intelligence company Brainchip Holdings (ASX:BRN) soared 17.7 per cent to $1.40, two days after the ASX slapped a speeding ticket.

Information technology was one of the losing sectors with Afterpay (ASX:APT) giving up gains, falling 1.3 per cent to $75.99 after its 5 per cent jump on Wednesday. The buy-now pay-later darling after receiving approval from the Bank of Spain for its takeover by US tech giant Block.

Across the banks, ANZ (ASX:ANZ) rose 1.3 per cent to $28.40, National Australia Bank (ASX:NAB) added 1.1 per cent to $29.57, Commonwealth Bank (ASX:CBA) added 0.5 per cent to $102.20 while Westpac closed 0.3 per cent higher to $21.73.

SPI futures

Looking ahead, taking all into consideration, the SPI futures are pointing to a 0.5 per cent fall.

Local economic news

The Australian Bureau of Statistics is set to release lending figures for November. A touch point on finance commitments across housing, personal, and business loans.

Company news

Qantas (ASX:QAN) will cut its domestic capacity to 70 per cent of pre-Covid levels and international capacity to 20 per cent pre-Covid levels. This reduction is driven by increased travel restrictions in countries such as Japan, Thailand and Indonesia and is mostly impacting Jetstar’s leisure routes. Shares in Qantas (ASX:QAN) closed 2.4 per cent lower at $4.99 yesterday.

Dividends-pay

VanEck Gold Miners ETF (ASX:GDX)
Kirkland Lake Gold (ASX:KLA)
Pengana Private Equity Trust (ASX:PE1)

Commodities

Iron ore has lost 2.8 per cent to US$127.95. Its futures are pointing to a fall of 1.4 per cent.

Gold fell $5.20 or 0.3 per cent to US$1,822 an ounce. Silver was down $0.10 or 0.4 per cent to US$23.11 an ounce.

Oil fell $1.14 or 1.4 per cent to US$81.50 a barrel.

Currencies

One Australian Dollar at 8:25 AM has weakened slightly since yesterday (72.91 US cents), buying 72.78 US cents, 53.10 Pence Sterling, 83.07 Yen and 63.55 Euro cents.
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Source: Finance News Network