The Overnight Report: I’m Going To Jackson

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By Greg Peel

The Dow closed down 23 points or 0.1% while the S&P fell a point to 2182 and the Nasdaq rose 0.1%.

Over-Valuation

I noted yesterday that to date in the local reporting season, broker ratings downgrades in response to earnings results have been outstripping upgrades by two to one while earnings beats are ahead of misses by (as of Friday’s results) 43% to 28%. The underlying theme is one of stocks that have simply run too far.

Enter APN Outdoor ((APO)). This stock has doubled in value over the course of twelve months, supported by positive analyst views on the growth available for digital outdoor advertising. Well, yesterday APN missed, and its shares plummeted 35%.

When your share price is overinflated you cannot afford to miss. APN’s partner in crime in the space with the ridiculous name ((OML)) dropped 15% in sympathy ahead of its result today.

By contrast, if you’ve been a serial disappointer who just can’t seem to catch a break, leading to shareholders giving up on you, then a return to form with an earnings beat will be well rewarded. Enter GWA Group ((GWA)), distributor of kitchen and bathroom fittings and garage doors, which enjoyed a 15% pop in its share price yesterday.

These were the standout individual results in another session yesterday that featured no macro theme, and really no sector themes either. The resources sectors were mostly responsible for the index finishing lower, with ongoing selling in Santos ((STO)) most notable.

And there would have been a few heads being scratched given a weak day for the materials sector included a 2.3% fall for Fortescue Metals ((FMG)). Twiggy completely knocked it out of the park, yet the stock price fell in response. See: APN Outdoor.

Another popular theme of late has been aged care. There have been some ups and downs in this sector amongst the recent newcomers and yesterday Japara Healthcare ((JHC)) suffered a down with its result, sending its shares -9% and dragging peer Estia Health ((EHE)) down -5% with it.

The next three days see more companies reporting than on any other day of this results season. No doubt there will be more stories to tell tomorrow.

Oil Slips

The annual Jackson Hole gathering of Fedheads and invited central bank types never used to draw much attention until then Fed chairman Ben Bernanke started using the symposium as the forum for unofficially announcing his various QE programs post-GFC. Once they were up and running, Bernanke stopped attending, and in her first year in the chair Janet Yellen gave it a miss as well.

But this year Yellen is attending. The assumption, given recent history, is that the Fed chair would not bother attending unless he/she actually has something important to say. Yellen will not be speaking until Friday, so Wall Street has a whole week to speculate about just what might be in store and reason not to do anything too dramatic on the trading front until more is known.

And reason to stay on the beach. The new week has started as it left off – thin volumes, low volatility, and a general lack of interest.

The only real interest last night was in the oil market. After rebounding solidly for seven sessions straight on the possibility of a Saudi production freeze, sending Brent back up over US$50/bbl and WTI not far off it, oil prices fell by 3% last night.

Fundamentally, there are signs of improving production out of the likes of Iraq and Nigeria. Technically, to see some selling after such a sharp rise is hardly surprising. But at the end of the day, we can probably put this slip down mostly to the fact the September delivery contract in WTI expired last night and tomorrow October will be the new front month.

So commentators are blaming oil for the Dow being lower last night but let’s face it, earlier this year a 3% drop in oil would have been worth at least a hundred Dow points to the downside, but these days traders just shrug.

Commodities

West Texas crude is down US$1.48 at US$47.05/bbl on expiry and Brent is down US$1.67 at US$49.16/bbl.

The US dollar index is flat this morning at 94.50 but it was a weak night in London for base metal prices, with copper and nickel down 1% and lead down 1.5%.

Iron ore rose US10c to US$61.10/t.

Gold is relatively steady at US$1338.60/oz.

The Aussie is also steady at US$0.7632.

Today

The SPI Overnight closed up 3 points.

Shopping centre REIT Scentre Group ((SCG)) is the big cap name reporting today while Oil Search ((OSH)) will wrap up results for the big gas producers. Otherwise today’s reporters represent a spread of diversified smaller names including energy sector service providers, retailers, REITs, telcos, Caltex ((CTX)), and the aforementioned other outdoor advertising company.

Things that make you go ooh.
 

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