The Overnight Report: All Eyes On The Hole

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

By Greg Peel

The Dow closed down 33 points or 0.2% while the S&P lost 0.1% to 2172 and the Nasdaq fell 0.1%.

Another Mixed Bag

A fall of 21 points represents one of the big moves for the ASX200 over the course of this result season but the market started with a handicap yesterday of lower oil and metals prices. The banks also saw some selling after having been bought up this week. Outside of these influences, it was another familiar day of sharp moves both up and down amongst the day’s individual earnings reporters.

The biggest sector fall on the day was registered by the smallest of all sectors, info tech. It fell 2.0% thanks to a miss from accounting software company MYOB ((MYO)) and a subsequent 10% share price drop.

The biggest move up was registered by consumer staples. It rose 2.4% thanks to a 4% gain for big cap Woolworths ((WOW)). Woolies actually missed consensus but did show signs of some sales improvement, which was enough to worry the many shorters of the stock. Woolies is the most heavily shorted Top 20 stock by a margin.

Western Areas ((WSA)) picked a bad day to disappoint given nickel prices were also down 3% overnight. The stock has flown these past months on the nickel price recovery and thus fell 13% yesterday. The biggest fall was reserved for oil explorer AWE ((AWE)), down 15%.

Education provider 3P Learning ((3PL)) has been sold down all year so a beat was worth a 15% pop, while Southern Cross Media ((SXL)) has traded sideways all year but jumped 12%.

Other notable moves among the big boys were a 4% gain for perpetual performer Amcor ((AMC)) and a 4% gain for underperformer Perpetual ((PPT)).

No macro themes amongst the results, and no sector themes either. Although we should acknowledge a sector theme that has been emerging all year and has perhaps now caught the attention of those who hadn’t been paying much up to now. Software is the new black.

Discounting MYOB, which has been around for as long as we’ve all had to do a BAS, we note two stocks that took off on their results on Wednesday kicked on with it yesterday. Altium ((ALU)) gained another 8% and iSentia ((ISD)) 5%.

Watch the weather, it’s clouding over.

Tell us about it Janet

Wall Street is setting itself up for disappointment, and knows it.

Tonight Fed chair Janet Yellen will deliver a prepared speech on the subject of the policy tools available to central banks and whether or not they remain relevant in today’s world. She is not there to make a policy commitment. The Jackson Hole symposium is academic in nature. It’s not an FOMC meeting.

The problem is former chair Ben Bernanke used Jackson Hole as means of flagging major, experimental policy changes to give markets a heads-up and to dampen volatility. A rate hike is not QE. The fact that Janet Yellen is attending the symposium this year when she doesn’t have to, and didn’t in her first year, has led Wall Street to believe she’s there to make a definitive statement on interest rates.

Yet no one really believes she will actually do so.

If she says nothing, or simply bangs out the same old line, there will be much frustration. There was much frustration last night when two Fedheads individually popped up to support a rate rise sooner rather than later. They are known hawks, and the market just really wishes Fedheads would just shut the hell up. They are part of the problem, not the solution.

The Fed is data-dependent, it so it endlessly tells us. Last night’s data released showed that having fallen for the prior two months, durable goods orders rebounded a better than expected 4.4%. Okay then, let’s have a rate rise.

The feeling now on Wall Street is that the Fed won’t raise in September, but will raise in December, simply because it’s been telling us all year that rate rises are planned and December’s the Last Chance Hotel. If not, they will look like idiots, if they don’t already.

On a side note, there was much hope in the wake of the Brexit rebound and reasonable data out of Europe lately that the closely watched German IFO survey of business sentiment would show improvement this month. Instead the index fell to 106.2 from 108.3, which is considered a sharp drop.

Commodities

West Texas crude bounced back last night, up US58c to US$47.38/bbl.

Other than a 1% gain for zinc, base metal prices barely moved.

Currency played its part. The US dollar index was unmoved at 94.73 and ditto the Aussie at US$0.7615.

Iron ore fell US40c to US$61.10/t.

Gold is slightly lower at US$1323.80/oz.

Today

The SPI Overnight closed up 5 points.

It’s been quiet all week on Wall Street in the summer heat, with the long countdown to Jackson Hole soon to end. The first revision of US June quarter GDP is also due tonight.

We have now struggled over the very steep hill that was the past two days of the earnings season. From today, the number of companies reporting each day begins to drop off as we head towards the end of the month.

Today’s highlights include Coca-Cola Amatil ((CCL)), Cabcharge ((CAB)) and Super Retail ((SUL)).

Rudi will Skype-link up with Sky Business to talk broker calls at around 11.05am.
 

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available in the FNArena Cockpit.  Click here. (Subscribers can access prices in the Cockpit.)

(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)

All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts in the Cockpit and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided. www.fnarena.com

Click to view our Glossary of Financial Terms