The Overnight Report: Tech Titans

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This story features TRANSURBAN GROUP LIMITED, and other companies.
For more info SHARE ANALYSIS: TCL
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

The Dow closed down -27 points or -0.1% while the S&P gained 0.2% to 2388 as the Nasdaq rose 0.7%.

Buy in May

The local market opened yesterday morning under the banner of “We’re going to 6000, and nothing’s going to stop us”, or so it seemed. There was an attempt to sell down the banks mid-morning, suggesting squaring up ahead of this week’s round of earnings results, but the buyers came flooding back to push the financials up 0.6% by day’s end.

I posed the question yesterday, what could get us to 6000? Well it seems the answer is “buyers”. Yes, well thanks Scoop. But what was interesting yesterday is just what investors were buying.

Utilities led the charge with a 1.7% gain supported by consumer staples (1.1%) and telcos (1.0%). If we get to 6000 it might be through defensive buying (although I have previously suggested telcos are no longer defensive). There appeared a possible theme of buying ahead of a federal budget that will likely include support for infrastructure, given utility buying was supported by strength in the likes of Transurban ((TCL)), Cimic ((CIM)) and Seven Group ((SVW)), the latter being the local Caterpillar dealer, helping to push industrials up 1.2%.

Yet to throw a spanner into the works, consumer discretionary rose 0.9%. This despite ongoing warnings of household debt stress and the likelihood of consumers entering a cycle of savings over spending. Or is it because local retailers will receive a boost when the budget enforces the GST on offshore purchases?

Meanwhile, materials, energy and healthcare all sat it out yesterday.

The ASX200 closed at 5956 yesterday. Many chartists have seen 5950 as a technical level that must be conquered. The SPI futures are again positive this morning despite the only move on Wall Street being strength in FANG stocks, or should that be FANA, or maybe FAANA. Anyway, worlds away from the Australian market context.

Perhaps the real question is: when we get to 6000, then what do we do?

For the record: In Wall Street terms, “Sell in May” has worked 55% of the time in the last ten years. Almost a coin toss. And four out of the last five Mays have seen rallies.

Fangs Bared

Two stocks that are yet to report in the US are Apple (Dow) and Netflix. Both last night hit new all-time highs. The Nasdaq also hit a new ATH in rising 0.7%, led by the big tech names that were once known as FANG (Facebook, Apple, Netflix, Google). But Google is now Alphabet and it would be remiss not to include Amazon in this club. Hence FAANA.

When Trump was elected and US banks, industrials, healthcare etc took off, FAANA went the other way. Initially. Silicon Valley had been highly critical of Trump’s anti-immigration stance, believing it would severely impact on America’s knowledge economy. But aside from Trump failing in this particular policy pledge, Big Tech has recovered and hit new highs based simply on fundamentals. Earnings are earnings.

The banks had a scare last night, mid-session, when Donald Trump reiterated his intention to wind back Dodd-Frank (legislation in response to the GFC) but also suggesting he would not be opposed to “breaking up the banks”, meaning reintroducing Glass-Steagall (legislation from the early twentieth century that enforced the separation of commercial (deposits-loans) and investment (corporate finance, proprietary trading) banking). The bank index plunged -1% in a blink.

And then immediately recovered. No one puts much credence in what might come spouting out of Trump’s mouth, off the cuff, anymore.

Otherwise, Wall Street was selling rather than buying defensives last night and energy was also weak on a lower oil price.

Speaking of things that no longer faze Wall Street, there has been a lot of talk over recent weeks and even months that the US government was at risk of shutting down last Friday, on the assumption the Democrats would not agree to the new debt ceiling level. The stumbling block was The Wall, which the Democrats refuse to fund.

Well the government is still open, thanks to agreement being reached over the weekend. Funding includes US$1.5bn for border security, as long as this does not include The Wall.

The Fence?

Commodities

The US dollar index rose only 0.1% to 99.14 last night but gold had another one of its dummy-spits, down -US$11.50 to US$1256.10/oz.

The LME was closed for the May Day holiday.

With China similarly on holiday, iron ore was unchanged at US$68.00/t.

West Texas crude is down -US43c at US$48.74/bbl.

The Aussie was on a bit of a tear in thin global trading last night, up 0.5% at US$75.23 this morning ahead of today’s RBA meeting.

Today

The SPI Overnight closed up 9 points.

Not sure why the Aussie’s so strong. One gets the feeling the RBA is poised, waiting to be sure the new and various APRA measures to tighten mortgage lending and calm the runaway stock market appear to be working before cutting the cash rate to head off a potentially slowing economy.

We’ll learn their view this afternoon.

Caixin will provide its take on the Chinese manufacturing PMI today.

Otherwise, all eyes will be on the earnings result due today from ANZ Bank ((ANZ)), and also on the quarterly sales report from Woolworths ((WOW)).

Quarterly reports are also forthcoming from Goodman Group ((GMG)) and Dexus Property ((DXS)).

Rudi will connect with Sky Business today, through Skype, to provide background and commentary on broker calls. Should be around 11.15am.
 

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