The Overnight Report: Tech Rebound

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This story features PREMIER INVESTMENTS LIMITED, and other companies.
For more info SHARE ANALYSIS: PMV
The company is included in ASX200, ASX300 and ALL-ORDS

By Greg Peel

Mixed Results

The futures said down -23 points yesterday despite a better session on Wall Street, but looked close enough to the mark after the ASX200 fell -32 points. But all of that fall came in the last hour and a half. Before that, the index simply balanced good and bad earnings results.

Only two sectors ultimately closed in the green. One was energy (+0.7%) on higher oil prices, and the other was consumer discretionary (+0.8%), on results and other announcements.

The other announcement was a strategic review to be conducted by Premier Investments ((PMV)), and the CEO departing. That was worth 12.2%.

Results-wise, good numbers for Breville Group ((BRG)) had that stock up 9.0%, while Lovisa Holdings rose 6.6%. The sector gain was not impacted by Adairs ((ADH)) going the other way, falling -15.5% (ASX300).

Among the losers, staples posted a rare worst-on-ground performance with a -1.3% fall, with a little trouble in big China taking a2 Milk ((A2M)) down -13.6%. Not reporting but issuing a profit warning was Elders ((ELD)), down -10.8%.

Technology fell -1.3%, largely due to a -35.5% thumping for Iress ((IRE)) after it announced it would cut its dividend and sell off a business to pay down debt.

Healthcare fell -1.0% because CSL ((CSL)), which reported a while back, fell -1.4%.

Financials lost -0.9% after Westpac ((WBC)) provided a June quarter update that disappointed on margins, worth -3.1%, while Insurance Australia Group ((IAG)) fell -0.9% on result.

Communication services lost -0.9% as Telstra ((TLS)) continued to fall. Seven West Media ((SWM)) dropped -7.3% after admitting it actually didn’t make much money out of our Sammy and friends due to ad-free play, but is not in the index.

Industrials lost -0.5%, with Reliance Worldwide ((RWC)) down -8.3% on result, bemoaning a slowing housing market.

Materials managed to fall only -0.1% after China cut its one-year rate by -10 basis points, which otherwise was another damp squib on the stimulus front.

Real estate fell -0.4% with Vicinity Centres ((VCX)) going ex.

The news from the front is that tech rebounded on Wall Street last night, sending the S&P500 up 0.7%, but our futures are up only 0.2% this morning, with another big day of earnings looming.

Australia is not really big on AI chips, EVs, cybersecurity and social media.

Taking a Punt

It began with cybersecurity company Palo Alto Networks reporting earnings in Friday night’s aftermarket, and closing up 14.8% last night.

Otherwise the rebound in Big Tech last night, in the face of rising bond yields, was driven by broker upgrades.

There has been a scramble to upgrade target prices for Nvidia ahead of its result tomorrow night, and another big shift up in target last night had Nvidia popping 8.5%. No pressure.

Tesla also received a glowing analyst report and rebounded 7.3%, having fallen -30% recently on EV price cuts and weakness in China.

Put those three together, and investors decided the Nasdaq had fallen far enough. This despite the US ten-year yield jumping 9 points to 4.34%, and the two-year closing back in on 5%.

Oh and in last night’s aftermarket Zoom Video reported – you may have heard of it – and is up 4%.

Have investors come to terms with higher discount rates for growth stocks? We recall that last week the Nasdaq posted a one-day wonder rebound. And as evidenced by the Dow, last night was all about Big Tech and Big Tech only – 20% of the S&P500.

There is a growing feeling that the big move up in bond yields, largely driven by apparent strength in the US economy, will worry the Fed. By rights, a strong economy should lead to further rate rises but having already hiked 525 points, the Fed would like to see what happens before going in hard again.

Ever higher yields imply further tightening of financial conditions, which could lead to something breaking again, a la SVB. Hence, there is an assumption that unlike last year’s rant, Jerome Powell will elect a dovish tome when he speaks at Jackson Hole on Friday night.

We’ll see.

Meanwhile, Nvidia holds the key.

Commodities

Yes, well, more Chinese stimulus really fired up those commodity prices.

Gold managed to rise a bit despite the big jump in bond yields, likely finding buyers under US$1900/oz at what is the low end of the recent range.

The Aussie is up – yay – 0.2% at US$0.6417.

Today

The SPI Overnight closed up 17 points or 0.2%.

The US will see monthly consumer confidence data tonight.

BHP Group ((BHP)) reports earnings (and dividend) today.

Other reporters of note today include ARB Corp ((ARB)), Coles ((COL)), Megaport ((MP1)), Scentre Group ((SCG)) and Woodside Energy ((WDS)).

Among the ex-divs today are Computershare ((CPU)), Deterra Royalties ((DRR)) and Netwealth Group ((NWL)).

For all company reporting dates, please refer to the FNArena Calendar (https://www.fnarena.com/index.php/financial-news/calendar/) or the Corporate Results Monitor (https://www.fnarena.com/index.php/reporting_season/). The latter summarises result responses from brokers following each day’s result releases.

The Australian share market over the past thirty days…

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

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

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