The Overnight Report: Jackson Jitters

This story features JUDO CAPITAL HOLDINGS LIMITED, and other companies. For more info SHARE ANALYSIS: JDO

By Greg Peel

One Step Forward

The ASX200 had been battling its way higher since Tuesday’s low just under 7100, making choppy progress through the earnings season amidst volatility on Wall Street. That volatility came back to bite last night, hence our futures are down -91 points this morning, which would take us back to the Tuesday low.

The standout of the last three sessions has been the technology sector – up 5% on Tuesday, down -5% on Wednesday, up 4.2% yesterday and, well, the Nasdaq was down -1.9% last night. The numbers are big but from a market-weight perspective, the index impact is small, unlike in the US.

By contrast, yesterday’s 1.0% gain for the banks provided the heavy lifting. Strength likely reflected a move down in bond yields, with the tens down -8 points and the twos down -5, following the US. US yields have bounced again overnight.

Among financials, Judo Capital ((JDO)) fell -19.8% on result yesterday, but it’s only in the ASX300. In the ASX200 are wealth managers Insignia Financial ((IFL)) and Perpetual ((PPT)), which fell -10.7% and -6.5% respectively on results.

Energy also provided strength (+0.9%), despite lower oil prices and a -5.1% fall for Whitehaven Coal ((WHC)) on result.

Real estate and discretionary held up well (both +0.5%) on lower yields – the latter despite JB Hi-Fi ((JBH)) going ex. ARB Corp ((ARB)) rose 7.9% on result, but Lovisa Holdings ((LOV)) fell -6.2%.

The big loser was staples (-1.1%), which has also had a volatile week between supermarket results and yesterday, a result from greengrocer Costa Group ((CGC)) that had that stock down -10.8%.

Utilities fell -1.1%, with a next-day response to APA Group’s ((APA)) result sending that stock down -3.4%.

Speaking of next-day moves, Wednesday’s winner McMillan Shakespeare ((MMS)) dropped -10.5% yesterday, while Wednesday’s big loser, WiseTech Global ((WTC)), jumped 8.1%. Corporate Travel Management ((CTD)) was another victim on Wednesday and it rose 4.4%.

Healthcare held up well (-0.3%) given Ramsay Health Care ((RHC)) fell -11.9% on result.

Looks like the losers were more plentiful than the winners on Super Thursday. Based on broker responses up to Wednesday’s results, 33% of companies have beaten and 30% have missed (based on FNArena’s assessment).

There are plenty more reports due today, although mercifully yesterday saw the peak in the season, which will continue through to next Thursday.

Sell the Fact

After another blow-away quarter, Nvidia rose 6% in Wednesday night’s aftermarket, which was fairly muted compared to the March quarter response, despite similar numbers. With the stock up 220% year to date, there had been expectation of some sell-the-fact.

Nvidia duly opened higher in last night’s session, but then started to fade. At the same time, US bond yields, which fell meaningfully on Wednesday night following a weak PMI, bounced back again. The two-year regained 5%.

Wall Street had in general been strong from the open. The Dow was up over 200 points before it turned and closed down -373. By the closing bell, Nvidia was up a mere 0.1%. Big Tech was once again trashed, with the Nasdaq down -1.9%.

It is assumed investors were waiting on Wednesday night to see whether Nvidia might produce another market-moving result, before taking risk off ahead of tonight’s speech from the Fed chair. The result was good enough but not the response, hence the door was open.

US durable goods orders rose 0.5% in July if the lumpy transport segment is excluded. Good news is bad news. Boeing had bad news of its own, having to delay deliveries of the 737 Max due to yet another manufacturing fault. Boeing (Dow) fell -4.9%.

Last night, speaking from Jackson Hole, the Philly Fed president suggested the Fed had “done enough” in lifting rates to date. He’s not alone in that view among members, but others are still in the “more work to do” camp.

The expectation is the Fed will pause in September, but what happens after that is up for grabs. Presumably we’ll get some clues tonight.

Commodities

Data yesterday suggested Chinese zinc demand was holding up better than expected.

The Aussie jumped 0.9% to yesterday morning and this morning is down -1.0%, at US$0.6420.

Today

The SPI Overnight closed down -91 points or -1.3%.

It will be down to today’s earnings reports to save the day. Unfortunately, the only stock of any weight reporting is Wesfarmers ((WES)).

Aside from hanging on Powell’s every word tonight, the US will see consumer sentiment.

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.

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