The Overnight Report: Mixed Feelings

This story features COMMONWEALTH BANK OF AUSTRALIA, and other companies. For more info SHARE ANALYSIS: CBA

World Overnight
SPI Overnight	7568.00	+ 1.00	0.01%
S&P ASX 200	7600.20	+ 21.80	0.29%
S&P500	4924.97	– 2.96	– 0.06%
Nasdaq Comp	15509.90	– 118.15	– 0.76%
DJIA	38467.31	+ 133.86	0.35%
S&P500 VIX	13.31	– 0.29	– 2.13%
US 10-year yield	4.06	– 0.03	– 0.78%
USD Index	103.42	– 0.19	– 0.18%
FTSE100	7666.31	+ 33.57	0.44%
DAX30	16972.34	+ 30.63	0.18%

By Greg Peel

Run Away

The ASX200 rallied 52 points to late morning yesterday, to 2 points shy of the all-time high, and ran away. That’s the second such bump on the ceiling this month – that other being Day One of 2024 trading on January 2. A nice top-and-tail to the month.

Three times a charm?

The turnaround, to a close of up only 21, coincided with the release of December retail sales data, which came in at a weak -2.7% month on month. This provided an excuse, but selling at the top was always on the cards.

While the number looks bad, there is an issue around seasonal adjustment of the ABS data. Until recent years, December was always the big Christmas spending month. Now it's November, particularly Black Friday (week). The seasonal adjustment need time to adjust.

That said, sales grew only 0.5% in the December quarter, despite inflation and population growth. Volume of sales have been flat to down in recent months. Yet the consumer discretionary sector rose 0.1% yesterday.

That’s likely because the Aussie ten-year yield fell -7 points to 4.14%, following US yields. Real estate felt the love (+1.2%), but the banks finally saw some selling (-0.2%), with Commonwealth Bank ((CBA)) having individually surpassed the prior all-time high.

The big winner on the day was technology (+1.9%), with Megaport ((MP1)) soaring 27.6% — not a takeover bid, just another quarterly update. It’s not the first time Megaport has enjoyed such a response; the stock is prone to volatile ups and downs.

Materials rose 0.7%, with gold and lithium stocks catching a bid, but the big mover on the day was Nickel Industries ((NIC)). It jumped 20.8% after announcing an increased dividend and a buyback.

Gold Road Resources ((GOR)) bounced back 10.0% following its big fall on Monday, after brokers brushed aside the bad news.

Healthcare rose 1.1%, with ResMed ((RMD)) continuing its fightback.

We may be back at the top, but the sectors are fairly fractured at the moment. Aside from the banks, staples, energy and industrials all saw small falls yesterday.

Later this morning we’ll get the December quarter CPI numbers. The futures are up one point, so it should be a quiet start.

One Bad Apple

After-the-bell earnings responses: Google down -4.5%, Microsoft as good as flat.

Last night an influential Taiwan-based Apple analyst warned of a -15% drop in iPhone shipments in 2024 due to structural issues. Apple fell -1.9%, which is influential when you’re the world’s (second) biggest company.

But as the disparity between the three major indices last night attests, traders were generally squaring up Mega Tech stock positions ahead of the first Mag7 reports for the week, being the aforementioned. Apple, Amazon and Meta all report on Thursday night.

We also have the Fed decision looming tomorrow morning.

Otherwise, Wall Street is firmly now in earnings report mode, Fed notwithstanding.

In a tale of two industries, General Motors rose 8% on result, while UPS fell -8%.

Commentators are beginning to question the inclusion of Tesla in the Mag7, with some now referring instead to the Mag6. While the other names have continued to power on through January, Tesla has been falling steadily since early December, on lower sales, lower margins and increased competition, as well as EV exhaustion in the US. Hybrids are currently the go. GM appears to be benefitting.

The two main issues are price and lack of charging stations.

Meanwhile, UPS is seen as an economic bellwether, and the -8% fall came in even as the parcel delivery service announced it was laying off -12,000 workers. Some announced layoffs are met with cheers, if they imply cutting excess fat out of the business. When they’re met with a sell-off, you know something’s not going well.

The US ten-year yield ticked down another -3 points last night to 4.06%.

The Conference Board monthly consumer confidence index came in at 114.8, ahead of 114.0 expectations.

Earnings results will roll on again tonight, in the biggest week of the season, with the biggies on Thursday night.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz)	2036.20	+ 4.20	0.21%
Silver (oz)	23.15	– 0.01	– 0.04%
Copper (lb)	3.89	+ 0.05	1.18%
Aluminium (lb)	1.02	+ 0.01	0.76%
Nickel (lb)	7.43	+ 0.02	0.33%
Zinc (lb)	1.16	+ 0.00	0.31%
West Texas Crude	77.93	+ 0.93	1.21%
Brent Crude	82.89	+ 0.34	0.41%
Iron Ore (t)	134.21	– 0.98	– 0.72%

A little bit of strength, as the markets look towards more Chinese stimulus.

The oils rose again as the US announced it had decided what to do about the attack in Jordan. It hasn’t said what yet.

The Aussie is down slightly at US$0.6602.

Today

The SPI Overnight closed up one point.

December quarter CPI today and December private sector credit.

China will report January PMIs.

The US will see January private sector jobs numbers and a Fed statement and press conference.

We’ll see the last rush of quarterly updates locally today, before it all comes to a screaming halt in February as earnings results take over.

Early reporters today are Credit Corp ((CCP)), Champion Iron ((CIA)) and BlueBet Holdings ((BBT)).

The Australian share market over the past thirty days…

Index	30 Jan 2024	Week To Date	Month To Date (Jan)	Quarter To Date (Jan-Mar)	Year To Date (2024)
S&P ASX 200 (ex-div)	7600.20	0.59%	0.12%	0.12%	0.12%

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
BAP	Bapcor	Upgrade to Add from Hold	Morgans
BOE	Boss Energy	Downgrade to Hold from Buy	Bell Potter
IGO	IGO	Upgrade to Buy from Neutral	Citi
NWL	Netwealth Group	Downgrade to Underperform from Neutral	Macquarie
		Downgrade to Hold from Accumulate	Ord Minnett
PDN	Paladin Energy	Upgrade to Buy from Hold	Bell Potter
		Upgrade to Buy from Neutral	Citi
RRL	Regis Resources	Downgrade to Sell from Neutral	UBS

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

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