The Overnight Report: Blow Off

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            [6] => ((BPT))
            [7] => ((CSL))
            [8] => ((AGL))
            [9] => ((CBA))
            [10] => ((AMP))
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            [12] => ((EVN))
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            [7] => CSL
            [8] => AGL
            [9] => CBA
            [10] => AMP
            [11] => DHG
            [12] => EVN
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This story features JB HI-FI LIMITED, and other companies.
For more info SHARE ANALYSIS: JBH
The company is included in ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

Wild West

The ASX200 may once again have moved in a fairly tight range yesterday, and sector moves were non-spectacular, but under the surface there were some serious stock moves on earnings results, up and down.

Two notable aspects from yesterday were second-day follow-throughs on broker reviews, and a disparity between domestic and international exposure.

Local company JB Hi-Fi ((JBH)) jumped strongly on its numbers on Monday, and following some effusive reviews from brokers, seeing a best-in-class performance, rose another 5.6% yesterday. Meanwhile, international stablemate Breville Group ((BRG)) disappointed with its result yesterday and fell -8.5%.

Boral ((BLD)) proved a winner with its result on Friday, but yesterday US-focused James Hardie ((JHX)) dropped -8.5% on result and disappointing guidance.

Seek ((SEK)) was also an international loser in falling -4.5%.

On the other side of the ledger, Challenger ((CGF)) won the day with an 8.4% pop on result, and while having starred on Monday with its report, Beach Energy ((BPT)) added another 6.7% following broker updates.

CSL ((CSL)) took a whack on Monday when it announced a failed drug trial, and on its result yesterday fell another -2.8%.

That took healthcare down another -1.6% yesterday to be the worst performing sector. Seek helped communication services down -1.1%.

Consumer discretionary balanced out with a 0.2% gain. Building material companies get lost in the influence of the big miners, and the materials sector closed flat.

Utilities rose 0.7% as AGL Energy ((AGL)) kept rising, while the banks held the fort (which includes Challenger) in adding 0.3%.

Another round of results is due today, and the bad news is US CPI print has come in “hot” and the S&P500 has fallen -1.4%. The good news, of course, is that the ASX200 has not been following Wall Street’s latest run up to fresh all-time highs, so while the US market has cooled off from an overbought position, we don’t need to.

Except the futures are down -90 points this morning.

It’s frustrating when the macro interferes with the micro during result seasons, as it distorts daily result responses. Commonwealth Bank ((CBA)) will be reporting into the wind today.

What Goes Up…

The US headline CPI rose 0.3% in January to an annual rate of 3.1%, down from 3.4% in December – still heading in the right direction, but forecasts were for 0.2% and 2.9%.

The core CPI was steady in January from December at 3.9%, against forecasts of 3.7%.

Wall Street lost its bottle, but did recover somewhat to the close. The S&P500 was down -1.9% at one point before recovering to close down -1.4%. The Dow was down over -700 points, before closing down -525.

Despite the recovery in the Dow, it was the biggest single-day fall for the average since last March.

The US ten-year yield rose 14 points to 4.31%, and the two-year 17 points to 4.64%.

Any hopes of a March rate cut are now dead and buried. May is also now considered unlikely, with June moving into the frame. There are plenty of data to flow before then, but the Fed had already indicated it was in no hurry.

Bond yields have been moving up since their December lows, with the ten-year taking back over 40 points – not quite two cuts. The market had been pricing in six cuts this year, then pulled that back to four, while the Fed is suggesting three.

Don’t fight the Fed.

All the while, the S&P500 kept pushing on to ever new highs, and calls of “overbought” became louder. The stage was set, so last night’s pullback came as no surprise to anyone.

The Fed’s greatest fear has long been cutting rates too early, before being convinced inflation is only moving one way, thus repeating mistakes made in the 1970s, when the Fed cut at the first signs of inflation receding, only to see it bounce up again.

The Fed wants to see a strong economy, and inflation falling back to 2%. The problem is the stronger the economy, the more inflation will be under upside pressure. It’s a delicate balance.

The question on Wall Street now is to how long traders will wait to take this opportunity to pick up the stocks they missed now they’re at lower levels, particularly those rampant Mega Techs. I think we already saw signs of that towards the close.

Commodities

With bond yields surging, the US dollar index rose 0.7%. This is mathematically a drag on commodity prices, as the fall in gold attests.

But those oils just keep on rising.

The Aussie is down -1.2% at US$6450.

Today

The SPI Overnight closed down -90 points or -1.2%.

Today’s list of reporters includes CommBank, AMP ((AMP)), Domain Group ((DHG)), and Evolution Mining ((EVN)), among others.

FNArena's Corporate Results Monitor: https://fnarena.com/index.php/reporting_season/ (with calendar).

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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