The Overnight Report: And We’re Back

Array
(
    [0] => Array
        (
            [0] => ((CBA))
            [1] => ((DOW))
            [2] => ((AMP))
            [3] => ((IEL))
            [4] => ((GUD))
            [5] => ((SEK))
            [6] => ((FBU))
            [7] => ((GNC))
            [8] => ((GMG))
            [9] => ((ORG))
            [10] => ((TLS))
            [11] => ((WES))
        )

    [1] => Array
        (
            [0] => CBA
            [1] => DOW
            [2] => AMP
            [3] => IEL
            [4] => GUD
            [5] => SEK
            [6] => FBU
            [7] => GNC
            [8] => GMG
            [9] => ORG
            [10] => TLS
            [11] => WES
        )

)

This story features COMMONWEALTH BANK OF AUSTRALIA, and other companies.
For more info SHARE ANALYSIS: CBA
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

All is Forgiven

The ASX200 closed down -55 points yesterday and the futures are up 52 points this morning. Go figure.

The hotter CPI print in the US on Tuesday night saw Wall Street heading for the exits, from record high and overbought positions, although it did manage to pare losses towards the close. Yesterday, the local lemmings threw themselves off the cliff from the open (mostly digital lemmings one presumes), and the ASX200 fell -110 points.

From the opening ten minutes to the closing bell, the index tracked a straight line back up to recover half the initial loss. Wall Street has bounced back solidly last night, so by the end of today – the day’s earnings results notwithstanding – we could well be back to where we were on Tuesday.

Thanks for playing.

Two other issues for the stock market yesterday were the local bonds also following Wall Street – the ten-year jumped 9 points – and Commonwealth Bank ((CBA)) underwhelming with its earnings result and falling -1.7%. CBA was also arguably overbought.

The result rattled the sector in general, hence the financials sector fell -1.2%, to represent a big chunk of yesterday’s ultimate fall.

Bonds took their toll on rate-sensitive sectors, with real estate down -1.0%, communication services -0.5% and utilities down -0.7%. Technology followed the Nasdaq (-1.3%).

The overnight jump in US bond yields had USD gold down sharply, hitting our mining sector, and materials fell -0.9%. Never mind that the Aussie fell -1.2% so the fall in AUD gold was minimal.

On to the day’s result responses, beyond CBA.

On the winners’ list were Downer EDI ((DOW)), which jumped 11.1% to help industrials to an overall 0.3% gain, winning the day, along with AMP ((AMP)), up 10.3%, but too small these days to make any impression on the financials sector.

Heavily shorted IDP Education ((IEL)) rose 8.3%, helping discretionary to a flat close, despite higher yields.

On the downside, GUD Holdings ((GUD)) lost -7.8% (and is also an industrial).

The day’s follow-ons were Seek ((SEK)), dropping another -5.2%, and Fletcher Building ((FBU)), having released its result, took its third tumble in a row, and so far the biggest, in dropping -14.2%.

GrainCorp ((GNC)) held its AGM, gave an outlook, and its shares lost -12.3%.

It only gets busier today, with a longer list of reporting stocks, so anything micro could happen to upset a macro attempt to get back to where we were.

Forget About It

It wasn’t really that bad, was last night’s response to Tuesday night’s hot CPI data. Inflation still went down, if not as much as hoped, and there is typically a “January effect” that seasonally has an upward push on prices, which can be corrected in February-March.

"Let’s not get amped up on one month of CPI that was higher than it was expected to be," said the Chicago Fed president.

"If you see inflation go up a little bit that doesn't mean that we're not on the target to get to 2%. We can still be on the path even if we have some increases and some ups and downs…so let's not get too flipped out."

There should not be any expectation, it has previously been pointed out, that inflation should dutifully track a straight line down, particularly now we’re in the “last mile” of low numbers. There will be bumps along the way.

Goldman Sachs’ respected senior economist had been stoically in the March rate cut camp after others had moved on to May, before he joined the May camp before the CPI release. The market has now moved the first cut to June, but Jan Hatzius believes May is still on the cards.

Whether these soothing words, or, as I noted yesterday, the line-up of traders looking to get into the stocks they’d missed out on on the way up in any downward blip, were responsible, last night the S&P500 bounced back 1.0%, having fallen -1.2% on Tuesday night.

The S&P closed smack on 5000, again.

The Nasdaq regained 1.4%, and while the Dow was a bit less relieved, that’s not important right now.

The US ten-year yield fell back -5 points to 4.27%.

The next big event is the PPI data release on Friday night, but more importantly, Nvidia’s result release next week.

Commodities

Metals markets are China holiday-quiet.

Gold did not respond to the dip back in yields.

The oils fell on a surge in weekly US inventories.

The Aussie has bounced back 0.7% to US$0.6492.

Today

The SPI Overnight closed up 52 points or 0.7%.

We’ll see January jobs numbers today.

Japan and the UK release December quarter GDP results.

The US will see retail sales and industrial production.

The daily list of earnings reporters is starting to get too long to pick highlights, but suffice to say Goodman Group ((GMG)), Origin Energy ((ORG)), Telstra ((TLS)) and Wesfarmers ((WES)) are just a few on the blocks today.

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.)

(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author's and not by association FNArena's – see disclaimer on the website)

All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts on the website and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided. www.fnarena.com

FNArena is proud about its track record and past achievements: Ten Years On

Click to view our Glossary of Financial Terms