The Overnight Report: Breathe a Sigh

Daily Market Reports | Feb 22 2024

This story features WOOLWORTHS GROUP LIMITED, and other companies. For more info SHARE ANALYSIS: WOW

World Overnight
SPI Overnight 7542.00 – 19.00 – 0.25%
S&P ASX 200 7608.40 – 50.60 – 0.66%
S&P500 4981.80 + 6.29 0.13%
Nasdaq Comp 15580.87 – 49.91 – 0.32%
DJIA 38612.24 + 48.44 0.13%
S&P500 VIX 15.34 – 0.08 – 0.52%
US 10-year yield 4.33 + 0.05 1.17%
USD Index 104.02 – 0.01 – 0.01%
FTSE100 7662.51 – 56.70 – 0.73%
DAX30 17118.12 + 49.69 0.29%

By Greg Peel

Oh how the mighty have fallen

Woolworths ((WOW)) posted a miss on profit yesterday – nothing substantial – and then the stock fell -6.6%, which pretty much sits in the “unheard of” category. And it was much lower than that at one stage.

The issue was not so much the result, but the news that following the patriotism scandal, accusations of price gouging, and walking out of a Four Corners interview to that end, the CEO has jumped ship. He claims it was planned all along.

Mind you, amidst said accusations, imagine if Woolies had posted a big profit beat.

The consumer staples sector fell -4.3%, which again is pretty much unheard of. It put somewhat of a dampener on a session which looked like just a bit of a mild pullback from the open; at the low the ASX200 was down -74 points.

Woolworths wasn’t the only story in town nonetheless. Lower iron ore prices, and further reflection on Tuesday’s result from BHP Group ((BHP)), had materials down -1.4%. Energy fell -0.4% on lower oil prices.

Not helping was Commonwealth Bank ((CBA)) going ex-div, which was a decent chunk of a -0.7% fall for the banks.

Consumer discretionary stood out – not because a 0.3% gain is anything special, but because Corporate Travel Management ((CTD)) lost -20.2% on result, revealing too much uncertainty with its UK contract.

On the other side of the coin, WiseTech Global ((WTC)) starred with its result, rising 11.1% and leading technology up 2.2%, after the Nasdaq had fallen -1% overnight.

CSR ((CSR)) jumped 17.4% on rumours of a takeover approach, before going into a trading halt.

Another result winner of note, from the ASX300, was Codan ((CDA)), up 16.6%.

Also in the “not helping” camp was yesterday’s economic data release, which showed wages grew by 0.9% in the December quarter to an annual rate of 4.2% — in line with the CPI. Real wages are no longer falling!

The result is not likely to fire up an already hawkish RBA nonetheless, which some in the market may have expected yesterday. The result was as forecast by both economists and the RBA itself.

The Aussie ten-year yield fell one point.

Today is Super Thursday part 1 in the earnings season – the most number of releases in a day so far.

You Can Relax

Heading into the final hour last night, the action on Wall Street was playing out as a repeat of Tuesday night, with Nvidia falling another -3% as more Nervous Nellies took profits ahead of the aftermarket result release, pulling the S&P500 down -0.5% and the Nasdaq -1%.

Late buying turned that around.

Concern regarding said Nvidia result was boosted during the session – not in fear of a miss but more in fear of a beat that would simply not be good enough to support the current price – when cybersecurity leader Palo Alto Networks reported and fell -28%.

Cybersecuity, like AI, has been a very crowded space for investors of late, and understandably so. Imagine what the baddies could do with AI. The issue was not Palo Alto’s result but its forward guidance, which very slightly missed consensus forecasts. Commentators called the share price move ridiculous, blaming trigger-happy algos.

Could the same thing happen for Nvidia?

It hasn’t. Nvidia has beaten on revenue, earnings and guidance, and as I write, has flip-flopped from down a bit to up a bit, but right now is up 8%. That could well have changed by the time you read this. Anyway, the share price hasn’t crashed.

The other issue last night was that of the Fed minutes, which showed most FOMC members were increasingly concerned inflation may well turn back up again. The meeting was held before the “hot” January inflation data were released.

The FOMC fears it might be a victim of its own success, bringing in the US economy for a soft landing or, arguably, no landing at all. Strength in the economy, loosening financial conditions (the cost and availability of corporate credit) and geopolitical turmoil may conspire to push prices back up again.

It is increasing clear the Fed is not going to cut rates anytime soon. March is now off the table, May is all but gone as well, leaving June as the best bet right now on a 73% chance.

As I have noted before, Jerome Powell is terrified of repeating the Fed mistake made in the 1970s, when rates were cut too early, inflation jumped back up again, and rates had to be hiked once more.

The US ten-year yield rose 5 points to 4.33%.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz) 2025.00 + 1.50 0.07%
Silver (oz) 22.86 – 0.13 – 0.57%
Copper (lb) 3.85 + 0.01 0.20%
Aluminium (lb) 1.00 – 0.00 – 0.09%
Nickel (lb) 7.57 + 0.16 2.22%
Zinc (lb) 1.08 + 0.01 0.71%
West Texas Crude 77.84 – 0.34 – 0.43%
Brent Crude 82.95 + 0.41 0.50%
Iron Ore (t) 117.35 – 2.24 – 1.87%

Again we see Chinese stimulus not much moving the dial for commodities, and particularly not for iron ore.

The move up in US bonds has not moved gold either, nor the US dollar.

The Aussie is little changed at US$0.6549.

Today

The SPI Overnight closed down -19 points or -0.3%, pre-Nvidia, whether that matters.

Earnings results are going to dominate locally anyway, although flash estimates of global February PMIs are due from today. That will be something for tomorrow.

Fortescue Metals ((FMG)) is but one stock reporting today, as is Qantas Airways ((QAN)), and Newmont Corp ((NEM)), but by God there are a lot more.

Aristocrat Leisure ((ALL)) holds its AGM.

Bendigo & Adelaide Bank ((BEN)), JB Hi-Fi ((JBH)) and Whitehaven Coal ((WHC)) are among a handful of stocks going ex.

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

The Australian share market over the past thirty days…

Index 21 Feb 2024 Week To Date Month To Date (Feb) Quarter To Date (Jan-Mar) Year To Date (2024)
S&P ASX 200 (ex-div) 7608.40 -0.65% -0.94% 0.23% 0.23%
BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
A2M a2 Milk Co Downgrade to Neutral from Buy Citi
Downgrade to Hold from Add Morgans
APM APM Human Services International Upgrade to Buy from Hold Bell Potter
Downgrade to Equal-weight from Overweight Morgan Stanley
ARB ARB Corp Upgrade to Accumulate from Hold Ord Minnett
BBN Baby Bunting Downgrade to Neutral from Buy Citi
GMG Goodman Group Downgrade to Hold from Add Morgans
IMD Imdex Upgrade to Hold from Sell Bell Potter
ING Inghams Group Upgrade to Outperform from Neutral Macquarie
JDO Judo Capital Downgrade to Underperform from Neutral Macquarie
LLC Lendlease Group Downgrade to Neutral from Buy Citi
LTR Liontown Resources Downgrade to Sell from Neutral Citi
MMS McMillan Shakespeare Upgrade to Accumulate from Hold Ord Minnett
MQG Macquarie Group Downgrade to Hold from Add Morgans
NXL Nuix Upgrade to Overweight from Equal-weight Morgan Stanley
RWC Reliance Worldwide Upgrade to Buy from Neutral Citi
Upgrade to Add from Hold Morgans
Upgrade to Accumulate from Hold Ord Minnett
SGM Sims Upgrade to Neutral from Sell Citi
STX Strike Energy Downgrade to Neutral from Outperform Macquarie
SVR Solvar Downgrade to Hold from Buy Bell Potter
WHC Whitehaven Coal Upgrade to Hold from Sell Bell Potter

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)

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CHARTS

ALL BEN BHP CBA CDA CSR CTD FMG JBH NEM QAN WHC WOW WTC

For more info SHARE ANALYSIS: ALL - ARISTOCRAT LEISURE LIMITED

For more info SHARE ANALYSIS: BEN - BENDIGO & ADELAIDE BANK LIMITED

For more info SHARE ANALYSIS: BHP - BHP GROUP LIMITED

For more info SHARE ANALYSIS: CBA - COMMONWEALTH BANK OF AUSTRALIA

For more info SHARE ANALYSIS: CDA - CODAN LIMITED

For more info SHARE ANALYSIS: CSR - CSR LIMITED

For more info SHARE ANALYSIS: CTD - CORPORATE TRAVEL MANAGEMENT LIMITED

For more info SHARE ANALYSIS: FMG - FORTESCUE LIMITED

For more info SHARE ANALYSIS: JBH - JB HI-FI LIMITED

For more info SHARE ANALYSIS: NEM - NEWMONT CORPORATION REGISTERED

For more info SHARE ANALYSIS: QAN - QANTAS AIRWAYS LIMITED

For more info SHARE ANALYSIS: WHC - WHITEHAVEN COAL LIMITED

For more info SHARE ANALYSIS: WOW - WOOLWORTHS GROUP LIMITED

For more info SHARE ANALYSIS: WTC - WISETECH GLOBAL LIMITED