The Overnight Report: So Much For The Fuss

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This story features HARVEY NORMAN HOLDINGS LIMITED, and other companies.
For more info SHARE ANALYSIS: HVN
The company is included in ASX200, ASX300 and ALL-ORDS

By Greg Peel

Bad News Good

Finally a break-out from the ASX200 stasis that has prevailed for over a week. There had been plenty of stock movements up and down in result season, and sector movements subsequently, but no net movement. Yesterday, the index shot up to within 5 points of its all-time high, with (almost) all sectors in alignment.

The impetus? A weak retail sales number.

Retail sales grew only 1.1% in January when economists had forecast 1.5%. Sales had fallen -2.1% in December so more of a bounce-back was expected. But as economists point out, seasonal adjustment is behind the times. Black Friday in November has now sucked the oxygen out of the old January sales period.

To correct for this, ANZ Bank economists note sales rose only 0.4% in the three months to January. They rose only 0.4% in the same period in 2023, but 5.2% in 2022, when we were all still in post-covid spending mode.

These numbers are nominal. Correct for inflation, and sales volumes have been stagnant for months. All about higher prices.

Clearly, the market decided yesterday the data provide more reason for the RBA not to have to hike again, as it has threatened. Aussie bond yields fell -3 points in unison.

After a weak start (including ex-divs), the ASX200 turned and tracked a straight line upward all session. Only utilities missed out (-0.3%), with all other sectors posting gains.

Consumer discretionary fared rather well under the circumstances (+1.3%), but Harvey Norman ((HVN)) rose 4.4% on result. Star Entertainment ((SGR)) found some punters after its result release, up 8.3%, despite the casino’s ongoing existence being a spin of the wheel.

Real estate should also, by rights, not enjoy weak sales numbers, but it rose 1.7%. Goodman Group ((GMG)) led the charge there – arguably one of Australia’s premier AI-related stocks. Competing in the data centre space now is Macquarie Technology ((MAQ)), which jumped 9.1% on its result.

They were the two bigger moving sectors, with others banding together to overcome only small contributions from the banks (+0.2%) and materials (+0.3%).

Healthcare rose 0.5%, with Ramsay Health Care ((RHC)) rising 7.3% on its result.

The good news that’s good is US PCE inflation came in last night exactly as forecast. After all the anticipation, it was a bit of a fizzer really. The S&P500 did finally find some legs.

It rose 0.5%, and our futures are up 20 points. Blue sky.

Moving On

The US personal consumption & expenditure measure of inflation rose 0.3% at the headline to a 2.4% annual rate, as forecast. The core rate – the Fed’s preferred indicator – rose 0.4% to 2.8%, as forecast.

The trimming of positions that had occurred all week ahead of the data, for fear of the PCE being “hot” as the CPI was, ended, and the buyers returned.

The 0.9% gain for the Nasdaq took it back to its all-time high set in November 2021. In 2022, the Nasdaq left Singapore and sailed all the way round the bottom of Africa before turning north in 2023 and now finally making it to Rotterdam.

The S&P500 has posted four consecutive months of gains from November through February. That has occurred sixteen times in its history, over that same period, and in every one of those cases the index closed higher for the year.

One twist in the PCE data was a 1.0% rise in personal income, when only 0.3% was forecast, and a -0.1% fall in personal spending, when a 0.2% gain was forecast. This would suggest consumers are becoming more frugal, but then credit card defaults have also been on the rise.

The bottom line from the data nevertheless is the Fed will be happy, but not trigger-happy. The first rate cut is still months off. But clearly, Wall Street is now caring less about the timing. The US result season has shown companies can increase earnings comfortably in the higher rate environment.

Commodities

Signs of China returning from holiday to get back to business.

While the local stock market rallied on the weak retail sales number and bond yields fell, the Aussie is unmoved at US$0.6497, having fallen on Wednesday on the CPI.

Today

The SPI Overnight closed up 20 points or 0.3%.

The results season’s over. Now we can all get some sleep. But not today perhaps, if we cheer on a new high.

We’ll see house prices today.

The US will see consumer sentiment.

February manufacturing PMIs are due across the globe.

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.

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