Overnight: Still Unsure

By Greg Peel

Dull and Duller

With a stock option expiry and only two sessions to go before quarter’s end we might have expected a little more action on the local market yesterday, notwithstanding a Fed rate hike to boot. But no, it was dullsville.

If Wall Street spent the two hours of trade post-Fed being confused on Wednesday night, the local market appeared to be either equally confused or simply indifferent.

The only sector getting close to a move of a one percent on the day were utilities, -1%, which one could put down to greater confirmation the Fed plans to at least raise again in December, and at this stage still has three more in the pipeline for 2019. But a lot of utility stocks went ex yesterday, which suggests even that sector leant more to the indifferent side.

The pre-RC report slide in the banks continued yesterday, albeit National Bank ((NAB)) has been hit with a class action (blow me down) and ANZ Bank’s ((ANZ)) trading platform crashed. Financials fell -0.3%.

Having rallied back steadily all month – likely because the RC focus shifted away from the banks and on to insurance, and those yields started looking good – the banks have given it all back in consecutive down-sessions all this week. To that end, the release of the RC report today could (assuming it can be digested swiftly enough) spark a relief rally. But that would require the findings not to be quite as overtly damning as the market fears.

A gain of just 0.6% allowed IT to be the sector winner on the day. Elsewhere, moves were insignificant and mixed. The coin came up tails this time on healthcare. Today might be different – the Aussie is down -0.7%.

At the individual stock level, investors were pleased with what they heard at Beach Energy’s investor day, sending that stock up 7.5% to be the ASX200 winner on the day.

Coming in at second was knocked-down Speedcast International ((SDA)), which gained 6.1%. Last week Speedcast joined the list of ASX200 stocks over 5% shorted.

The weaker Aussie will be a positive for relative sectors today but it is a yin-yang for resources stocks. Most base metals prices are down and gold is down over ten bucks.

Still, the futures traders are keen – the SPI closed up 28 points.

Tech is Back

It’s a little hard to gauge just what Wall Street ultimately thinks about the Fed statement and press conference, having had a night to sleep on it — particularly the removal of the word “accommodative” and as good as confirmation of a December hike. The reason being, last night one stockbroker upgraded their price target on Apple to a market high and another did the same for Amazon – implying upside of 20-30% for America’s two biggest companies.

Apple’s and Amazon’s share prices each rose around 2%, which doesn’t sound like much but has a big impact when your market cap is a trillion dollars. Alone the two stocks crowd out the Nasdaq (+0.7%) and dominate the S&P500 (+0.3%), while Apple also contributes to the Dow (+0.2%).

The Dow opened mildly to the upside last night, following Wednesday night’s two hundred point negative turnaround, and tracked a straight line to be up 175 points by lunchtime. The afternoon then saw a drift back, but interestingly not for either Apple or Amazon. The A-A upgrades had floated all “tech” boats, but we now have the FANGs and Co spread across three different sectors and fund managers are still trying to get around their rebalancing requirements.

The new communications sector (telcos, Facebook, Netflix, Google) was the second best performer on the day followed by technology (Apple, Microsoft) and consumer discretionary (Amazon). It was other sectors that led Wall Street back down in the afternoon, suggesting somewhat of a Fed hangover.

Indeed, that hangover had the US dollar index up a full 0.8% last night – likely as a result of the first chance of a Fed response from the rest of the world. That would be enough to put the brakes on some sectors. But the banks were again weak, despite the promise of higher rates.

And if we want to find evidence of Wall Street remaining confused post-Fed we need look no further than the utilities sector. It was the worst performer on Wednesday as one might expect – rising rates – but last night it was the best performer.

Work that one out.

In other news, late in the session it was announced the SEC is charging Elon Musk (the man, not Tesla the company), with fraud in the wake of the infamous “taking Tesla private at $420” with “funding secured” tweet. Tesla shares are down -15% in the aftermarket as I write at US$267 – some -36% below Musk’s supposed privatisation price.

Commodities

The strong greenback clearly had its impact on base metal prices, but not by any more than recent volatility has provided for.

The main loser was gold, which was dragged out of the mud around 1200 and thrown in the pond.

The oils managed to again hang tight, on hold for the next development in sanctions/trade.

The Aussie, as noted, is down -0.7% at US$0.7208.

Today

The SPI Overnight closed up 28 points or 0.5%. Today is the end of the quarter, meaning an “anything can happen” day. To make things more interesting, Victoria has the day off to jeer the most hated club in the AFL and jeer the WA pretenders at the parade today, because there’s nothing better to do in Victoria until Cup Day — another gazetted piss-up.

But it is also the day we see the interim RC report. So clearly, anything can happen.

Local private sector credit numbers are out today.

Tonight sees the PCE inflation reading in the US.

On the local stock front, today’s ex-div stocks are all tiddlers.

Rudi is scheduled to make a rather early appearance on Sky News Business this morning, at around 10.15am instead of the usual 11.15am, via Skype.

The Australian share market over the past thirty days…