Rotate, or not to rotate – an investment decision with Shakespearian overtones – Wall Street was the cause on Wednesday when after three days of selling, investors went back sniffing for ‘value’ in mega techs and eased off on the move into ‘value’ shares.
As a result, the Nasdaq rose 2%, the S&P 500 was uncertain and the Dow said blahhh.
That saw the ASX 200 futures market lose its confidence of being up more than 50 points and follow the Dow lower over the afternoon to where it was up 18 points at the close.
While that would normally point to a small rise when the ASX re-opens this morning, it could also be a sign of a weak and confused session, especially after Wednesday’s 1.7% surge.
Wall Street confusion flowed from the continuing campaign by defeated candidate, Donald Trump to prevent Joe Biden from becoming President and as that news of at least one working COVID-19 vaccine raised hopes of a faster-than-expected economic rebound.
But the continuing surge in COVID infection numbers (the US has had a million in the past 10 days including 8 days in a row of more than 100,000 cases or more) and rising deaths saw some investors have an each-way bet by returning to technology stocks that had driven the markets higher since the low in late March.
The tech-heavy Nasdaq was up nearly 2% at the end, despite easing. It stormed higher at the close, as mega-caps like Netflix, Amazon, and Apple, the lockdown winners saw gains between 0.7% (Alphabet) and 3.3% (Apple and Amazon).
The tech index climbed 2.5% at one stage before ending up 1.57%, the most among major S&P sectors, followed by the consumer discretionary index.
The S&P growth stock index outperformed the value index, which includes banks and energy stocks, in a reversal of Tuesday’s sell-off.
Encouraging data from a late-stage vaccine earlier this week prompted a rotation away from technology names and lifted demand for stocks sensitive to the economic outlook, as well as value stocks including industrials, travel, cruise, aviation, airport, entertainment, some media, and materials.
The Dow ended down 23 points or 0.08% at 23,399, the S&P 500 edged up 0.77% or 27 points to close at 3,572 and Nasdaq jumped 2% or 232 points to end at 11,786.
Oil prices edged high, – West Texas Intermediate was up to $US41.59, up around half a per cent while Brent crude futures gained nearly half a percent to $US43.82.
But Comex gold futures sold off, again, down to around $US1.861 an ounce. Comex silver eased to settle at $US24.26. Comex copper eased to $US3.13 a pound from $US3.15 the day before.
Iron ore prices took their gains since last Friday to nearly 6% with a rise of $US2.29 in the price of 62% Fe fines (delivered to northern China) to $US122.56.
Meanwhile, the ASX is heading for the sixth positive day in a row after rising nearly 400 points in the previous five sessions.
Accelerating progress on a COVID-19 vaccine and a nearly-certain US election result were have seen global sentiment improve, especially for the energy and the materials sectors that dominate the ASX200.
However, it was weighing on stocks that had done well out of pandemic spending habits, like Domino’s Pizza and JB Hi-Fi, Kogan, and Temple & Webster.
The ASX rose 1.7% to end Wednesday at 6,449.7 points, the highest close since February 27.
The question for today is whether this will be built on to any great extent.
The dip in gold won’t help, but the small rise in oil will, for a while until investors see how trading is going in Asia.
