Overnight: Nasdaq Snap-Back

By Greg Peel

Exercise Bike

Yesterday’s drop on the ASX200 represented the ninth day of non-consecutive moves, meaning the index has failed to put together two sessions in the same direction over that period. The net result of this stretch is a move down from 6012 to 6001.

The futures are up 42 this morning so we’re going for ten.

The ASX200 ignored Wall Street and opened lower yesterday, but it was the daily Victorian case-count update that accelerated the selling. At 275, the number was lower than the 400-plus from the weekend, but higher than the day before, suggesting no sign of a diminishing trend. Meanwhile the count ticks up in NSW.

By lunchtime the index was down -42 points at 5991, looking like it may have broken down through support at 6000, but no, it then bounced back, fading to the close to just hold support.

Only two sectors closed in the green, being IT, up 1.3% as Afterpay ((APT)) rose 3.1%, and materials, up 0.5% as gold miners bounced back. Resolute Mining ((RSG)) topped the index table with a 4.8% gain.

Among the losers, energy was the standout with a -2.6% drop as the unabated global spread of the virus again threatens demand. Financials contributed with -1.1% as the domestic second wave implies further mortgage relief. Bendigo & Adelaide Bank ((BEN)) fell -5.2% as investors remembered that Bendigo is in Victoria.

Industrials fell -1.2%, with Sydney Airport ((SYD)) reporting a -95% reduction in air travel. Telcos fell -1.5%, largely because TPG Telecom ((TPG)) has become very volatile since the merger. It fell -5.3%.

Discretionary fell -1.1% as one might expect but staples (-0.6%) weren’t much help either, while healthcare and utilities closed flat.

Add it all up and it looks very much like a focus on the domestic economy in its current predicament. The government will today reveal what JobKeeper/Seeker will look like after the September expiry, ahead of Thursday’s “mini” budget. Clearly this can be a binary focal point for the market, if the new payments are considered better or worse than hoped for.

Meanwhile, the second round of permitted super drawdowns will be having a negative effect on the market. APRA reports 581,000 applications received in the week to July 12, with 472,000 being repeat applications from round one. Payouts in that week totalled -$6.2bn, bringing the total since the beginning to -$25.3bn.

Five-Day Wonder

Wall Street investors spent all last week trimming positions in the high-flying Big Tech names, which made sense ahead of actual earnings results due shortly. Among the FANG-Plus group, Amazon was the most trimmed, down -8% for the week.

I suggested yesterday that the pullback would take some pressure off those companies’ earnings results, given the stocks had been priced for perfection. Well, throw that idea out the window.

Last night Goldman Sachs upgraded its price target on Amazon to a Street-high US$3800 (last close US$3196). Amazon jumped 8% on the day.

Investors who had been hoping the Big Tech pullback might carry on into this week, providing some more realistic entry points, were blindsided. There followed a frenzied scramble that resulted in the Nasdaq rising 2.5%.

The S&P500 closed up 0.8%, but only because of the Big Tech component. Consumer discretionary (Amazon), Technology (Apple, Microsoft) and Communication Services (Facebook, Google) all rose on the session, every other sector fell. More stocks on the S&P closed lower than higher, and volume to the downside exceeded volume to the upside.

An equal-weighted S&P500 ETF closed down on the day.

Notably, the broad market was weak despite more encouraging news on the vaccine front, with the Oxford Uni/AstraZeneca candidate returning positive results leading to the suggestion of a vaccine being ready by September. Such news would normally have Wall Street surging, but perhaps investors are becoming a bit wary of continuing to push the market higher on vaccine news, and last night’s news was actually flagged a week ago.

Nonetheless, a Swedish biotech listed on the NYSE – Enzymatica – announced it had a mouth spray that worked against the virus in a lab, and it jumped 62%.

Tesla was back in business, jumping 9.5%, while rival Nikola fell -21% after raising a significant amount of capital. Talk is, and has been for a while, of Tesla cashing in on what even Elon Musk has described as an overinflated share price and raising capital as well.

Chevron (Dow) will buy Noble Energy in a scrip-swap worth about US$10 per Noble share. Noble was trading at US$24 pre-pandemic and US$40 in 2017. It won’t be the last consolidation move in the energy space.

IBM (Dow) reported earnings after the bell last night and is up 4.5% in the aftermarket.

Commodities

Copper came off a bit last night but gold has pushed on.

Not much to see elsewhere.

Most frustrating is the Aussie, up 0.4% at US$0.7017 when our economy is again under threat, and the government is again going to the cookie jar.

Today

The SPI Overnight closed up 42 points or 0.7%. Why is anyone’s guess. Is it because the government has at least now confirmed a JobKeeper/Seeker extension? Because why we would follow Amazon is unclear.

Note that if you add the market caps of Amazon and Microsoft together you get two ASX200s.

The minutes of the July RBA meeting are out today and the governor will make a speech.

BHP Group ((BHP)) and Oil Search ((OSH)) report quarterly numbers.

The Australian share market over the past thirty days…