Overnight: Time To Pause

By Greg Peel

Ups and Downs

In another session dominated by earnings results, the ASX200 netted out a 44 points gain amidst some huge individual stock moves both to the upside and the downside, again underscoring just what little certainty analysts (and the companies themselves) had during the June quarter. If you wanted to get on the top five index winners or losers boards, you had to post a very big move.

To put things into perspective, CSL ((CSL)) did not make to the top five in rising 6.4% on its result, with Australia’s biggest company singularly accounting for 26 index points. The healthcare sector again stood out with a 4.0% gain. On Tuesday it was Cochlear ((COH)), but yesterday they sold down Cochlear (-3.4%) to buy CSL.

IT was the next best performer, rising 2.7% on the back of a whopping 33.9% jump for oft maligned WiseTech Global ((WTC)), rather sticking it up to the critics offshore.

WiseTech is not as heavily shorted as Corporate Travel Management ((CTD)), which jumped 10.6% on its result, and only Myer is more heavily shorted than Webjet ((WEB)) which also reported and rose 7.8%.

Indeed the consumer discretionary sector was awash with big gainers on earnings, netting to a 2.2% rise for the sector. G8 Education ((GEM)) rose 12.2%, Domino’s Pizza ((DMP)) 8.9% and Bapcor ((BAP)) 7.8%. A contrasting -14% drop for The Reject Shop ((TRS)) did not impact as it’s not in the ASX200.

The biggest loser on the day was gold miner Resolute Mining ((RSG)), down -17.5% following news of a coup in Mali. Treasury Wine Estates ((TWE)) continued its plunge from Tuesday, down another -8.5%, while UR Westfield’s ((URW)) announced bond issue had that stock down another -7.7%.

None of those falls were to do with earnings results. It was left to Nearmap ((NEA)), down -11.6% and McMillan Shakespeare ((MMS)), down -6.5%, to make up the places.

The worst performing sectors were consumer staples, down -0.8% on Treasury Wines, Property, down -1.4% on UR Westfield, and materials, down -1.3% due somewhat to Resolute but also more selling in BHP Group ((BHP)), down -1.5% after disappointing on Tuesday with its dividend in the face of soaring iron ore prices.

It was a big day of earnings results, and there were many more impressive moves among stocks that just weren’t enough to be highlights in a session of volatility that largely cancelled itself out.

Today is another very big day. Wall Street sold off a bit last night but our futures are down only -15 points this morning. As I noted yesterday, result season is not the time to take big bets. The beat/miss ratio on FNArena’s Corporate Results Monitor is still running at a very high 2 to 1 but in terms of stocks reporting, we’re only just past the first quarter.

Help Required

The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term and is posing considerable risks to the economic outlook over the medium term, the Fed noted in its minutes released last night, and members agreed more fiscal help was needed from Congress.

Good luck with that one, although Nancy Pelosi did suggest last night she was prepared to compromise further, having already dropped Democrat demands down from US$3trn to US$2trn to try to get the Republicans up from US$1trn, without success.

The release of the minutes sparked an instant sell-off on Wall Street.

But was it really the minutes? Realistically the Fed said nothing new. They may have taken some of the wind out of the sails of a positive start to the session, helped by standout earnings reports from US retailers (Target up 12.5%), but more likely the minutes were an excuse to pull back after having reclaimed the all-time high. The S&P500 peaked at 3999.

In a day in which rubber bands had become stretched too far, the minutes prompted a big short-covering rally in the US dollar index (+0.8%), possibly because the Fed announced no new stimulus itself, sending gold plunging once more. The US ten-year yield rose, albeit only slightly, and the Nasdaq underperformed.

Yet Apple became the first company to hit a US$2trn market cap, if only for a couple of hours.

As suggested yesterday, from the all-time high the S&P500 could either burst on through, consolidate or pull back extensively. Fed support, an eventual fiscal agreement, and a falling daily case-count rate will likely preclude the latter. Last night showed burst on through does not look like happening just yet.

So stand by for some more consolidation.

Commodities

Last night Trump declared he was prepared to abandon the US-China trade deal, although it’s not the first time he’s made this claim.

The big bounce in the US dollar should have by rights impacted on all commodities, but in fact the opposite was largely true, except for precious metals.

While the gold price moves seems extensive, as was the case last week, it seems US$2000/oz is the road block at least for the time being.

But Huzzah! The Aussie is down -0.8% at US$0.7182.

Today

The SPI Overnight closed down -15 points or -0.2%.

Earnings results, and lots of them.

The Australian share market over the past thirty days…