Declines in bank and mining stocks took some of the shine off a winning week for the Australian share market.
The S&P/ASX 200 slipped 23 points or 0.34 per cent following a mixed night on Wall Street as the mid-week 'Biden bounce' faltered.
Despite today's setback, the index put on 85 points or almost 1.3 per cent during a breakout week when the index finally kicked clear of the horizontal trading range that had capped progress since late November.
What moved the market
The heavily-weighted financial and materials sectors were deadweights this session after being left behind in the US overnight. The big three iron ore producers all fell at least 1.9 per cent. The banks lost between 0.2 and 0.7 per cent. Those declines outweighed advances in CSL, Wesfarmers, Telstra and the supermarkets.
Big Tech was the only game in town on Wall Street ahead of earnings reports next week from Apple, Amazon and Alphabet. The Nasdaq Composite climbed 0.55 per cent to a new record. The broader S&P 500 added 0.03 per cent. The tech-lite Dow slipped 0.04 per cent.
The ASX fell away after lunch as deteriorating US futures cast a long shadow. S&P 500 futures were lately down 10.5 points or 0.3 per cent. Asian markets deteriorated after China ordered fresh restrictions to contain the coronavirus.
Speculation mounted this week that markets were ripe for correction as valuations in the US reached their highest since 2000. Kalkine Group CEO Kunal Sawnhey said shareholders should be wary, but stimulus hopes and the rollout of vaccines could sustain the rally.
"The successful distribution of Covid-19 vaccines and hefty stimulus packages are expected to drive investors’ temper in the equity market. At the same time, a cautious approach with a hawk-eye view can aid market participants in dodging any potential losses in this speculative bubble," he said.
"An impressive Q4 2020 earnings report from Netflix seems to have sparked investors’ optimism on a better-than-expected earnings season for technology majors, due this month. And the BNPL space is one hot territory, which if entered at the right time and with a prudent mix of select stocks, can work wonders for market participants," he added.
The domestic BNPL sub-sector took a breather after running hard all week. Afterpay sank 5.2 per cent following a six-session surge that lifted the share price from around $110 to above $150. Z1P Co sagged 1.8 per cent after Morningstar cut its rating to 'Sell'. The stock was earlier up more than 15 per cent. Splitit fell 1 per cent and Sezzle 0.1 per cent.
Healthcare was the pick of the sectors, rising 1.5 per cent following a well-received trading update from Fisher & Paykel Healthcare, and broker upgrades for CSL, Cochlear and Ramsay Health Care. Fisher & Paykel surged 5.9 per cent after announcing it expects revenue and net profit this financial year to be higher than previously indicated. CSL put on 2.2 per cent and Cochlear 0.6 per cent after Citi raised its ratings on each. Ramsay declined 1.7 per cent.
Wesfarmers climbed for a fifth day, rising 2.2 per cent to a new high amid optimism about next month's half-year result. A November update showed strong growth across the first four months of the financial year. Other gains at the heavyweight end of the market included Brambles +1.7 per cent, Woolworths +1.1 per cent, Telstra +1 per cent and Coles +0.4 per cent.
A major contract with the US government lifted Lynas Rare Earths 13.7 per cent to its highest level since 2013. The company will build a separation plant for rare earths in Texas. South32 rallied 4.1 per cent to a near-12-month high following yesterday's trading update.
A strong session for media stocks saw Seven West soar 12.9 per cent to its highest level since November 2019. Nine Entertainment added 2.9 per cent.
Most of the market's 800-pound gorillas declined. Fortescue Metals led a retreat in the iron ore majors, falling 2.2 per cent. BHP shed 1.9 per cent and Rio Tinto 2.1 per cent. Woodside Petroleum and Newcrest shed 1.5 per cent.
In the financial sector, NAB sank 0.7 per cent, ANZ 0.4 per cent, CBA 0.3 per cent and Westpac 0.2 per cent. Macquarie Group lost 1.7 per cent.
Lithium miner Pilbara Minerals has been one of this year's big winners, but plunged 15.6 per cent at the end of a frothy week for industry players.
Travel and tourism stocks came under mild pressure following a downbeat outlook for air travel overnight from United Airlines. Webjet slid 1.6 per cent and Flight Centre 1.1 per cent. Qantas reversed early weakness to finish flat.
Asian markets declined as China ordered new restrictions to halt the spread of Covid-19. The Shanghai Composite fell 0.73 per cent, Hong Kong's Hang Seng 1.5 per cent and Japan's Nikkei 0.31 per cent.
Oil joined a general deterioration in risk assets. Brent crude dropped 50 cents or 0.9 per cent to $US55.60 a barrel. Gold eased $2.60 or 0.1 per cent to $US1,863.30 an ounce.
The dollar faded 0.19 per cent to 77.45 US cents.
Hot today and not today
Hot today: Shares in traffic systems specialist Redflex Holdings (ASX:RDF) more than doubled following a takeover offer from Nasdaq-listed Verra Mobility. The US company offered 92 cents a share, a 130 per cent premium to Redflex's last traded price. The offer has the unanimous support of Redflex's directors. The share price climbed 115 per cent to 86 cents.
Not today: Asset manager Perpetual (ASX:PPT) fell 4.8 per cent after reporting its Australian funds under management declined 2 per cent to $22.7 billion last quarter. Most of the net outflow of $2.7 billion came from the loss of a low-margin institutional cash mandate. CEO and Managing Director Rob Adams insisted the company was seeing "positive momentum in FY21 across all divisions".