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The share market’s longest winning run in six weeks ended as investors locked in gains ahead of a tone-setting policy announcement from the US Federal Reserve.

The S&P/ASX 200 dropped 32 points or 0.47 per cent, terminating a run of three straight advances. Gains in tech stocks, Telstra and Transurban were dwarfed by declines in miners, banks, oil companies and REITs.

What moved the market

Investors on both sides of the Pacific pared their exposure ahead of a potentially disruptive policy announcement from the Fed tonight. Chair Jerome Powell has the unenviable task of acknowledging recent gains in the economy while reassuring investors the central bank will not remove support too soon.

The key question for a market addicted to stimulus spending and low interest rates is how long it will last. Particular attention will be given to the “dot plot“, where committee members signal their expectations for when rates will increase.

“With rates and guidance expected to be unchanged, focus will be on the refreshed set of forecasts given the fiscal package and Treasury Secretary Yellen’s observation that full employment could be reached by mid-2022,” NAB Director and Senior Economist David de Garis said.

“The December dot plot only had one Fed member with a hike in 2022 and five with a hike in 2023. It is conceivable a few more pencil in hikes in either year given Yellen’s full employment comment, though the median dot is unlikely to point to hikes. Chair Powell is also likely to be pressed on the recent rise in bond yields and whether the Fed would respond.”

Overnight, the Dow eased 0.39 per cent and the S&P 500 0.16 per cent. US futures drifted lower this afternoon, but moves were minimal. S&P futures dropped three points or less than 0.1 per cent. Dow and Nasdaq futures fell between 0.1 and 0.15 per cent.

Here, the leading miners dropped for a third straight day amid questions over the durability of the post-pandemic recovery in raw materials. BHP declined 1.6 per cent, Rio Tinto 1 per cent and Fortescue Metals 0.6 per cent. Iron ore prices have under pressure over the last week after China introduced temporary curbs on heavy truck movements to reduce pollution.

“Market players need to remain cautious over mounting pressure amid the overall commodities super boom and energy momentum,” Kalkine Group CEO Kunal Sawhney said. “Tangshan’s steel output restrictions to tackle air pollution and rising port inventories in China are casting bearish clouds over iron ore spot prices. At the same time, the bullish scenario cannot be ignored, given the rising overall demand outside of China.”

Winners’ circle

Afterpay shook off a mid-session wobble after the nation’s largest bank announced its entry into the buy-now-pay-later space. Commonwealth Bank will launch an instalment payment model for purchases between $100 and $1,000. Shares in Afterpay briefly turned negative before rebounding to a final gain of almost 1.2 per cent.   

Elsewhere in the tech space, WiseTech put on 2.9 per cent, Bravura Solutions 3 per cent and Xero 1.7 per cent.

Dull-but-steady telecoms and utilities also resisted the broader down-trend. These defensive holdings are seen as a safe place to park cash in times of market uncertainty. APA added 1.3 per cent and AusNet 1.1 per cent. Telstra sealed a fourth straight gain, advancing 2.2 per cent.

Toll road operator Transurban added 0.4 per cent, Macquarie Group, Wesfarmers and Aristocrat Leisure all put on 0.2 per cent.

Fast food providers outperformed supermarkets as traders positioned for an increase in eating out as the vaccine rollout accelerates. Collins Foods, which operates the KFC, Sizzler and Taco Bell brands in Australia, was the index’s best performer, gaining 5.3 per cent. Domino’s Pizza climbed 1 per cent. Woolworths retreated 0.9 per cent and Coles 0.8 per cent as the ten-year yield ticked higher.

Tabcorp jumped 0.9 per cent in the final minutes of trade after Nine media reported bidding interest from Rupert Murdoch’s Fox Corporation.

Doghouse

Energy stocks dragged as oil traders fretted about the enduring impact of last month’s wintry blast on US inventories. Revised figures are due tonight. Woodside retreated 0.9 per cent, Oil Search 2.5 per cent and Ampol 1.1 per cent. Gold miner Newcrest dropped 1 per cent despite a two-week overnight high in the yellow metal.

The big four banks eased from multi-month highs last week with bond yields, but until today had been the bedrock of this week’s gains while the miners retreated. CBA faded 0.1 per cent today, ANZ 0.7 per cent, NAB less than 0.1 per cent and Westpac 0.2 per cent.

News that Managing Director Jamie Pherous had reduced his stake helped pull Corporate Travel Management down from an 18-month peak. The company announced its largest shareholder sold 1.5 million shares on-market, reducing his holding from 15.2 per cent to 14.1 per cent. The share price fell 5.6 per cent.

Other moves at the top end of the market included Brambles falling 0.8 per cent, Goodman Group 1.4 per cent and CSL 0.3 per cent.

Poultry group Inghams fell 3.9 per cent as it traded without the right to a dividend.

Other markets

The Asia Dow shed 0.43 per cent. China’s Shanghai Composite lost 0.31 per cent, Hong Kong’s Hang Seng 0.09 per cent and Japan’s Nikkei 0.17 per cent.

Oil retreated for a fourth session. Brent crude fell 12 cents or 0.2 per cent to US$68.27 a barrel. Gold rallied $4.40 or 0.25 per cent to US$1,735.30 an ounce.

The dollar dropped 0.14 per cent to 77.35 US cents.

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