The share market broke a run of three straight losing weeks in unconvincing fashion after rising borrowing rates and falling US futures took investors on another torrid ride.
The S&P/ASX 200 plunged as much as 100 points mid-morning before halving its loss to 50 points or 0.74 per cent as Asian markets recovered. That partial reversal was enough for a weekly gain of 37.5 points or almost 0.6 per cent.
What moved the market
Speculative stocks, small caps, tech companies and BNPL players took a hit as a rotation into cyclicals continued. Energy stocks outperformed after crude touched a 13-month high, sharpening inflation concerns.
US stocks sank overnight after Federal Reserve Chair Jerome Powell disappointed investors looking for central bank action to arrest a spike in borrowing rates. The yield on ten-year US treasuries responded by charging up almost seven basis points.
"Chair Powell effectively says that current yields are okay as long as moves are not disorderly," Stephen Innes, Chief Global Market Strategist at Axi, said.
The Nasdaq Composite sagged 2.11 per cent and the S&P 500 1.34 per cent. Futures moves this afternoon threatened further down-pressure tonight. S&P 500 futures eased six points or 0.2 per cent. Nasdaq futures fell 39 points or 0.3 per cent.
Here, tech and BNPL players vulnerable to higher input costs from rising rates fell to multi-month lows. The tech sector slumped to a five-month low before a partial recovery. Afterpay fell 8.4 per cent before trimming its loss to 2.5 per cent. Z1P Co lost 5.3 per cent and Sezzle 4 per cent.
"Growth stocks have the most to lose in this adjustment," Carl Capolingua, ThinkMarkets analyst, said "The BNPL sector comes to mind, their earnings are skewed way into future, so they've got the most to lose here. Most of them don't have a PE just yet, and if you look at Afterpay, its PE for next financial year is around 200 times. This means it would take 200 years of earnings to pay back your investment. When you look at it that way, you can see why higher interest rates are knocking share prices in the sector about."
The energy sector jumped 2.8 per cent after the OPEC+ oil cartel extended production caps that supported last year's recovery in prices. Brent crude surged to a 13-month high. Here, Oil Search climbed 5 per cent, Santos 4.7 per cent and Woodside 3.1 per cent.
Utilities have been hammered by weak profit results and the market's preference for stocks with more upside in a recovery. The sector bounced almost 0.9 per cent today from its lowest level in seven years. APA Group gained 0.8 per cent, AusNet 1.2 per cent and AGL 2 per cent.
Heavyweight risers included Brambles +0.9 per cent, Coles +0.7 per cent and Woolworths +0.5 per cent. ANZ was the best of the banks, rising 1.6 per cent. CBA and Westpac edged up 0.1 per cent. NAB gained 0.3 per cent. Telstra added 0.3 per cent.
The deterioration in risk appetite was underlined by sharp falls in speculative stocks and small caps. The S&P/ASX Emerging Companies Index dived 3.4 per cent to its lowest level since December, finishing 1.9 per cent in the red. The Small Ords trimmed a fall of 2.2 per cent to a one-month low to 1.6 per cent. Both indices contain companies whose valuations reflect future earnings.
At the heavyweight end of the market, CSL shed 2.8 per cent, Macquarie Group 1.5 per cent, Transurban 1.6 per cent and Wesfarmers 0.8 per cent. Among the miners, Rio Tinto fell 3.3 per cent, BHP 2.2 per cent and Fortescue 0.7 per cent.
Lithium stocks have been among the recovery's best performers, but met a wall of selling today. Piedmont Lithium tumbled 15.6 per cent, Galaxy Resources 9.8 per cent and Orocobre 6.4 per cent.
Asian markets reduced their losses in afternoon trade. The Asia Dow cut its fall to 0.66 per cent. China's Shanghai Composite gave up 0.34 per cent, Hong Kong's Hang Seng 0.28 per cent and Japan's Nikkei 0.57 per cent.
Oil built on its overnight gains. Brent crude rose 67 cents or 1 per cent $US67.41 a barrel. Gold fell $11.60 or 0.7 per cent to $US1,689.10 an ounce.
The dollar partly recovered after a brief dip under 77 US cents. The Aussie was lately down 0.08 per cent to 77.07 US cents.