A new month looked set for a cautious start following a flurry of profit-taking in Wall Street's megacap tech stocks.
ASX futures dipped seven points or 0.1 per cent after US stocks and key commodities declined on Friday. Iron ore, copper and crude oil retreated, pressuring the US energy and materials sectors.
The last session of the month and heaviest week of the reporting season ended with solid falls as traders locked in gains near record levels. The S&P 500 fell 30 points or 0.72 per cent from Thursday's all-time closing high. The Dow Jones Industrial Average gave up 186 points or 0.54 per cent. The Nasdaq Composite shed 120 points or 0.85 per cent.
Amazon faded to a loss of 0.11 per cent after being up more than 2 per cent. Shares in the company have risen 40 per cent in 12 months. The fade continued a trend towards winners from the pandemic falling away despite reporting strong earnings. Apple, Alphabet and Facebook also declined.
More than 300 companies on the S&P 500 have reported this season. Around 87 per cent have beaten analyst's estimates for earnings, according to Refinitiv data. Despite a strong season, the index has risen less than 2 per cent since reporting started in the middle of the month.
“There is a sense that maybe next quarter is as good as it’s going to get, and we’re going to roll over, particularly among the Nasdaq stocks and Big Tech stocks that benefited from the pandemic,” Jack Ablin, chief investment officer at Cresset Wealth Advisors, told Reuters.
The season starts to wind down this week. Among the larger names left to report are Pfizer and ConocoPhillips.
Apple shed 1.51 per cent after the European Commission said the company breached EU competition law. An investigation found the tech giant "abused its dominant position for the distribution of music streaming apps through its App Store". Spotify and other app developers have long complained about Apple's commission fees.
Despite Friday's weakness, the S&P 500 put on 5 per cent during April, rising for a third straight month. The Dow gained 2.7 per cent. The Nasdaq added 5.4 per cent.
Futures action suggests a flat start to the week. However, the first and last sessions of the month are notoriously hard to call as institutional traders shuffle portfolios. It would not surprise to see the S&P/ASX 200 recoup some of Friday's 0.8 per cent end-of-month profit taking.
The index underperformed Wall Street last month when adding around 3.5 per cent. A 5 per cent increase on the S&P 500 suggests the Australian benchmark has a little room to play catch-up.
Mining and energy stocks face headwinds this session from declines in iron ore, copper and crude (more below). US materials fell 1.07 per cent. Energy was Friday's worst US performer, falling 2.72 per cent. Financials and tech were also weak, falling 0.96 and 1.43 per cent, respectively.
Traditional defensives were the best performers in the US. Utilities gained 0.76 per cent. Real estate added 0.62 per cent and consumer staples 0.3 per cent.
The domestic financial sector will be in the spotlight this week. Three of the big four banks are scheduled to release half-year earnings. Westpac is first up today. ANZ releases on Wednesday and NAB on Thursday. Rio Tinto, QBE and TPG are among larger companies holding AGMs this week.
Also in the spotlight this week is the Reserve Bank. The board holds a policy meeting tomorrow. No major policy shifts are anticipated, but subtle variations in language often offer clues to the bank's intentions. Deputy Governor Guy Debelle is due to give a speech on "Monetary policy during Covid" on Thursday night. On Friday the bank releases its quarterly monetary policy statement.
A new month brings a swag of economic indicators: job advertising (today); trade balance (Tuesday); construction, building approvals (Wednesday); and services industry activity (Friday).
The recent flood of IPOs slows a little this week. The ASX has just three listings: mining services firm MLG Oz (Tuesday); and explorer NickelX and recruitment company Hiremii (Friday).
Trading activity across the wider region may be dulled by market holidays across the first three days of the week in China and Japan.
The dollar bounced 0.18 per cent to 77.22 US cents this morning after testing the 77 US cents level.
BHP and Rio Tinto declined in overseas trade as iron ore fell further from last week's record. The spot price for ore landed in China retreated $4 or 2.1 per cent on Friday to US$186.45 a tonne. Ore hit US$193.85 earlier in the week. BHP's US-listed stock dropped 2.69 per cent after its UK-listed stock lost 1.09 per cent. Rio Tinto gave up 2.82 per cent in the US and 1.3 per cent in the UK.
Copper eased from a decade high ahead of three days of holidays in major consumers China and Japan. Benchmark copper on the London Metal Exchange fell 0.6 per cent to US$9,829 a tonne. The exchange closes tonight for the UK Labour Day holiday. Aluminium also lost 0.6 per cent. Nickel put on 2.4 per cent, lead 1.8 per cent, zinc 0.3 per cent and tin 2.6 per cent.
"There's been a bit of profit taking in copper, we're going into the holiday season in China," Robert Montefusco at broker Sucden Financial told Reuters. "But people still seem to be quite bullish. There's a lot of bullish talk from the banks and trade houses about the green energy targets."
Oil trimmed a winning week and month. Brent crude settled $1.31 or 1.9 per cent weaker at US$67.25 a barrel. The June contract gained 1.7 per cent for the week and 5.8 per cent for the month despite demand concerns as India's Covid crisis deepened.
Gold ended little changed. The yellow metal settled 60 cents or 0.03 per cent lower at US$1,767.70 an ounce. Gold lost around 0.6 per cent during the last week of a month when it gained 3 per cent. The NYSE Arca Gold Bugs Index declined 1.31 per cent.