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Records continued to tumble in the US overnight as tech stocks sparkled, setting up the ASX for a positive open after yesterday’s slide.
Australian index futures rallied 15 points or more than 0.2 per cent as upbeat earnings and positive economic data helped power the S&P 500 and Nasdaq to new highs.
Iron ore and most metals advanced. The dollar climbed 0.5 per cent to 72.25 US cents, just below last week’s 18-month high.
Wall Street
The megacap tech giants that carried Wall Street out of the depths of the pandemic shone once again overnight. The Nasdaq climbed 199 points or 1.73 per cent to a new closing high as Facebook surged 8.2 per cent, Netflix 11.6 per cent and Tesla 6.4 per cent.
The S&P 500 put on 35 points or 1.02 per cent. The Dow, which has yet to regain its old February high, gained 83 points or 0.3 per cent.
Market analysts fretted that the pandemic meltdown rebound has been concentrated in a handful of stocks, leaving the rest of the market behind. While the S&P 500 has bounced 58 per cent since its March low, the Nasdaq has surged 75 per cent. Last night, a little more than half the sectors recorded gains.
“This rally has been about five or six stocks,” Mark Travis, CEO of Intrepid Capital told CNBC. “I think it creates a bit of a smokescreen as far as what’s really happening below the surface.”
“Markets are singing the same tune,” Peter Cardillo, chief market economist at Spartan Capital Securities in the US, told Reuters. “The market continues to move higher on momentum buying, and of course it’s the same Nasdaq group all the time… There’s no indication of any real shift in leadership.”
Driving the market
Cloud-based software company Salesforce, which is scheduled to replace Exxon Mobil on the Dow Jones Industrial Average at the end of the month, soared 26 per cent after smashing earnings expectations. The news seemed to spark a rally in momentum tech stocks.
Also helping sentiment was unexpected strength in orders for durable goods last month as demand for cars rebounded. Orders jumped 11.2 per cent, more than twice what economists expected. Automobile sales climbed 22 per cent.
The market was also looking ahead to a speech tonight by Federal Reserve Chair Jerome Powell that is expected to include a major change in central bank policy. Powell is expected to outline a new approach that will allow inflation to move higher than in the past before the Fed raises rates. The policy change is intended to spur the economy out of a threatened period of “stagflation”.
Commodities
BHP and Rio Tinto rebounded from yesterday’s ASX losses after iron ore broke a four-session losing streak. BHP’s US-listed stock put on 0.8 per cent and its UK-listed stock 0.93 per cent. Rio Tinto gained 1.18 per cent in the US and 1.57 per cent in the UK. The spot price for iron ore landed in China bounced $1.75 or 1.4 per cent to US$123.25 a tonne.
Gold and silver rose to their highest levels in a week in anticipation of an inflationary change to Federal Reserve policy. Gold for December delivery settled $29.40 or 1.5 per cent ahead at US$1,952.50 an ounce. Silver rose $1.18 or 4.4 per cent to US$27.45.
Energy was the worst of the US sectors, falling 2.2 per cent as oil hovered near its highest level since March. International benchmark Brent crude settled 22 cents or 0.5 per cent lower at US$45.64 a barrel, while the US benchmark edged up four cents or 0.1 per cent to US$43.39.
A 14-year low in London Metal Exchange warehouse inventories helped push copper back towards a two-year high. Benchmark copper climbed 1.1 per cent to US$6,615 a tonne on the LME. Aluminium edged up 0.3 per cent, nickel 1.2 per cent and tin 1.1 per cent. Lead eased 1 per cent and zinc 0.7 per cent
Aussie outlook
The last big day of the full-year earnings season brings reports from supermarket Woolworths, tech darling Afterpay and media giant Nine Entertainment.
Reports are also scheduled from Appen, Z1p Co, Independence Group, Ardent Leisure, Ramsay Health Care and Link Administration Holdings. Today also brings quarterly private capital expenditure data at 11.30 am EST.
The market has defied grim expectations for this reporting season to grind steadily higher. Despite yesterday’s 45-point drop, the S&P/ASX 200 is up 189 points or around 3.2 per cent for the month.
