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Shares looked set for a positive start after a rebound in recovery plays helped lift the Dow Jones Industrial Average back above 29,000 and the S&P 500 and Nasdaq to new records.
ASX SPI200 index futures climbed 42 points or 0.7 per cent. Iron ore surged to its highest level since 2014, but a rebound in the US dollar pressured oil and precious metals.
Wall Street
US stocks continued a strong run, with the S&P 500 rising for the ninth time in ten sessions. The broadest of the three major benchmarks put on 54 points or 1.54 per cent and closed at an all-time high.
The Dow regained the 29,000 level for the first time since February. The blue-chip average advanced 455 points or 1.59 per cent to 29,100, its biggest one-day move since July. The Nasdaq trailled with a rise of 27 points or 0.98 per cent, but closed above 12,000 for the first time.
What’s driving the market
While the headline numbers were strong, there were signs of a change in market leadership as traders rotated out of megacap tech stocks into laggards from the five-month recovery from the March pandemic lows. On the Dow, Coca-Cola gained 4.2 per cent and Dow Inc 4.1 per cent, while Apple fell 2.1 per cent. Tesla slumped 5.8 per cent. The iShares S&P 500 value ETF outperformed its growth equivalent.
“We’re seeing buyers perhaps looking for a little bit more durable growth, but not wanting to pay the kinds of crazy tech valuations that are out there,” Mike Bailey, director of research at FBB Capital Partners, told CNBC.
The Nasdaq has significantly outpaced the Dow during the rebound. While the tech-heavy index has risen 20 per cent from its pre-pandemic high, the Dow was still roughly 2 per cent below its old record.
The night’s economic data was mixed. The August private payrolls report came in much weaker than expected: the private sector created just 428,000 new jobs last month, roughly half the figure anticipated by economists. Factory orders increased for a third month, up 6.4 per cent in July as the country went back to work. Market sentiment was also boosted by signs of economic recovery reported in the Federal Reserve’s “Beige Book”.
Aussie outlook
A volatile week looks set to offer a second day of gains. The S&P/ASX 200 followed up its heaviest loss in a month with its best session in four weeks yesterday, bouncing 110 points or 1.8 per cent.
Iron ore miners led the way as the price of ore soared to its highest level in more than six years. The spot price for iron ore landed in China climbed $2.60 or 2.1 per cent to US$128.05 a dry ton. However, the local rally was not reflected in overseas action. BHP’s US-listed stock eased 0.72 per cent and its UK-listed stock 0.65 per cent. Rio Tinto edged up 0.18 per cent in the US and 0.06 per cent in the UK.
The outlook for exporters continued to improve as the dollar extended its retreat from two-year highs. The Aussie declined 0.55 per cent to 73.36 US cents. A push above 74 US cents was one of the triggers for the share market’s dive to a four-week low earlier in the week.
Defensive sectors outperformed in the US. Utilities jumped 3.1 per cent, real estate 2.2 per cent, communication services 2.2 per cent and health 2.1 per cent.
Commodities
The US energy sector fell 0.4 per cent as US oil slid to its lowest level in almost a month. West Texas Intermediate crude dropped $1.25 or 2.9 per cent to US$41.51 a barrel. The international benchmark, Brent crude, settled $1.15 or 2.5 per cent lower at US$44.43 a barrel.
Gold was crushed by a bounce in the greenback from two-year lows. Gold for December delivery settled $34.20 or 1.7 per cent weaker at US$1,944.70 an ounce. Silver fell 4.4 per cent.
Copper hovered near a two-year high as soft US payrolls and a rising greenback stifled buying interest. Benchmark copper on the London Metal Exchange edged up $1 or less than 0.1 per cent to US$6.709.75 a tonne. Aluminium and lead slumped 1.8 per cent and zinc 0.9 per cent. Nickel gained 1.1 per cent and 0.9 tin per cent.
