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The ASX’s powerful November rally looks set to lose momentum after Wall Street finished broadly lower ahead of tonight’s Thanksgiving US market holiday.
Australian index futures finished near flat, down four points or less than 0.1 per cent, a day after the S&P/ASX 200 turned fleetingly positive for the year. The local index rose as high as 6713 yesterday before finishing at 6683, less than a point below where it opened on January 2.
The rally extended the ASX 200’s November gains to 12.7 per cent, the best monthly return in its 20-year history. The older All Ordinaries was on track for its best month since at least 1988.
Wall Street
Trading volumes in the US more than halved as many market participants skipped the session to travel home for family celebrations. The New York Stock Exchange closes tonight for Thanksgiving and re-opens on Friday for half a session.
A day after closing at all-time highs, the Dow and S&P 500 fell as rising benefits claims underlined strains in the labour market. The Dow Jones Industrial Average declined 174 points or 0.58 per cent, surrendering its grip on the 30,000 handle. The S&P 500 shed six points or 0.16 per cent.
The Nasdaq Composite rose 58 points or 0.48 per cent to a record close as ‘stay-at-home’ stocks outperformed. Zoom Video gained 3.8 per cent, Amazon 2.2 per cent and Netflix 0.4 per cent.
The market looked ripe for profit-taking with a holiday looming after Tuesday’s record closes. A jump in claims for jobless benefits provided a convenient excuse. First-time claims rose to 778,000 last week from 742,000 the week before. The numbers of claims far exceeded the 733,000 anticipated by economists polled by Dow Jones.
“For the last several weeks, the market has been looking through bad news, but then you get the statistic about the unemployment claims and the market focuses again on the short-term difficulties we are having,” Christopher Grisanti, chief equity strategist at MAI Capital Management, told Reuters.
Benefit claims have decreased steadily since the height of the pandemic, but the rate of decline has slowed dramatically since government stimulus measures expired and record Covid-19 cases forced temporary restrictions in parts of the country. Political analysts say a new fiscal package is unlikely before Joe Biden is sworn in as president on January 20.
Australian outlook
The local market looks increasingly ready for a breather after three-and-a-half weeks of breakneck gains. The index poked its head into positive territory for 2020 but gave back almost half its gains by yesterday’s close. A sign of fatigue?
There is nothing yet in the market action to indicate a dramatic change of investor sentiment, but analysts on both sides of the Pacific raised concerns yesterday that the rally looks over-extended. The S&P/ASX 200 has blithely ignored negative US leads for weeks, supported by Australia’s vastly superior Covid rates and stimulus outlook.
Trading volumes are likely to fade over the next two sessions without the US traders who provide much of the ‘active’ intraday movement.
US action showed pockets of strength amid the broader weakness. Technology – the weakest ASX sector yesterday – rallied 0.2 per cent. The consumer discretionary sector climbed 0.6 per cent on gains in the likes of Nike, Walmart and Walgreens. Defensive sectors fared better than cyclicals. The energy sector fell 2.4 per cent, materials 1.1 per cent and industrials 0.8 per cent. Financials eased 0.4 per cent.
Today’s virtual AGM line-up includes WiseTech, Evolution Mining, Lynas, Ramelius Resources, Qube Holdings, Hansen Technologies, Beston, HUB24 and NRW. Gentrack and EROAD report earnings. Quarterly private-capital expenditure figures are also scheduled.
The dollar hit a near two-month high in the last 24 hours and was lately ahead 0.03 per cent at 73.69 US cents.
Commodities
Oil claimed a second straight eight-month high as investors looked beyond near-term headwinds to a vaccine-fuelled recovery in demand. Brent crude settled 75 cents or 1.6 per cent higher at US$48.61 a barrel.
Gold stocks edged higher as the metal held critical technical support. The NYSE Arca Gold Bugs Index rose 1.4 per cent. Gold for December delivery settled 90 cents or less than 0.1 per cent ahead at US$1,805.50 an ounce.
BHP and Rio Tinto look like potential market drags today following weakness in overnight action. BHP’s US-listed stock declined 0.92 per cent and its UK-listed stock 1.42 per cent. Rio Tinto gave up 2.08 per cent in the US and 2.66 per cent in the UK. The spot price for iron ore landed in China inched up 40 cents or 0.3 per cent to US$128.15 a tonne.
