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The share market faces early pressure after a sell-off in chip stocks steered Wall Street lower ahead of tonight’s high-stakes inflation report.
The S&P 500 fell for a fourth night amid jitters over consumer price data that could send the July market recovery into reverse.
Gold rose to a six-week high as traders bought havens. Oil, iron ore and copper retreated. The dollar dropped around 0.3 per cent to 69.65 US cents.
ASX futures retreated 39 points or 0.56 per cent, signalling a reversal after three days of gains. The S&P/ASX 200 edged up nine points yesterday to an eight-week closing high.
Wall Street
Investors continued to reduce their exposure after the second revenue warning from a major chipmaker in two days underlined headwinds facing corporate America. Bond yields rallied ahead of tonight’s July CPI.
The S&P 500 declined 18 points or 0.42 per cent. The Dow Jones Industrial Average eased 58 points or 0.13 per cent. The Nasdaq Composite fell 151 points or 1.19 per cent.
“There’s a lot of nervousness around the inflation reports coming out [tonight] and Thursday,” Paul Nolte, portfolio manager at Kingsview Investment Management, said. “And continued weakness in the chips sector, which has historically been seen as a market-leading sector, is also helping to hold stocks back.”
Chip makers slumped for a second day after Micron warned weak demand meant it might miss revenue guidance provided on June 30. The news came a day after Nvidia issued a similar message about supply-chain issues and a downturn in consumer spending on gaming.
“These are two big players that I think investors thought were in a better position to navigate through some of these recent supply chain issues. I think there’s concern that this is really going to weigh on tech,” Ed Moya, senior market analyst at Oanda, said.
Micron fell 3.74 per cent. Nvidia lost another 3.97 per cent. The PHLX Semiconductor Index skidded 4.57 per cent.
Other corporate results also weighed. A weak outlook from Norwegian Cruise Line dragged on travel stocks. Novavax tanked 29.64 per cent after slashing its sales forecast.
The S&P 500 rose for three weeks, before running into mild selling pressure over the last four sessions as investors nervously await signs inflation has topped out. Tonight’s report is expected to show headline inflation eased last month to 8.7 per cent year-on-year from 9.1 per cent in June.
A recent rally in “meme stocks” stuttered as the main indices retreated. Bed, Bath & Beyond slumped 14.2 per cent. The Reddit trader favourite surged 36 per cent on Monday. GameStop shed 7.09 per cent. AMC Entertainment fell 6.3 per cent.
Australian outlook
The S&P/ASX 200 has crept steadily higher over the last three sessions even as the S&P 500 retreated. That disconnect looks unlikely to survive today.
Falls on the S&P 500 have been modest, but a four-session losing streak sends a message investors are genuinely nervous about tonight’s CPI. A “hot” result could turn this week’s gentle retreat into full-blown flight.
“For the past number of months, traders and investors have been hoping that they will get to see a peak in inflation readings, and today their prayers may come true as it is widely anticipated that they may see a slow down in the inflation number,” Naeem Aslam, chief market analyst at AVATrade, said.
“If the inflation data cooperates, it may provide policymakers a cause to ease up, if not in September than later in the year,” he added.
Consumer and tech stocks bore the brunt of last night’s selling, thanks to weak quarterlies. Travel stocks here may feel some heat from a cruise line’s warning that the post-pandemic recovery is taking longer than expected.
Also weak were basic materials -0.51 per cent, industrials -0.37 per cent and healthcare -0.29 per cent.
The night’s best-performing sectors were energy +1.77 per cent and utilities +1.06 per cent. The financial sector gained 0.57 per cent.
The market gets full-year earnings today from one of the big guns: Commonwealth Bank. A disappointing quarterly yesterday from NAB suggested lending margins had not benefitted from higher rates as much as the market anticipated. CommSec expects the bank to report full-year net profit of around $9.3 billion and a final dividend of $2.14.
Chinese inflation data at 11.30am AEST could have an impact if it deviates too far from expectations. Economists predict consumer inflation accelerated last month to around 2.9 per cent year-on-year. Producer price inflation is expected to have declined as lockdowns lifted.
Commodities
Gold logged its strongest close in six weeks as traders hedged against a hot inflation report tonight. Gold for December delivery settled US$7.10 or 0.4 per cent ahead at US$1,812.30 an ounce. The NYSE Arca Gold Bugs Index inched up 0.16 per cent.
“Gold is getting a boost today from both safe-haven flows as stocks weaken and the dollar softens,” Oanda’s Moya said. “If inflation eases a little more than expected, gold could make a run towards the $1850 region.”
Oil finished lower as traders weighed mixed market drivers. Prices rose initially after Russia suspended supply through a pipeline to central Europe over a dispute about a transit fee impacted by sanctions. However, progress towards a European Union nuclear deal with Iran capped buying interest with the prospect of Iranian supply coming back online if sanctions are lifted.
Brent crude settled 34 US cents or 0.4 per cent weaker at US$96.31 a barrel.
Iron ore declined as China battled fresh Covid outbreaks. Local media reported mass testing in parts of Tibet and growing clusters in Hainan and Xinjiang.
The spot price for ore landed in China retreated US$1.67 or 1.5 per cent to US$109.28 a tonne. The most-traded contract on the Dalian Commodity Exchange fell 1.4 per cent to 723 yuan.
BHP and Rio Tinto suffered differing fortunes for a second session. BHP‘s US-traded depositary receipts dropped 0.88 per cent. The miner’s UK listing gave up 0.8 per cent. Rio Tinto improved 0.89 per cent in the US and 0.55 per cent in the UK.
Industrial metals were mixed. Benchmark copper on the London Metal Exchange dipped 0.1 per cent to US$7,980.50 a tonne. Nickel gave up 0.6 per cent and lead 0.4 per cent. Aluminium put on 1.9 per cent, zinc 3.1 per cent and tin 0.5 per cent.
