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The share market looks set to give back some of yesterday’s bumper gains following a mixed night on Wall Street as traders rotated out of Big Tech into cyclical plays.
The S&P/ASX 200 attained a four-month high yesterday after surging 155 points or 2.6 per cent during its best session in five weeks. Index futures point to an opening loss of 65 points or 1 per cent this morning after the S&P 500 gave up most of its gains in the final hour of US trade.
Signs of political divisions over a new stimulus plan appeared to suck much of the life out of an opening rally in the US. The S&P 500 finished five points or 0.17 per cent ahead after Senate Majority Leader Mitch McConnell said he did not expect Congress to pass a stimulus package in the next two weeks. The Dow trimmed a rally of more than 300 points to 160 points or 0.6 per cent.
The Nasdaq shed 87 points or 0.81 per cent as traders locked in profits following Monday’s record high. Most of the FAANG leadership group lost at least 1 per cent. Alphabet fell 0.5 per cent. Tesla slumped 4.5 per cent following a broker downgrade and reports of heavy discounting in China to meet sales targets.
“The price action is the reverse of Monday directionally as cyclicals/value outperform while investors book profits in growth/momentum,” Adam Crisafulli of Vital Knowledge wrote.
The US political discord struck a sour – if familiar – note at the end of a 24-hour cycle dominated by stimulus news. Australian stocks rocketed yesterday after the Morrison government outlined plans to extend JobKeeper and JobSeeker payments into March next year, soothing fears the economy might fall off a “stimulus cliff” if payments stopped in September. Local sentiment was also helped by news the European Union had agreed on a US$860 billion rescue fund to help countries worst affected by the COVID-19 pandemic.
The White House is pushing for a second stimulus package to replace a package scheduled to end this month, but hopes for a quick deal were dented by the usual political wrangling. Democrat Senate Minority Leader Chuck Schumer accused Republicans of being in “complete disarray” over the proposed bill.
Bank and energy stocks outperformed during last night’s rotation. The energy sector soared 6.2 per cent as the EU stimulus deal lifted oil prices. Brent crude settled $1 or 2.4 per cent higher at US$41.92 a barrel.
Companies continued to hurdle modest expectations for second-quarter earnings. Coca-Cola gained 2.3 per cent on optimism trading conditions are improving after a 33 per cent slump in Q2 profit. IBM climbed 4.6 per cent before fading to a loss of 0.3 per cent. Data from The Earnings Scout indicate 81 per cent of S&P 500 companies have beaten analyst expectations, though this reporting season is still in its infancy.
Mining giants BHP and Rio Tinto face setbacks after overseas markets failed to build on yesterday’s Australian advances. BHP’s US-listed stock dropped 0.5 per cent and its UK-listed stock 2.61 per cent. Rio Tinto shed 1.78 per cent in the US and 2.31 per cent in the UK. The spot price for iron ore landed in China gained $1.65 or 1.5 per cent to US$111.15 a dry ton.
Silver soared almost 7 per cent to a six-year high, narrowing the performance gap on gold. Silver for September delivery settled $1.37 or 6.8 per cent ahead at US$21.56 an ounce. Gold for August delivery settled $26.50 or 1.5 per cent higher at US$1,843.90 an ounce.
Copper was boosted by optimism over the demand implications of higher spending in Europe. Benchmark copper on the London Metal Exchange climbed 0.8 per cent to US$6,544.45 a tonne. Aluminium and zinc put on 2 per cent, nickel 1.7 per cent, lead 0.4 per cent and tin 1.2 per cent.
The dollar climbed 1.5 per cent to 71.28 US cents.
