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Australian stock futures pointed to a cautiously positive open after a late recovery on the Dow helped offset heavy falls among social media stocks as Snap’s outlook disappointed and economic data deteriorated.  

June SPI 200 futures edged up eight points or 0.11 per cent.

A volatile session on Wall Street saw the Nasdaq Composite sink more than 2.3 per cent. Tech selling kept the S&P 500 down 0.8 per cent even as the Dow turned positive.

Gold edged higher for a fourth night as traders bought havens. Oil booked a slim gain. Iron ore and industrial metals retreated. The dollar regained 71 US cents.

Wall Street

A sharply-divided market saw defensive sectors rally and social media stocks plunge as traders weighed a weak outlook from Snap and a sharp retreat in bond yields as soft economic data fuelled a rush to the safety of the bond market.  

The Dow Jones Industrial Average finished 48 points or 0.15 per cent higher after being down as much as 1.6 per cent. The tech-heavy Nasdaq Composite shed 271 points or 2.35 per cent. The S&P 500 lost 32 points or 0.81 per cent.

Social media stocks spearheaded falls amid fears of a slowdown in digital advertising. Snap warned employees it will miss revenue and earnings targets. The social media firm suffered its worst day on the boards, falling 43.08 per cent.

Amazon and Google parent Alphabet hit 52-week lows. Pinterest plunged 23.64 per cent, Facebook owner Meta Platforms 7.62 per cent and Twitter 5.55 per cent.

“Some are a bit incredulous that a relatively small and perennially unprofitable ephemeral social media firm can take down the whole tape, but given how sensitive this tape is, SNAP is able to punch above its weight,” Adam Crisafulli of Vital Knowledge wrote.

“Tech still dominates the market, both numerically (it remains the biggest weighting) and psychologically, and despite aggressive liquidation in the last couple of months, people still own a lot of it,” he added.

Retailers remained under pressure after Abercrombie & Fitch continued a run of weak trading updates from high-street brands. Shares in the fashion brand slumped 28.58 per cent after rising costs and weakening sales triggered an unexpected first-quarter loss.  

The Dow climbed off its low as a deterioration in economic data sharpened recession worries. Bond yields declined, fuelling a rotation into “bond proxies” – stocks that attract fund flows when returns from the bond market weaken. Utilities, consumer staples and REITs all advanced.

“The US economy is not falling apart, but the weakness it is experiencing is much worse than many expected,” Edward Moya, senior market analyst at Oanda, wrote.

S&P flash surveys showed US business growth decelerated this month. A slump in home sales to their lowest level since April 2020 added to worries.

“The Federal Reserve is pumping the brakes; the most interest-rate sensitive sectors, notably housing, are cooling,” analysts at Grant Thornton wrote.

Australian outlook

The Dow’s late revival offers the prospect of a positive start after another torrid session in the US. The S&P/ASX 200 pre-empted a bad night by retreating 20 points or around 0.3 per cent yesterday. That move allows the ASX a little room for recovery this morning.

Defensive sectors look the best bet for the day ahead following carnage at the “sexier” end of the market in the US. A retreat in treasury yields encouraged traders to buy sectors that offer some of the same characteristics as bonds (reliable returns, modest price movement).

Utilities rose 2.01 per cent, consumer staples 1.66 per cent and real estate 1.2 per cent. Gold miners drew a bid: the NYSE Arca Gold Bugs Index firmed 2.11 per cent. The energy and healthcare sectors also finished higher.

Communication services, the sector that contains most of the social media firms, dived 3.7 per cent. Consumer discretionary (retailers) sank 2.58 per cent. Tech gave up 1.57 per cent.

The materials sector dropped 0.61 per cent as the lingering threat of broader Chinese lockdowns weighed on iron ore and industrial metals. Financials eased 0.24 per cent after a big rise on Monday night.  

Back home, Costa Group, Alumina and Boart Longyear hold AGMs today.

Quarterly construction figures are due at 11.30 am AEST. The Reserve Bank’s Assistant Governor (Economics) Luci Ellis is due to address the Urban Development Institute of Australia in Sydney this morning.

IPOs: Bellavista Resources lists at 12 pm AEST. This explorer is targeting battery metals in WA.

The dollar regained 71 US cents, rising 0.32 per cent to 71.09 US cents.

Commodities

Iron ore  and industrial metals declined amid questions over the outlook for Chinese demand and disappointment over economic stimulus measures announced so far. Covid case numbers hovered near record levels in Beijing.

The spot price for ore landed in China dropped US$1.19 or 0.9 per cent to US$133.10 a tonne. The most traded contract on the Dalian Commodity Exchange dropped 30.5 yuan (around US$4.58) to 830.5 yuan.

Copper backed off its highest level in around two and a half weeks. Benchmark copper on the London Metal Exchange declined 1.4 per cent to US$9,459 a tonne. Aluminium fell 2 per cent, nickel 4.3 per cent, lead 1.6 per cent, zinc less than 0.1 per cent and tin 1.2 per cent.

BHP‘s US-traded depositary receipts edged up 0.45 per cent following a flat close in the UK. Rio Tinto gained 0.76 per cent in the US after losing 0.38 per cent in the UK.

Gold advanced for a fourth night as weak US economic data boosted traditional havens. Metal for June delivery settled US$17.60 or 1 per cent ahead at US$1,865.40 an ounce.

“There might be no stopping gold right now as the wall of worry on Wall Street continues to grow,” Oanda’s Moya said. “Gold should remain supported as inflationary pressures weigh further, China’s COVID situation remains a big unknown, and corporate America continues to slash outlooks.”

Brent crude edged higher during a subdued session on energy markets. The global benchmark settled 14 US cents or 0.1 per cent ahead at US$113.56 a barrel. The US benchmark dropped 52 US cents or 0.5 per cent to US$109.77.

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