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Australian shares look set to open lower after banks and miners missed out on a narrow tech-led rally on Wall Street.

US stocks inched deeper into record territory, but the two sectors with the biggest weighting on the ASX – financials and materials – declined. ASX SPI200 futures fell 18 points or 0.27 per cent.

BHP and Rio Tinto dropped in overseas trade. Iron ore and gold ticked lower. Oil was flat. The dollar rose 0.15 per cent to 77.55 US cents.

Wall Street

US stocks edged higher as optimism over next week’s tech earnings offset soft jobs data. The S&P 500 overcame a weak start, a mid-session wobble and a late dip to end a point or 0.03 per cent ahead at a new record.

The Nasdaq Composite also hit a fresh peak, rising 74 points or 0.55 per cent as heavyweights Apple, Amazon and Alphabet advanced. The Dow Jones Industrial Average dipped 12 points or 0.04 per cent as value stocks were outpaced by growth stocks.

A broker upgrade ahead of next week’s quarterly update helped lift Apple 3.7 per cent. Morgan Stanley predicted a record quarter on strong demand for the iPhone 12. Expectations for earnings from ‘stay at home’ stocks were boosted this week by an unexpectedly strong result from Netflix.

A two-month US rotation from growth back into value sectors has hit a temporary pause. Airlines tumbled overnight after United warned it does not expect demand to recover until “a critical mass” of Americans have been vaccinated.

“Investors are going to realise that technology names are still where a lot of impressive earnings growth is coming from and those shares could hold up well because they’ve underperformed for the last couple of months,” Ryan Detrick, chief market strategist at LPL Financial, told Reuters.

Interest in value stocks has waned as the rollout of vaccines takes longer than expected and restrictions to stem the spread of Covid-19 hinder the economy. First-time claims for unemployment benefits declined last week from 926,000 to 900,000 but remained extraordinarily high by historic standards.

Australian outlook

Weak leads for the big guns of the ASX point to a soft start. The  US materials sector fell 1.5 per cent and financials almost 1.1 per cent.

The US rally was narrow. Just three sectors rose: technology +1.3 per cent, consumer discretionary (Amazon) +0.6 per cent and communication services (Facebook) +0.3 per cent. The energy sector skidded 3.4 per cent and industrials 0.8 per cent. A rise in US bond yields weighed on heath, utilities and other proxies.

Travel and tourism stocks may be impacted by a warning from United Airlines that it does not expect demand to recover for months. Shares in the US airline dived 5.7 per cent after it reported a fourth straight quarterly loss. The S&P 1500 airlines index fell 2.3 per cent.

“Until we can put as a society coronavirus in the rearview mirror, it’s going to continue to be a tough environment for aviation for everyone who’s involved in travel, tourism and leisure,” CEO Scott Kirby told CNBC.

Despite the headwinds, this has been a significant week for the S&P/ASX 200. The index broke out of a sideways trading range that had developed since late November. The breakout clears the way for another up-leg, provided Wall Street plays nice. US stock valuations look stretched, but there is no evidence yet that the elastic is about to snap.

On the economic calendar, monthly retail sales, manufacturing and services industry reports are due today. The quarterly reporting season continues.

Commodities

BHP and Rio Tinto retreated during a downbeat night for the resources sector. BHP’s US-listed stock fell 0.62 per cent and its UK-listed stock 1.5 per cent. Rio Tinto shed 0.36 per cent in the US and 1.82 per cent in the UK. The spot price for iron ore landed in China eased $1.65 or 1 per cent to US$170.55 a tonne.

Gold clung near its highest level in two weeks. Gold for February delivery settled 60 cents or less than 0.1 per cent lower at US$1,865.90 an ounce. The NYSE Arca Gold Bugs Index eased 1.2 per cent.

Oil finished little changed as an unexpected increase in US inventories dulled buying interest. Brent crude settled two cents or less than 0.1 per cent ahead at US$56.10 a barrel. The US benchmark eased 18 cents or 0.3 per cent to US$53.13.

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