A breakout week for the Australian share market drifted towards a downbeat conclusion as declines in banks and miners outweighed advances in healthcare and consumer stocks.
The S&P/ASX 200 eased five points or 0.1 per cent from yesterday's 11-month closing peak by mid-session.
Despite the setback, the index was on track for a weekly tally of around 1.5 per cent. Three days of gains through the middle of the week lifted the index clear of the horizontal trading range that had constrained progress since late November.
What's driving the market
The 'Biden bounce' showed signs of fatigue overnight. US stocks inched to closing highs, but momentum weakened following a powerful up-move when the new president was sworn in. The S&P 500 finished a single point or 0.03 per cent higher. The Nasdaq Composite gained a more convincing 0.55 per cent. The Dow dropped 0.04 per cent amid a rotation from value stocks back into Big Tech.
The two sectors with the biggest weighting on the ASX - financials and materials - were left behind by last night's US rally. That accounts for today's weakness. Rio Tinto, BHP, Fortescue Metals and Macquarie Group all fell more than 1 per cent. CSL, Wesfarmers and the supermarkets cushioned the market from a bigger loss.
"The ASX 200 seems to be taking a breather today, falling from its 11-month peak," Kalkine Group CEO Kunal Sawnhey said. "However, overall, the market remains upbeat on reporting season and political cheer in the US. Investors are counting on speedy vaccine rollouts and additional pandemic stimulus under Joe Biden’s administration."
Retail stocks traded mixed following news of an unexpectedly heavy slump in retail sales last month. Retail spending dived 4.2 per cent, almost three times as much as economists expected after a jump in November. Covid restrictions had an impact.
Healthcare was the pick of the sectors, rising 1.8 per cent following a well-received trading update from Fisher & Paykel Healthcare and broker upgrades for CSL, Cochlear and Ramsay Health Care. Fisher & Paykel surged 6 per cent after announcing it expects revenue and net profit this financial year to be higher than previously indicated. CSL put on 2.6 per cent and Cochlear 0.7 per cent after Citi raised its ratings on each. Ramsay declined 0.8 per cent.
Wesfarmers climbed for a fifth day, rising 3 per cent to a new high amid optimism about next month's half-year result. A November update showed strong growth across the first four months of the financial year. Other gains at the heavyweight end of the market included Brambles +1.5 per cent, Woolworths +1.2 per cent and Coles +0.5 per cent.
A major contract with the US government lifted Lynas Rare Earths 11.7 per cent to its highest level since 2013. The company will build a separation plant for rare earths in Texas. South32 rallied 3.2 per cent to a near-12-month high following yesterday's trading update.
A strong morning for media stocks saw Seven West soar 11.4 per cent to its highest level since November 2019 and Nine Entertainment add 2.3 per cent.
Most of the market's 800-pound gorillas declined. Rio Tinto led a retreat in the iron ore majors, falling 1.7 per cent. BHP shed 1.5 per cent and Fortescue Metals 1.1 per cent. Woodside Petroleum shed 2.1 per cent and Newcrest 0.9 per cent. The big four banks lost between 0.1 and 0.6 per cent.
The BNPL sector came under pressure at the end of a strong week. Afterpay sank 4.7 per cent following a six-session surge that lifted the share price from around $110 to above $150. Z1P Co sagged 2.3 per cent after Morningstar cut its rating to 'Sell'. Splitit fell 1.4 per cent and Sezzle 2.2 per cent.
Travel and tourism stocks came under mild pressure following a downbeat outlook for air travel overnight from United Airlines. Webjet slid 0.6 per cent and Flight Centre 0.3 per cent. Qantas eased 0.6 per cent.
A losing session on Asian markets saw China's Shanghai Composite fall 0.28 per cent, Hong Kong's Hang Seng 0.35 per cent and Japan's Nikkei 0.4 per cent.
US futures faded as the morning wore on. S&P 500 futures were lately down six points or 0.2 per cent.
Oil joined a general deterioration in risk assets. Brent crude dropped 50 cents or 0.9 per cent to $US55.61 a barrel. Gold rose 30 cents or 0.1 per cent to $US1,866.20 an ounce.
The dollar dipped 0.05 per cent to 77.56 US cents.
What's hot today and what's not
Hot today: Shares in traffic systems specialist Redflex Holdings (ASX:RDF) more than doubled following a takeover offer from Nasdaq-listed Verra Mobility. The US company offered 92 cents a share, a 130 per cent premium to Redflex's last traded price. The offer has the unanimous support of Redflex's directors. The share price climbed 113.8 per cent to 85.5 cents.
Not today: Asset manager Perpetual (ASX:PPT) fell 3.5 per cent after reporting its Australian funds under management declined 2 per cent to $22.7 billion last quarter. Most of the net outflow of $2.7 billion came from the loss of a low-margin institutional cash mandate. CEO and Managing Director Rob Adams insisted the company was seeing "positive momentum in FY21 across all divisions".