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The ASX suffered its biggest setback in three months, tumbling almost 2 per cent following a brutal sell-off on Wall Street.
The S&P/ASX 200 dived 127 points or 1.87 per cent to its lowest level since the first week of the year. The decline was the index’s heaviest since a 104.6-point plunge on October 27. Earlier, the index fell as much as 2.7 per cent.
What’s driving the market
Sharp losses on Wall Street left Australian investors few places to hide. Ten of the eleven local sectors declined, led by plunges in tech and healthcare stocks. Every one of the market heavyweights of the S&P/ASX 20 fell. Fewer than one in ten stocks on the broader ASX 200 advanced.
The speculative end of the market bore the brunt of the selling. The S&P/ASX Emerging Companies Index tanked 3.5 per cent.
US stocks tumbled after speculative mania, forced selling, soft earnings and cautious commentary from the Federal Reserve rattled investors. The S&P 500 plunged 2.57 per cent to its worst loss since October. The Dow and Nasdaq also lost at least 2 per cent.
The downbeat mood extended into after-hours trading. S&P 500 futures were lately down three points or 0.1 per cent.
“This is a time for caution for investors,” Scott Knapp, chief market strategist at CUNA Mutual Group, told CNBC. Knapp said recent surges in initial public offerings, cashbox listings, Bitcoin and speculative stocks such as GameStop and AMC were all “data points supporting a market bubble thesis”.
NAB Currency Strategist Rodrigo Catril said in addition markets may have been unsettled by a cautious outlook from Fed Chair Jerome Powell.
“Powell’s acknowledgment of a slowdown in the pace of the recovery and dependency on vaccine roll out are not new news, but it does provide equity investors a bit of a reality check, pushing out the timing for the recovery and uncertainty around vaccination roll out programmes,” he said.
Going up
The winner’s list was the shortest today in months. Among the biggest winners were some of the most shorted stocks on the ASX – a sign local retail traders may be mimicking their US counterparts by buying stocks fund and hedge managers expect to decline. The phenomenon mirrors events in the US where so-called Reddit traders have lifted unloved stocks to extraordinary heights, forcing hedge funds to cover positions with shattering losses.
Funeral company InvoCare surged 7.2 per cent to its highest level since March. The company is among the top ten most shorted stocks on the ASX, according to Rivkin Securities. Other companies on the list to rally today included Tassal Group +4.7 per cent, Webjet +3.1 per cent and Inghams +4.4 per cent.
The local listing of European shopping mall operator Unibail-Rodamco-Westfield – heavily shorted in Europe – jumped 13.4 per cent. Out-of-favour wine company Treasury Wine Estates rallied 5.4 per cent.
The defensive utilities sector bucked the trend, rising 0.4 per cent as AGL Energy bounced 1 per cent from a 12-year low and APA Group edged up 0.3 per cent.
Going down
Ten of eleven sectors declined, led by a 4 per cent drop in the tech sector. Xero tumbled 6.5 per cent, Nearmap 4.9 per cent and Afterpay 4.4 per cent.
CSL sagged 3.2 per cent to its lowest level since the March pandemic plunge. The big four banks shed between 2 and 2.3 per cent. Mining giants BHP and Rio Tinto gave up 2 and 3.1 per cent, respectively.
Positive earnings news was trampled in the rush to the exits. Fortescue Metals reported a record half but saw its share price skid 3.5 per cent. Newcrest CEO Sandeep Biswas declared “excellent progress in relation to our expanding exploration portfolio” and was rewarded with a share price decline of 1.8 per cent.
Evolution Mining dipped 1.3 per cent after reaffirming full-year production guidance. Lithium miner Galaxy Resources dropped 5.3 per cent despite predicting a “very strong year of demand”.
Nickel miner IGO eased 2.4 per cent after reporting a 3 per cent decline in half-year revenue due to lower production and sales. Investors shrugged off another record quarter from BNPL player Splitit, sending the share price down 2 per cent.
Other markets
Asian markets followed Wall Street lower. China’s Shanghai Composite shed 1.08 per cent, Hong Kong’s Hang Seng 1.31 per cent and Japan’s Nikkei 1.3 per cent.
Gold declined for a sixth session, falling $11.50 or 0.6 per cent to $US1,833.40 an ounce.
Oil turned lower. Brent crude fell 27 cents or 0.5 per cent to $US55.26 a barrel.
The dollar eased 0.12 per cent to 76.39 US cents.
What’s hot today and what’s not
Hot today: Shares in lithium hopeful Hawkstone Mining (ASX:HWK) have gone up fivefold in three weeks as the company moves nearer to production. Shares that traded for a cent as recently as January 12 hit 6.3 cents today. The company announced preliminary metallurgical tests showed lithium recovery of 90 per cent at its Big Sandy project in the US. The company hopes to produce battery-grade lithium carbonate by the end of next month. The share price was last up 28.2 per cent at 5 cents.
Not today: Shareholders bailed out of Marquee Resources (ASX:MQR) after drilling at the West Spargoville project came up empty. The company reported the first 21 holes “failed to detect any significant zones of gold mineralisation”. Executive Chair Charles Thomas said the results were “well below expectation”. Results from the remaining 15 holes are expected in the next two weeks. The share price slumped 23.5 per cent.
