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A fleeting opening recovery gave way to further selling as the share market’s torrid start to 2022 continued.

The S&P/ASX 200 rallied more than 1 per cent in early action before the rot set in. By mid-session the index had fallen 162 points or 2.33 per cent to its weakest since early April.

The decline continued a dire run this month. The index has collapsed more than 800 points since peaking above 7600 on January 5.

Today’s fall brought the index into technical correction territory, defined as a decline of 10 per cent from a peak. A close at current levels this afternoon would confirm the correction.

Oil producers rose after crude logged its highest close in seven years. Bulk metal miners were boosted by a jump in iron ore prices. Disappointing quarterlies weighed on the gold sub-sector.

What’s driving the market

Stock-watchers hoping for a Wall Street rebound over the Australia Day holiday saw their prayers go unanswered. Instead, the main equity indices in the US continued a week of wild gyrations.

The S&P 500 and Dow erased strong early gains overnight after the Federal Reserve indicated rates could rise faster and higher than the market anticipated. Bonds sold off, yields jumped and risk assets slumped.  

The S&P 500 flipped an advance of 2.2 per cent into a loss of.15 per cent. The Dow shed 0.38 per cent.

“Risk assets fell sharply in the wake of the FOMC [Federal Open Market Committee] meeting overnight with Fed Chair Powell sounding hawkish, even if he tried to be measured,” NAB Director, Economics, Tapas Strickland, said.

“Yields sky rocketed with the 2yr yield up 11bps to 1.12% and the 10yr also up 7.7 bps to 1.85%. Markets have increased their pricing for Fed rate hikes to 4.8 being priced in 2022 from 4.2 yesterday,” he added.

The overnight action continued a roller-coaster week for investors. US stocks plunged on Monday and Tuesday night before recouping most of their losses. The ASX sold off sharply on Tuesday as investors reduced their exposure over yesterday’s public holiday.

Australian yields followed their US counterparts higher this morning. The yield on ten-year Australian government bonds firmed eight basis points to 2.02 per cent, the highest in almost three months.

Higher yields allow lenders to increase profit margins. The big four banks briefly moved higher this morning before the mood soured. Bond proxies – safe, conservative assets that compete with bonds for investment flows – declined.

Going up

Energy companies chased gains in the price of crude across the holiday. Brent crude cracked US$90 a barrel overnight for the first time since 2014. Beach Energy rose 7.47 per cent, Santos 2.31 per cent and Woodside 2.45 per cent.

Premier Investments overcame pandemic store closures to increase sales during the first half. The retail group expects sales for the half to improve around 0.5 per cent to $769 million. Online sales increased 27 per cent. The share price lifted 2 per cent.

BHP firmed 0.61 per cent after a UK court sanctioned the miner’s proposal to reunify its corporate structure back in Australia. Unification is now expected to complete by January 31. BHP Group will then become the sole parent company.

Rio Tinto gained 0.79 per cent. Fortescue Metals eased 0.92 per cent.

Champion Iron will pay shareholders an inaugural dividend of 10 cents per share after reporting net income of $68 million for the quarter. The company reported record iron ore production. The miner’s shares added 1.49 per cent.

Genworth jumped 9.4 per cent after retaining its role as exclusive provider of lenders’ mortgage insurance to Commonwealth Bank. The new contract will run for three years from the expiry of the current contract at the end of the year.

Investment manager Insignia (formerly IOOF Holdings) gained 0.62 per cent after reporting a slowdown in net outflows. Rival Perpetual fell 1.12 per cent despite increasing assets under management by 1.8 per cent last quarter.

Going down

An unforgiving market punished any company that hinted at cost pressures or Covid-related supply-chain issues. OZ Minerals dropped 4.26 per cent despite meeting 2021 production and costs guidance. The diversified miner reported record calendar-year revenue of $2.1 billion but warned of persisting workforce and supply challenges.

Online retailer Kogan plunged 9.99 per cent to a 21-month low after first-half profit and earnings fell short of the market consensus. Gross profit declined 4 per cent year-on-year as the company struggled with supply chain interruptions. Gross sales rose 9 per cent year on year.

Gold miners struggled following a sharp retreat in precious metals as the US dollar rallied. Evolution Mining sagged 11.67 per cent despite reaffirming full-year production guidance. The miner produced 148,084 ounces of gold in the face of significant rainfall, labour shortages and Covid cases.

Silver Lake Resources said it was “well placed” to meet full-year guidance following a “solid” quarter, but saw its shares fall 10.45 per cent during a tough morning for the sector. Westgold also fell after reporting, lately down 6.05 per cent.

Tech stocks saw heavy selling as investors continued to unload companies seen as vulnerable to higher borrowing costs. WiseTech sagged 9.2 per cent, Xero 7.69 per cent and Megaport 7.5 per cent.

Block shed 3.28 per cent and Zip Co 8.26 per cent. Tuesday’s best performer, Codan, fell 10.02 per cent.

The heavyweight banks turned mixed with the sinking tide after briefly rallying on the prospect of a return to more typical profit margins as this era of record-low rates draws to an end. ANZ improved 0.19 per cent. Westpac faded 0.64 per cent, NAB 1.17 per cent and CBA 1.96 per cent. UK banking group Virgin Money firmed 3.54 per cent.

Other markets

US futures fell as Asian markets declined. S&P 500 futures were recently down 28 points or 0.63 per cent.

In Asia, the Asia Dow slid 1.98 per cent, China’s Shanghai Composite 0.03 per cent, Hong Kong’s Hang Seng 1.68 per cent and Japan’s Nikkei 1.45 per cent.

Oil retreated after settling higher ahead of the Fed policy update. Brent crude faded 19 US cents or 0.2 per cent to US$88.55 a barrel.

Gold fell as the US dollar rallied. The yellow metal declined US$13.90 or 0.8 per cent to US$1,815.80 an ounce.

The dollar faded 0.45 per cent to 70.89 US cents.

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