The share market rose for a second day as strong US leads encouraged traders to remain in the market over the long weekend.
The S&P/ASX 200 fell as much as 28 points in early action before rebounding to a mid-session gain of 15 points or 0.21 per cent.
A positive close tonight would break a run of daily reversals. The index has moved in a different direction every session since Monday.
Gains in tech and mining stocks kept the index ahead. Bank and property stocks weighed after bond markets shrugged off the hottest US inflation report in 13 years.
What's driving the market
The S&P/ASX 200 has flattered to deceive this week. A succession of all-time highs suggests strength, but each time the market set a new record, it retraced. Today's reversal lifted the index towards a modest weekly gain of around 20 points or 0.3 per cent.
With the index near record levels and Wall Street due to trade twice before the ASX reopens on Tuesday, traders initially seemed ready to lock in a little profit from some of the best-performing sectors.
The financial sector declined as Australian bond yields followed US yields lower. Declining yields are a net negative for lenders because tightening borrowing costs crimp margin opportunities. ANZ dropped 1.36 per cent, Westpac 0.92 per cent, NAB 0.54 per cent and CBA 0.23 per cent. The sector hit a three-and-a-half-year high last week.
Property stocks have an inverse relationship with yields , but were vulnerable to profit-taking after the REIT sector closed at a pandemic-era peak last night following four weeks of gains. Stockland gave up 1.13 per cent, Dexus 1.42 per cent and Goodman Group 0.31 per cent.
Overnight, US stocks shrugged off news consumer prices surged 5 per cent from last May. The S&P 500 climbed 0.47 per cent as investors cleaved to the old adage, "Don't fight the Fed".
The US central bank has consistently argued this year's spike in inflation will be temporary, allowing the bank to retain record-low rates. The drop in US bond yields in the wake of last night's inflation report suggested bond traders were throwing in the towel.
"Equity investors seem to have put their inflation worries to rest for some time that a higher-than-expected rise in inflation could push policymakers to reconsider their stimulus measures," Kalkine Group CEO Kunal Sawhney said.
"Investors were seen to be in a largely buoyant mood, with the US economy observing a remarkable recovery from last year's virus-induced economic slump. Optimism about the economic recovery surfaced after the latest data exhibited a decline in claims for jobless benefits to their lowest level last week since the start of the COVID-19 outbreak."
Back home, buying interest may have been stoked by news Victoria recorded zero locally-acquired new Covid cases yesterday for the first time since the start of the latest breakout.
Growth stocks and bond proxies were the obvious winners from last night's dive in global bond yields. Tech stocks become more attractive when yields decline because of the impact of borrowing costs on valuations. Bond proxies compete with bond markets for investment funds and prosper when returns on bonds weaken. The yield on ten-year Australian bonds sank almost two basis points this morning to 1.429 per cent, the lowest since February.
Appen led the tech charge, rising 6.94 per cent. Afterpay gained 4.86 per cent, Nanosonics 2.73 per cent and Xero 2.27 per cent.
Wesfarmers put on 0.79 per cent, Telstra 0.28 per cent and CSL 0.61 per cent.
The heavyweight miners took a while to warm up, but eventually added bulk to the morning reversal. Fortescue Metals firmed 1.69 per cent, Newcrest 2.31 per cent, BHP 0.88 per cent and Rio Tinto 0.44 per cent.
A strong trading update lifted retail group Premier Investments to an all-time high. Sales for the first 18 weeks of the year increased 70 per cent above the same Covid-affected period last year and 15.8 per cent over the equivalent Covid-free period in 2019. Shares in the Solomon Lew-controlled retailer rose as high as $28.75 before easing to $27.59, a gain of 0.95 per cent.
Domino's Pizza climbed 0.9 per cent back towards record levels after striking a deal to acquire Domino's Taiwan for around $79 million. The Taiwanese operation is the island's second-largest chain, with 157 outlets.
Crown Resorts slumped 1.53 per cent on news the Victorian Royal Commission into the betting group's suitability to hold a casino licence had been extended by ten weeks. The extension ensures the company's dirty laundry will be aired until October 15.
Supermarkets Woolworths and Coles dropped 0.34 and 0.24 per cent, respectively. Aristocrat Leisure eased 0.34 per cent.
Cimic declined 1.81 per cent as it traded without the right to a dividend.
A low-key session on Asian markets saw the Asia Dow higher by 0.07 per cent and China's Shanghai Composite off 0.15 per cent. Hong Kong's Hang Seng rose 0.35 per cent. Japan's Nikkei eased 0.09 per cent.
US futures marked time. S&P 500 futures edged up a point or 0.02 per cent.
Oil unwound last night's gains. Brent crude declined 40 cents or 0.55 per cent to US$72.12 a barrel.
Gold, a traditional hedge against inflation, built on a tentative rally since last night's US data, rising $6 or 0.32 per cent to US$1,902.50 an ounce.
The dollar held steady at 77.48 US cents.