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The share market has a third day of gains in its sights after the S&P 500 and Nasdaq Composite rose for a sixth night, fuelled by positive earnings and economic data.
ASX futures rallied 20 points or 0.27 per cent. The S&P/ASX 200 has gained more than 100 points in two sessions and looked set to open near a seven-week high.
US crude fell below US$80 a barrel following last night’s OPEC meeting. Gold rose for the first time in three sessions. Iron ore and most industrial metals declined.
Wall Street
The S&P 500 and Nasdaq ended at all-time highs as strong earnings from Qualcomm boosted chipmakers, and claims for unemployment benefits fell to a pandemic-era low. The Dow declined as financial heavyweights Goldman Sachs and JPMorgan Chase weighed.
The S&P 500 rose 19 points or 0.42 per cent. The Nasdaq Composite put on 129 points or 0.81 per cent. The Dow Jones Industrial Average eased 33 points or 0.09 per cent.
Rate-sensitive tech stocks rallied as long-term US interest rates retreated in the wake of Wednesday’s Federal Reserve’s policy statement. Four of the Nasdaq’s five largest companies advanced.
Qualcomm upgraded its full-year forecast after Huawei’s exit from the smart phone market boosted demand for its chips. Shares in the company jumped 12.73 per cent. Rival Nvidia surged 12.04 per cent. The iShares Semiconductor ETF climbed 3.36 per cent.
Games makers were also strong. Electronic Arts and Take-Two Interactive both rose on strong demand from gamers.
Lenders declined as a slide in bond yields indicated investors interpreted the Fed’s policy update as delaying interest rate rises. The yield on ten-year US treasuries slid more than eight basis points to a three-week low.
“We have had a very strong earning season and the Fed has followed through on what it was preparing markets for and investors generally get happy if they get what they expect,” Randy Frederick, managing director of trading and derivatives at Charles Schwab, said.
“The last time the Fed tapered, it took more than a year for it to hike rates and it looks like that’s what is going to happen going ahead too, with only one-third of the market factoring hikes next year.”
Goldman Sachs dropped 2.35 per cent, Wells Fargo 2.28 per cent, Bank of America 2.13 per cent and JPMorgan Chase 1.31 per cent.
First-time claims for jobless benefits fell by 14,000 to 269,000 last week, a fresh pandemic-era low. Economists surveyed by Dow Jones expected a smaller decline to 275,000.
Wall Street’s “fear gauge”, the VIX or Volatility Index, fell to its lowest since early July.
Australian outlook
A bright start coming up as the clouds continue to clear. The Fed seems to have pulled off the launch of the bond taper without causing major ripples. Wall Street is on a tear, supported by strong corporate earnings and benign economic data.
The S&P/ASX 200 looks set to open near last week’s resistance zone. A breakout would clear the way for a charge up to 7500 and a test of technical resistance at the 7550 level.
A retreat in the dollar should provide a tailwind for exporters. The Aussie turned sharply lower overnight, falling 0.91 per cent to 74.01 US cents.
Growth stocks are back in favour as long-term interest rates retreat. The US tech sector put on 1.54 per cent. Bond proxies were mixed. Consumer discretionary gained 1.49 per cent and industrials 0.42 per cent.
Headwinds may include the major banks – US financials sagged 1.34 per cent. US materials slipped 0.11 per cent, with both BHP and Rio Tinto losing ground.
The Reserve Bank releases a quarterly monetary policy statement at 11.30 am AEDT that may shed more light on the bank’s rates outlook.
Today’s annual general meetings include Qantas, Spark New Zealand and Integral Diagnostics.
IPOs: North America-focused lithium hopeful Green Technology Metals lists at 12 pm AEDT. The company has three projects in Canada.
Commodities
Oil fell to a four-week low even as the Organization of the Petroleum Exporting Countries and allies again stared down calls for sharp increases in production. The cartel stuck to a previously-announced plan to raise output by 400,000 barrels per day next month.
“There is speculation that major oil consumer nations will open their strategic petroleum reserves if OPEC+ does not play nice,” Robert Yawger, executive director of energy futures at Mizuho, said.
Brent crude settled US$1.45 or 1.8 per cent lower at US$80.54 a barrel. The US benchmark dropped 2.5 per cent to US$78.81.
Iron ore reversed Wednesday’s tentative rebound. SGX TSI iron ore futures dropped 3 per cent or US$3.02 to US$96.19 a tonne.
BHP’s US-listed stock fell 0.99 per cent after its UK-listed stock bounced 0.83 per cent. Rio Tinto shed 2.01 per cent in the US and 0.57 per cent in the UK.
Gold was a big winner from the decline in treasury yields. Metal for December delivery settled US$29.60 or 1.7 per cent ahead at US$1,793.50 an ounce. The NYSE Arca Gold Bugs Index fell 0.46 per cent.
Aluminium plunged 4 per cent on the London Metal Exchange after China’s daily coal output neared the highest this year, clearing the way for increased smelting. The increase was expected to ease a power shortage that had forced aluminium smelters to reduce production.
Benchmark copper firmed 0.5 per cent to US$9,699 a tonne. Nickel shed 0.2 per cent, lead 1.2 per cent, zinc 1.9 per cent and tin 2.2 per cent.
