Aussie stocks were poised to open sharply lower after an attempted Wall Street rebound gave way to further selling.
ASX futures slid 66 points or 0.91 per cent, signalling renewed pressure after a tentative bounce yesterday.
US stocks gave up strong early gains in the final hour of trade. Iron ore hit a four-month high. Crude, nickel and copper rose. Gold was broadly steady.
Wall Street
Falling bond yields offered US stocks temporary relief overnight before the rally flamed out. The major indices closed at session lows as investors continued to pare exposure ahead of next week’s Federal Reserve meeting.
The S&P 500 finished 50 points or 1.11 per cent in the red after earlier rising 1.5 per cent. A similar rally for the Dow Jones Industrial Average ended with a loss of 314 points or 0.9 per cent. The Nasdaq Composite shed 186 points or 1.3 per cent as a 2 per cent opening surge withered.
Bond yields retreated after an unexpected increase in claims for unemployment benefits eased pressure on the Fed to go big when it starts to raise rates. First-time claims for benefits jumped from 231,000 to 286,000 last week, well above Wall Street expectations.
There were also signs of weakness in the property market. Home sales declined by 4.6 per cent last month as high prices and low inventory undermined activity.
“The surge in jobless claims and drop in existing home sales has lead to some easing 10-year bond yields which could reflect some reduction in the degree the Fed could tighten – certainly dampens speculation of a 50 [basis points] rate hike in March,” Kathy Bostjancic, chief US economist at Oxford Economics, said.
“Moreover we are in for more volatile markets due to the heightened degree of uncertainty surrounding the economic, inflation and interest rate outlook.”
Both stocks and bonds have fallen this year as investors prepare for the Fed to raise official rates. The yield on ten-year US treasuries hit a two-year high earlier this week. (Yields move inversely to prices.) Overnight, the ten-year yield backed down to 1.82 per cent after hitting 1.9 per cent on Wednesday.
The decline encouraged bargain-hunters to dip their toes in the likes of Tesla, Meta Platforms (Facebook), Netflix and Microsoft, but all but the electric car-maker finished in the red.
A lighter night for quarterly corporate updates included a win for Dow component Travelers and losses for United Airlines and American Airlines. Peloton dived 23.93 per cent after reportedly halting production of its exercise bikes due to weak demand.
Australian outlook
The clouds that briefly parted yesterday closed in again overnight. Wall Street mounted a rebound but once again could not sustain early gains. As the old market adage goes, amateurs open the market, professionals close it. Closing prices matter most and they make ugly reading this morning.
The Nasdaq Composite pushed deeper into correction territory. The Dow and S&P 500 remained some way from 10 per cent corrections, but their runways have shrunk.
The three Big Tech sectors accounted for much of the selling. The consumer discretionary sector (Amazon) sagged 1.95 per cent, technology 1.33 per cent and communication services (Google, Netflix) 1.14 per cent.
Cyclicals took a hit from the night’s weak economic data. Materials – yesterday’s best ASX performer – dropped 1.43 per cent. Industrials eased 1.24 per cent. While defensive sectors fared best, by the close utilities was the only gainer with a slim rise of 0.14 per cent.
Chinese rate cuts helped the S&P/ASX 200 bounce ten points or 0.14 per cent yesterday on expectations of higher demand for Australian raw materials. The market looks likely to retest yesterday’s 2022 low this session.
The domestic economic calendar is empty, but the quarterly corporate reporting season rolls on.
IPOs: OrExplore Technologies lists at 12 pm AEDT. The company offers a new approach to analysing rock samples with X-rays. Two other listings originally scheduled for today have been pushed back.
The dollar inched up 0.04 per cent to 72.19 US cents.
Commodities
BHP and Rio Tinto turned negative in US trade as Wall Street sentiment soured. BHP‘s US-listed stock shed 0.66 per cent after its UK-listed stock put on 1.17 per cent. Rio Tinto declined 2.25 per cent in the US and 1.31 per cent in the UK.
The falls came even after iron ore hit a fresh four-month high. The spot price for ore landed in China climbed US$3.45 or 2.6 per cent to US$133.65 a tonne.
Oil added to seven-year highs. Brent crude settled 1.1 per cent ahead at US$88.44 a barrel. The international benchmark has put on 13.7 per cent since the start of the year, adding to inflationary pressures for consumers. The US benchmark is up 16 per cent.
“Oil could be what breaks the market’s back if it goes parabolic here,” technical analyst Andrew Adams wrote for Saut Strategy.
“Higher oil prices should continue to help the oil companies, but it also raises costs on many other industries and could further harm margins,” he added.
Gold held broadly steady during a consolidation session following the metal’s best night since December. Gold for February delivery settled 60 US cents or less than 0.1 per cent lower at US$1,842.60 an ounce. The metal is widely used as a hedge against inflation.
“Gold is finally finding its footing, largely due to the inflationary environment we find ourselves in, combined with the recent weakness in the U.S. dollar,” Adam Koos, president at Libertas Wealth Management Group, told MarketWatch.
The NYSE Arca Gold Bugs Index eased 1.89 per cent, a day after jumping 7.88 per cent.
Copper rose sharply for a second day following Chinese efforts to stimulate the economy. The People’s Bank of China cut lending rates yesterday for the second time this week. US-traded copper jumped 2.5 per cent to US$4.583 a pound.
Nickel hit a decade high on the London Metal Exchange and a record on the Shanghai Futures Exchange. Demand has been fuelled by falling inventories. On the LME, prices firmed 2.5 per cent to US$24,076 a tonne. Copper gained 1.6 per cent, aluminium 2.4 per cent, zinc 2.1 per cent and tin 1.8 per cent.