The ASX200 came down to earth with a bang yesterday falling over 1%, surrendering most of Mondays gains in the process as we followed the weak lead by global indices. The selling was broad based yesterday taking the index down 76-points with only a poultry 14% of stocks managing to close up while on the sector level losses were again led by the IT Sector which plunged well over -4%, the group underperformed their US peers on the way up and now they are on the way down, perhaps they will bottom out first?
A number of global indices feel like they have rolled over and are already in the initial throws of classic “sell in May & go away” market pullback with US tech already close to 7% below its April all-time high. The local index is clearly outperforming courtesy of a rampaging resources sector and strong banks but as we’ve seen in the US this can and usually does change quickly, we wouldn’t be surprised to see some seasonal profit taking in the coming days, at one stage last night before US tech bounced, our SPI was calling a 100-point plunge locally as volatility starts rise.
Overnight we saw Treasurer Josh Frydenberg spend big in an effort to create another 250,000 jobs, there’s obviously no concerns around inflation or debt levels at this point in time. The booming mining sector has enabled the cash splash from revenue not envisaged by many a year ago when the pandemic dominated most conversations. Significant spending is being directed at child and aged care plus a whopping $29bn in temporary personal and business tax cuts with the only areas that felt ignored were travel and tourism, the governments assumption that borders will remain closed until mid-2022 likely to devastate many operators.
Overseas equities experienced a weak and volatile session with the Dow ultimately closing down almost 500-points while tech was only marginally lower after recovering from significant early losses. The broader S&P500 eventually closed down -0.9% as the selling migrated from tech towards the financials and energy stocks, the SPI is calling the ASX200 to fall over -0.5% early this morning with Mays gains rapidly being eroded.
MM remains very cautious towards stocks at current levels
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