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The ASX200 almost begrudgingly climbed +0.4% on Thursday, with the Materials Sector continuing to weigh on the broad-based index while tech stocks led the gains. Same story, different day! The Tech Sector is now up +26.3% year-to-date compared to the Materials Sector, which is down -11.2%, and importantly, over the coming weeks, the performance elastic band is unlikely to receive any reprieve from the likes of tax loss selling; if anything, it will exaggerate the gap further i.e. selling stocks with big capital gains consequences makes little sense so close to the EOFY while fund managers like to hold winners so they can talk about them in post-June 30 marketing material!
Yesterday’s themes were consistent with 2024:
Winners: NEXTDC Ltd (NXT) +3.6%, REA Group (REA) +3.2%, National Storage (NSR) +3.1%, JB Hi-Fi (JBH) +3%, Xero (XRO) +2.3%, Goodman Group (GMG) +2.3%, and Commonwealth Bank (CBA) +1.1%.
Losers: ASX Ltd (ASX) -8%, Liontown Resources (LTR) -4.8%, Lynas (LYC) -4.4%, IGO Ltd (IGO) -3.5%, Iluka (ILU) -3.5%, Pilbara (PLS) -2.6%, Mineral Resources (MIN) -1.6%, and Woodside Energy (WDS) -0.9%.
From a seasonal perspective, next month is typically a good one for stocks with July usually delivering for investors. Over the last decade, the ASX has produced an average return of +3% with 2017 being the only year that saw a loss, down just -0.02%. Hence, disciples of seasonality will remain optimistic towards local equities for at least the next 6-7 weeks. Remember, the doubters are getting plenty of airtime, we’re getting a few soggy days, but the ASX200 is still only 2% below its all-time high, and if the miners could regain their mojo, 8000 would already be in the rearview mirror.
US stocks ended mixed overnight, with the Dow slipping -0.2% while the tech-based NASDAQ rallied another +0.6%. However, if we take the influential tech names out of the market, it was an uninspiring session for equities. Both the S&P500 and NASDAQ closed at record highs for the fourth consecutive day. Tech stocks should gain further help from a 15% surge by Adobe (ADBE US) in late trading following better-than-expected Q3 earnings and forward guidance.
On the economic front, data showed the number of Americans filing new claims for unemployment benefits increased last week, and another report showed producer prices unexpectedly fell in May, stoking optimism of a September rate cut by the Federal Reserve. Bond yields declined accordingly, but the stock market is all about tech at the moment, with little else garnering investors’ attention. This will change as it always does, but when is the classic million-dollar question?
- The SPI Futures are pointing to a dip of less than 10 points on the open with BHP Group (BHP) flat in the US, a welcome reprieve.
MM is neutral towards the ASX200
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