Archives: Reports
This week’s reports from Telsa & Alphabet are investors’ first look at Mega-cap Tech companies’ performance during the second quarter. Reports from these names are particularly interesting to Wall Street as this small cohort is responsible for most of this year’s gains. The overnight selloff doesn’t surprise MM as it was triggered by the perfect storm of an overbought market, high expectations for earnings and a seasonally weak period for equities. The local market is set to test 7900 support again today, but with the “glass half empty” attitude adopted by US stocks overnight, it feels 50-50 whether it will hold.
While the market ultimately ended down a touch, there was some interesting price action intra-day in certain sectors, with the retailers well bid early on only to give up gains, Gold stocks rallied defying a recent pullback in bullion, while many of the miners recovered nicely from early weakness i.e. some signs playing out that recent trends may be approaching an inflexion point.
Kamala Harris looks almost sure to be the Democratic candidate to take on Trump on November 5th. She will be a more challenging adversary than Biden, but the betting odds still say she has a mountain to climb over the coming months. We will look at what the “Trump Trade” means for some ASX names later this week, but one sector that continues to dive lower with Trump set to reverse the Biden administration’s new climate policies is the EV-related names. However, with Harris having a more than 40% chance to win in November, we thought the sector might see at least some short-covering, but it’s not been evident so far this week.
European markets bounced strongly overnight, with the EURO STOXX 50 closing up +1.45% as dip buyers waded back into US futures. US stocks rebounded following their worst week since April as investors embraced a stronger Democratic candidate. This enabled them to focus on the looming major earnings reports, with Tesla and Alphabet facing the music on Tuesday. The political news is unlikely to materially impact the market unless Harris can dent Trump’s apparent significant lead, something Biden was unlikely ever to do. By the close, the S&P500 had risen the most since June, with the “Magnificent Seven” up around 2.5% while the small-cap Russell 2000 added +1.7%. Crowdstrike (CRWD US) fell another 13% as the magnitude of the weekend blackout hit home and, of course, the prospect of litigation on the horizon.
The ASX 200 came back and re-tested the prior breakout area today at 7900 (low of 7902), which in theory should provide a decent level of support given it took over 4-months and 4 failed attempts to leap over the milestone, which finally came on the 11th July. While only early days, we may well be seeing the formation of a new trading range, and the risk/reward stacks up to be a buyer ~7900, using 7850 as a point to raise the white flag, given a move through that level suggests the recent run towards 8100 was a false break. All very micro and index-orientated, but important nonetheless to determine whether the general market is in a risk-on or risk-off position. For now, support held, and we saw buying come in by the close.
The ASX200 managed to mildly higher last week, but it certainly felt worse after Friday’s sharp drop, and there is more to come on Monday. While the press rotates its coverage between the largest IT outage in history and if/when Joe Biden will exit the November presidential race, the stock market had its own pronounced rotation underway. As financial markets priced in a Fed interest rate pivot come September, investors decided it was time to rejig portfolios in earnest – something MM has been discussing for a few weeks. On the ASX, we saw the rate of the sensitive/defensive sectors advance, led by real estate, at +1.7%, while the Materials and Tech Sectors dropped 2.2% and 1.8%, respectively. The moves were more pronounced on the stock level
A soft session played out on Friday, with the ASX down 64pts/0.81% at 7971, though we did see a decent recovery from the lows (up around 45pts),perhaps a result of a major IT issue caused by global Cyber Security firm CrowdStrike that impacted many of us, including the ASX. Short CrowdStrike, long Microsoft might be the play tonight!
The Dow Jones tumbled over 500 points on Thursday night, although it’s the only major US index on track to finish the week higher. As we enter the gauntlet of the seasonally weakest two months, there’s room for further downside in the coming weeks, with markets trading at lofty valuations around all-time highs. With stocks already factoring in three rate cuts into January, there is room for disappointment. Ironically, Nvidia (NVDA US) and Meta Platforms (META US) bounced overnight after their recent sharp falls leaving the sellers to focus on the broad market.
