Tech and Communication sectors once again led the charge in the US overnight. The energy sector was the weakest again. From a sector point of view, it was a fairly mixed night. Focus still is on the FED which will talk either late tonight or early tomorrow.
Locally it is all about reporting for the moment, we are seeing a very mixed reporting season. At this stage, the majority are missing expectations in the face of COVID-19 related issues. Out of 142 companies that have reported, 42.96% have beat expectations and 30.99 have seen EPS growth.
With strong leads from the U.S last night and their futures this morning, our market is set to have a positive open. We should go on to test our post fall highs again today at roughly 6200 – a level we have failed to break multiple times in the past.
We should eventually break this level with the U.S now experiencing three days of fresh all time highs, but the prospect of a rallying dollar is likely holding us back. The miners have been doing the heavy lifting for our market as the banks have been left out in the cold, but with a strong AUD keep our miners from excessive gains. We likely need to see the banks join the party for our market to start pushing higher in any meaningful way and play catch up to the U.S.
VIC cases are the lowest in seven weeks, but the death toll is the highest. A fall in numbers is promising, but the theory of re-infection is solidifying which feels like a blow to the hope of a return to normality. New cases in NSW continue to creep, an area we need to keep an eye on.
US stocks extended their rally higher overnight, with analysts pointing to the Federal Reserve’s annual policy review as a driver of recent strength. It was fresh all-time highs for the S&P 500 and NASDAQ indices for the fourth consecutive day, with the S&P 500 index now 55 percent above its March lows. There was also a fair amount of positive economic data overnight, with durable goods orders and crude oil inventories both better than expected. Technology stocks and Basic Materials stocks saw the most buying, while Utilities and Oil & Gas stocks were the weakest. Oil & Gas stocks in the US don’t seem to be responding to recent strength in the oil price.
Technically, the S&P 500 is trading firmly into blue sky territory, with no further levels of resistance to suggest where it might stall. This recent rally comes after the index broke through an ascending triangle pattern a few days ago. Given that markets do like round numbers, it is possible that the 3,500 level could act as resistance. To the downside, the previous resistance at 3,400 could now act as support. Following that we have the uptrend line that has formed since the March lows, which could also provide support to falling prices.