Overnight US markets broke higher after a whippy session, although moved with low momentum. It seems with every move higher there is less participation. Earnings continue to beat but some companies are struggling to display confidence in future earnings. Reporting stocks overnight closed relatively mixed.
Most sectors closed in the green. Financials led the way higher with Energy, as Crude continued to push higher. Communications Services was the stand out closing 2.75% higher.
The more markets push up into May the more we expect a May pullback. At this stage, the S&P500 is up around 9% since late March, with our XJO up 5.30%. The typical seasonal pattern for the markets is a rise into May and then ‘Sell in May and Go Away. This means more times than not May is a bearish month.
Copper and Iron Ore pushed to all-time highs this week, but overnight we have seen a breather. So Locally the Materials sector is testing the all-time high as well. We are waiting to see if it will Materials can keep pushing higher from here or not. Banks are reporting next week so we will likely see financials gain a little more into the reporting.
The XJO is expected to open flat to lower this morning despite fresh all-time highs from the U.S overnight. One could speculate that our market may be hesitant to follow the U.S’s lead because it does not trust that the U.S will continue to move higher following their break, and instead will pull back to the support as can be typical with a meek fresh high. In addition, our market can tend to be week going into a weekend as we likely have PTSD from the Trump era where the weekend could bring any number of sucker punches. Holistically though, markets remain positive with little but high prices to make investors cautious.
It will likely only take one piece of bad news for the dam to break, but it would still likely need to be a doozy. For example, Biden recently announced tax increases and the market spat the dummy, but he quickly restated it was only for top earners and the market went back to business. The market seems to be inoculated along with swathes of the modern world to the virus now, and provided the roll-out continues, a relapse is unlikely. In addition, with terrible inflation numbers locally, our RBA is not likely to take the foot of the gas, and one would wonder if the Fed in the U.S ever will.
US shares rose to fresh all-time highs overnight, with the flagship S&P 500 closing above the 4,200 point mark for the first time ever. After the US market closed, Amazon reported its biggest profit ever, with shares rising three percent in after market trading. So far, almost 87 of reporting S&P 500 companies have beat analysts expectations, which is strong even for US markets that typically exceed consensus forecasts.
In economic data, US GDP came in stronger than expected and is growing at an annualised rate of 6.5 percent for the first quarter, though initial jobless claims came in worse than expected. Just about every major sector closed higher, with Communications and Financial stocks leading the charge. Healthcare stocks were the only stocks to meaningfully push lower.