Overnight we saw the US markets close lower after a whippy session. At one point markets were in the green but strong selling towards the close saw them close on their lows. This is indicating a pullback here is likely, but unlikely to last long. The overall trend is up, and this is looking more like a bit of profit-taking which is healthy after such strong gains recently.
The market right now is a balance between Virus, Stimulus, and Vaccine. We continue to see positive vaccine news but what the market needs to drive higher is a path forward on more US fiscal stimulus.
Locally our market looks set to hold gains better than the US. We must remember that the Australian market has some catch-up to do. Also, there is a lot more to be positive about in Australia, we have a clear path on stimulus, the virus is under control at the moment and we expect state boarders to slowly reopen. Commodities and metals continue to edge higher and including Iron Ore which is all positive locally. Banks have been doing the heavily listing thanks to the recent RBA rate cut which the banks held onto except for fixed loans.
Our market is expected to open slightly lower near 6510. This follows a strong bearish night in the U.S and flat to negative futures.
The expected pullback on open this morning will likely have us test 6500. With the positive local news, our market is likely to roughly hold this level, but if not, expect a fall to roughly 6400.
These pull retracement and breathers are healthy, that can often shallow out aggressive uptrends to be more sustainable.
Media focus remains on the virus and the vaccine, and the stimulus bill in America has somewhat taken a back seat. It will come back into focus at some point as we draw closer to spending season and an expected 12 million more Americans will be cut off the day after Christmas.
US shares fell overnight with high virus cases and a series of confidence denting announcements from New York. New York will close its schools and childcares as well as cutting public transport services; this was after the city reached a three percent ‘positivity rate’ triggering certain responses. This was the first time the major S&P 500 dropped for two consecutive days since October.
Despite the selling, economic data was positive, with oil inventories showing a greater consumption of oil than expected. Housing starts were also strong. Despite the positive oil inventory data, oil stocks were the worst performers overnight, while Utilities and Healthcare stocks also closed strongly lower. Every other major sector also closed lower to some degree.