The Tech rally was back on overnight with the sector up 2.31%. All sectors closed in the green other than financials. The sentiment around the world is very mixed but at this stage one thing you can bet on is the US market moving up. The true test now is if they can push into all-time highs or not. In the past, the SP500 will usually flirt with this level for a while before moving higher. So what we mean there is it could break slightly and come back down and move sideways before gaining much more from here.
Locally the focus will come onto the reporting season with a lot of companies reporting this morning. CBA reported yesterday, it came in well close to expectations and even with the drop of dividend we really did not see much selling. Digging into the report though we saw bad and doubtful debts double, which is not that bad considering the lockdown situations we have seen. The risk here is that the can might be just kicked down the road with the loan holidays. But that is something to worry about next year.
Australian Outlook
With strong leads from the U.S last night our market is set to open near our key resistance and post fall highs of roughly 6175. U.S futures sit slightly in the red this morning, but if we see them tick into the green during our sessions today, there is a good chance we break this level and therefore the broad ascending triangle we have been trading in since June. If we stall here, then a move back to 6000 is likely as we await signals from overseas and further guidance from reporting.
With reporting well underway, volatility should start to seep back into the market as it slowly understands the health of its components and how they expect to fair in the coming 6 to 12 months. The market seems to be digesting these reports perhaps a little slower, due to this reporting season being rather a-typical with the impact of Covid having far reaching effects.
The market’s focus is solely on reporting at the moment, but we need to continue to monitor NSW cases. New Zealand having infections is also worrying as they felt like a success story and proof that we could beat this pandemic. U.S elections are right around the corner and the market will eventually turn its searing gaze on the race for the next POTUS.
US Markets
US shares returned to their rally overnight, with the major S&P 500 index climbing to just a whisper off its all-time high. US shares have been driven higher by stimulus from the Fed and US government, but given that talks have stalled for the latest fiscal stimulus from the US government, it is likely momentum that helped the index to the all-time high. Still, there’s plenty to be concerned about for US shares; valuations are at extreme highs; the coronavirus is still a significant issue; and China-US tensions are only getting worse. There were positive CPI and oil inventory reads from the US overnight, that showed inflation was slightly stronger than expected and that oil inventories were declining, both of which helped the market. Technology, Health Care, and Financials stocks were the strongest performers overnight, while every other major sector also closed higher.
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