Markets took a breather despite most companies beating expectations overnight. The pullback seems more just technical driven then fundamental at this stage. Chinese economic data was strong yesterday, but we saw a broad pullback in the region yesterday.
Netflix’s missing expectations will not help the Tech sector rally, so we could be seeing the start of a switch in sectors. The question will remain which sector/s will be favored moving forward. Financials in the US have reported mixed, Banks that have large trading desks have beat by a lot, whilst others have missed.
Dominos Pizza beat expectations by 34% which shows that Consumer Discretionary and perhaps staples with Pepsi Co beating can do well through this reporting season.
PPG Industries Inc, the first of the Large Materials in the US, also beat earnings expectations by 41%, but EPS fell 17% compared to last quarter and 47% compared to the quarter before. PPG is a supplier of paints, coatings, and specialty materials.
Talks of a stage 4 lockdown are becoming very real in Victoria with many people calling for a complete lockdown to eliminate the spread of Covid-19. At this stage, Victoria Premier Daniel Andrews has only used stage 4 as a threat but overwhelming public polls have the majority pushing for stage 4. We are also seeing talks heat up that Keepers allowance will be extended but will look different and businesses will likely have to reply.
With positive to weak leads from both the U.S trading session last night and their futures this morning, our market is set to open flat. If their futures during our session today push harder one way or the other, it will likely dictate where we go.
We are trading in the point of a pennant pattern, with very little room to continue before we must break out. At this stage, our market looks set on holding both the counter trend and underlying uptrend. A breakout will occur at some point, but considering the market is mainly tracking sideward, it may be rather lackluster.
We continue to assume bullish to sideward movement in the short term until we see changes that indicate otherwise.
U.S reporting continues which has brought back some volatility. VIC cases continue to grow with governments hinting at possible stricter lockdowns. Keep an eye in these areas, but in the shorter term, trade with the trend.
US shares fell overnight, with technology stocks leading the weakness. Netflix was the largest tech stock reporting overnight and their earnings per share and subscriber numbers came in below estimates, although its results weren’t known until after the market closed. We did see some economic data from the US as well, with retail sales and jobless claims both coming in better than expected. The tech sector was the worst performer overnight, but Oil & Gas and Financials stocks also pushed a fair degree lower. Utilities and telecoms stocks pushed higher, while Basic Materials and Health Care were fairly flat.