ASX bullish journey gets bumpy

May 5, 2021 - 2 weeks ago
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The Australian share market is expected to open to a mixed sentiment as investors sifted through comments from U.S. Treasury Secretary Janet Yellen, who said U.S. interest rates could rise a bit if the economy overheated.

The ASX futures ended down -24 points, or -0.3%, at 7,011, while our local currency, the Australian dollar, is currently buying US$0.7718 (as of writing).

The US. Treasury Secretary Janet Yellen suggested that interest rates may need to rise slightly to keep the economy from overheating early on Tuesday.

Those remarks triggered a modest decline on Wall Street led by tech shares.

“It may be that interest rates will have to rise somewhat to make sure that our economy doesn’t overheat, even though the additional spending is relatively small relative to the size of the economy,” Yellen said in remarks webcast during The Atlantic’s Future Economy Summit.

But later in the day, Yellen was asked about the market reaction to the comments at a separate virtual conference said sees no inflation problem brewing, downplaying earlier comments.

She said a rise in interest rates “is not something that I am predicting or recommending”.

Janet Yellen, the first woman to head both the Federal Reserve and the Treasury Department, said no one respects the Fed’s independence more than she does.

The yield on the US 10-year note slid 1 basis point to 1.58%.

At the finishing bell, on the New York Stock Exchange (NYSE), the blue-chip Dow Jones Industrial Average closed +19.80 points, or +0.06%, higher to 34,133.03, bouncing close to 370 points from its intraday low of 33,765.68.

The broad-based Standard & Poor’s 500 Index slid -28 points, or -0.7%, to 4,164.66, while the rich-tech Nasdaq Composite Index dropped -261.61 points, or -1.9%, to 13,633.50, for its largest one-day decline since Wednesday, March 24, 2021.

Shares of Apple, the largest publicly traded company in the U.S., fell -3.54%, while Google-parent Alphabet lost -1.71%, Facebook shed slid -1.31% and electric car maker Tesla dropped -1.65%, Nvidia and Intel lost -3.3% and -0.6%, respectively.

This Friday, traders will focus on the jobs report from the U.S., which will provide insights into the state of recovery of the labour market.

The Non-Farm Employment Change forecast is seen for a rise of 975,000, with the previous release at 916,000, while the Unemployment Rate forecast at 5.7%, with the last release at 6.0%.

Viewing the S&P/ASX 200 (XJO) chart, the daily technical set-up is slowly attempting to restore its bullish structure since last week’s volatile session.

The Relative Strength Index (RSI) 3-daily ‘lookback’ indicator holds above the 50-midway point, supporting a positive signal, while the Moving Average Convergence Divergence (MACD) holds a weak negative signal as it potentially poses a bullish threat as it rises towards the 0.00 axis line.

The Average Directional Movement Index (ADX) trend indicator holds no trend – Now ranging.

Developed by J. Welles Wilder, the Relative Strength Index (RSI) is an extremely popular momentum indicator (oscillator) that measures price movements’ speed and change.

RSI oscillates between zero and 100.

According to Wilder (depending on the period setting), the RSI is considered overbought when above 70 and oversold when below 30.

Signals can also be generated by looking for divergences, failure swings and centreline crossovers.

RSI can also be used to identify the general trend.

Gerald Appel developed the (MACD) technical indicator back in 1979, while in 1986, Thomas Aspray added the histogram.

The MACD is a tool used to identify moving averages that indicate a new trend, whether bullish or bearish.

(MACD) plots the distance between moving averages and helps traders identify trend direction and whether the bullish or bearish momentum in the price is strengthening or weakening.

The immediate resistance is 7,135 minor, with the February 2020 all-time high viewed at 7,197.20. Reassess from there.

The support is located at 7,055 minor, with 6,985-95 situated beneath. Reassess from there.

Daily outlook on the benchmark S&P/ASX 200

The Australian sharemarket climbs higher for the second day on Tuesday, although the journey has been a bumpy ride after the Reserve Bank of Australia (RBA) left interest rates at a record low of 0.10%, as widely expected.

There were no surprises from the Reserve Bank of Australia today after RBA Governor Philip Lowe made it clear that the board is unlikely to hike rates until inflation and wages are boosted.

“Despite the strong recovery in economic activity, the recent CPI data confirmed that inflation pressures remain subdued in most parts of the Australian economy,” the RBA said.

“A pick-up in inflation and wages growth is expected, but it is likely to be only gradual and modest.”

The bank expects unemployment to fall from 5.6% in March to 4.5% by the end of next year and for GDP to grow 4.75% this year and 3.5% next year.

Mr Lowe reiterated that the board does not expect to raise the cash rate until 2024 at the earliest.

“It will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range.

For this to occur, the labour market will need to be tight enough to generate wages growth that is materially higher than it is currently.

This is unlikely to be until 2024 at the earliest,” Lowe said.

The resources sectors bounced back from losses posted yesterday as Materials gained +2.21%, while Information Technology weighed on the index after plummeting -1.96%.

The ASX 200 index now stands 130 points short of its February 2020 all-time highs viewed at 7,197.20, set days before the coronavirus crash started in February last year.

At the closing bell, the benchmark S&P/ASX 200 index advanced +39.1 points, or +0.56%, to 7,067.9, while the broad All Ordinaries index climbed +36.7 points, or +0.50%, to 7,323.0.

Materials stormed back in positive territory, with BHP Group leading the titans higher after climbing +2.55%, to $48.23, while Rio Tinto rose +2.53% to $123.13, and Fortescue Metals Group added +0.8%, to $22.66.

Gold stocks were firmer, with Newcrest Mining rising +1.45% to $26.65, Northern Star Resources climbed +4.2% to $10.92, and Evolution Mining Ltd rallied +3.28% to $4.73.

The Financial sector was mixed, with Commonwealth Bank leading the “Fab Four” (banks) after climbing +0.84%, to $90.45.

Meanwhile, National Australia Bank ended up +0.07%, to $27.25, with the Westpac Banking Corp falling -0.91%, to $25.99, Australia and New Zealand Banking Group lost -0.93%, to $28.83 and Macquarie Group added +0.06% and settled at $160.28.

Supermarket giants Coles and Woolworths were among the consumer staples stocks to rise with Coles climbing +1.41%, to $16.50, and its rival Woolworths rose +0.62%, to $39.24.

E-commerce group Kogan ended higher after climbing +1.58% to $11.57, Seek added +1.85% to $31.30.

Meanwhile, JB Hi-Fi slid -0.67% lower at $45.92, while Telstra added 0.29% to $3.50, while Wesfarmers rose +0.73%, to $54.17, QBE Insurance added +0.5%, to $10.04, and Aristocrat Leisure rose +0.99%, to $37.71.

Nick Scali fell after it said it expected its full-year net profit to soar 85% to 90% as demand for sofas, dining suites, and coffee tables further soar. It dropped -2.6%, to $10.42.

Biotechnology giant CSL rose +0.1%, to $271.21, while ResMed gained +1.12%, to $25.29, Fisher & Paykel Healthcare dropped -0.24%, to $32.83, while Cochlear slid -0.28%, to $220.92 and Mesoblast advanced +0.53%, to $1.88.

In technology, Buy-now-pay-later giant Afterpay fell -2.82%, to $110.79, accounting software provider Xero tumbled -1.74%, to $137.51, Altium lost -3.18%, to $27.68, Megaport tumbled -4.2%, to $13.70, NEXTDC sank -1.47%, to $11.40, EML lost -2.09%, to $5.63 and Zip Co plummeted -1.92%, to $7.66.

As for our oil and gas producers, Woodside Petroleum climbed +1.51% to $22.86, while Oil Search ended up +2.14%, to $3.82, Santos added +2.35%, to $6.98, and Beach Energy rose +0.1.96% to $1.30.

Worley climbed +4.25%, to $11.03 after it confirmed it was on track for an improved result in the second half compared with the first half of the financial year.

Travel stocks were weaker, with Sydney Airport lost -0.49%, to $6.12, Corporate Travel Management down -1.84%, to $17.59, Flight Centre fell -4.61%, to $16.14, and Webjet fell -1.81% to $4.89.

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