ASX skids off the bullish path as Wall Street close near session lows

September 24, 2020 - 1 month ago
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The ASX is expected to open lower on Thursday as all three major U.S. stock indexes closed lower, adding to September’s struggles after sliding in the final hour of trade, as investors fretted over uncertainty around the coronavirus pandemic and further stimulus.

The ASX futures ended down -59 points or -0.1% to 5,846, while our local currency, the Australian dollar is currently buying US$0.7262 (as of writing).

At the finishing bell, on the New York Stock Exchange (NYSE), the Standard & Poor’s 500 Index fell -78.65 points, or -2.37%, ending at 3,236.92.

The losses took the S&P 500 within a whisker of a correction, defined as a 10% pullback from a recent peak.

The Dow Jones Industrial Average tumbled -525.05 points, or -1.92%, to close at 26,763.13.

The rich-tech Nasdaq Composite lost -330.65 points, or -3.02%, finishing at 10,632.99.

Shares of Amazon, Apple and Netflix, were all down by more than -4% to lead lower the group of tech stocks known as “FAANGM.”

Facebook slid -2.3%, Alphabet dipped -3.5% and Microsoft pulled back by -3.3%.

Those declines added to already steep FAANGM losses for the month.

Shares of Tesla fell -10.3% after Elon Musk offered new delivery predictions for 2020 and detailed a new battery design that he claims will make Tesla’s cars cheaper to produce.

The stock was also under pressure after Tesla sued the U.S. government to overturn tariffs on China.

The S&P 500 and Dow are down -7.5% and -5.9%, respectively, for the month, while the Nasdaq has dropped -9.7% over that time period.

Shares of Facebook, Amazon, Apple, Netflix, Alphabet and Microsoft are all down at least -11% in September.

On the stimulus front, lawmakers are still struggling to move forward with a new package.

U.S. Federal Reserve Chairman Jerome Powell told a congressional panel Wednesday that further fiscal stimulus is still needed for the U.S. economic recovery to continue.

Elsewhere, Johnson & Johnson on Wednesday announced the start of a 60,000-person clinical trial of its single-dose COVID-19 vaccine on three continents, making the drugmaker the fourth experimental vaccine candidate to enter final-stage testing in the U.S.

Later in the U.S. is the Weekly jobless claims are set for release Thursday morning along with new home sales numbers.

Viewing the technical assessment for the S&P/ASX 200, Wednesday’s rebound has shaped up the technical assessment to a slightly firmer stance as the Relative Strength Index (RSI) 3-day lookback has once again broken above the 50-midway point.

Meanwhile, the Moving Average Convergence Divergence (MACD), at present, is regaining momentum as its grins closer towards the 0.00 axis.

A break above 0.00 axis should indicate a positive signal.

The (MACD) technical indicator is a tool that is used to identify moving averages that are indicating a new trend, whether it is 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.

Viewing the support, it is assessed the level at 5,845 is considered to be a point where the bulls may return.

However, failing this, the short-term base is viewed 5,730-35.

Resistance is viewed minor from 5,895, with 5,955-65 viewed above.

Daily outlook on the benchmark S&P/ASX 200

The ASX put in a stellar performance on Wednesday and snap a four-day bearish streak after displaying its best session in two-months as ‘tongues were wagging’ following market speculation that the Reserve Bank of Australia will cut its cash rate once again.

On Tuesday, the RBA Deputy Governor Guy Debelle said that Australia’s central bank is assessing various monetary policy options, including currency market intervention and negative rates to meet its inflation and employment goals.

Mr Debelle had also suggested the Reserve Bank is a little uncomfortable with the level of the Australian dollar, saying a lower exchange rate would “definitely be beneficial” for the Australian economy.

Analysts expect the Reserve Bank could cut the cash rate to 0.10% as early as the next board meeting on October 6, coinciding with the release of the federal budget.

The benchmark index had fallen over -3% since last Thursday and erased roughly $50 billion in the selloff; however, today’s rally of +2.42% put the ASX 200 back on the bullish road after chalking up a healthy $42 billion of the value of Australian listed companies.

The benchmark S&P/ASX 200 index surged +139 points, or +2.42%, to 5,923.89 in its best day since July 21, while the broader All Ordinaries index rose +137.8 points, or +2.3%, to 6,111.3.

The Financial sector shined today after National Australia Bank lead the “Fab Four” (banks) higher after rallying +2.88% to $17.12, while Australia and New Zealand Banking Group climbed +2.37% to $16.85, with Westpac Banking Corp advancing +2.12% to +$16.39, the Commonwealth Bank added +1.9% to $64.27, and Macquarie Group added +1.86% to $122.23.

Mining heavyweights, meanwhile, also lead the index higher, with titans BHP Group climbed +1.31% to $37.15, while Rio Tinto rose 0.52% to $97.50, and Fortescue Metals added +0.69% to $15.98.

Biotechnology giant CSL rose +3.8% to close at a month-high $297.21.
Toll road operator Transurban rallied +4.9% to $14.44, and Sydney Airport rose +4.9% to $5.80.

Aristocrat Leisure surged +5.1% to $30.64 after JPMorgan tipped the slot machine company strong growth after forecasting it will enter the iGaming marker by the second half of the 2021 financial year.

The broker held its overweight rating on the stock and increased its price target to $38.60 from $28.50.

Elsewhere, Qantas was +4.5% higher at $3.94 after the airline announced it is ending its 30-year sponsorship with Rugby Australia after a review of its major sporting sponsorship deals.

Outdoor adventure retailer Kathmandu plummeted -8.5% to $1.07 after it said its net profit from continuing operations plunged 84.6 per cent to $NZ8.88 million ($8.2 million) in the year ended July 31, while revenue rose +48.7% to $NZ801.5 million.

Afterpay rose +2.9% to $78.73 to help the tech sector gain a collective +2.7%.
Its newly acquired surf brand Rip Curl added $NZ315.7 million of the sales total in the nine months it contributed to the full-year result.

It said COVID-19 related lockdowns lopped about $NZ135 million off full-year sales, with Rip Curl most affected because of the impact on global trade.

Wesfarmers surged +2.9% to $45.68, Woolworths added +3.8% to $38.25, and Telstra chalked up a +1.77% to $2.87.

Nufarm advanced +4.3% to $4.34 after reporting a day earlier, as it swung to a $456 million full-year loss that stemmed from $215 million in impairments related to its European assets’ value. Revenue rose +6.5% to $2.847 billion.

Internet network services business Service Stream surged +14% to $2.03 after the NBN Company said it would spend $4.5 billion in the next two years to provide almost 10 million households and businesses with the option of high-speed fibre connections.

Service Stream shares already have long-term contracts with NBN Co to provide multi-technology network operations, maintenance and optimisation services.

Investors are betting it’s a prime beneficiary of the NBN’s upgrade plans.

The Australian Bureau of Statistics preliminary retail trade figures for the month showed national turnover fell from last month’s +3.2% to -4.2%.

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