The Australian share market looks set to end the week on a lower tone, as Wall Street’s main indexes closed mostly lower Thursday, pulling back further from the record highs they reached at the start of the week.
The ASX futures ended down -6 points or -0.1%, at 7,237, while our local currency, the Australian dollar, is currently buying US$0.7426 (as of writing).
On Thursday, U.S. Federal Reserve Chairman Jerome Powell delivered his second day of testimony before Congress.
Powell reiterated that signs of inflation will likely remain elevated in the coming months before moderating while acknowledging that the U.S. is in the midst of an unparalleled economic reopening on the heels of a pandemic-induced recession.
“The challenge we’re confronting is how to react to this inflation, which is larger than we had expected or that anybody had expected. To the extent that it is temporary, then it wouldn’t be appropriate to react to that. But to the extent that it gets longer and longer, we’ll have to continue to reevaluate the risks that would affect inflation expectations and would be of longer duration, and that’s what we’re monitoring,” Powell said.
In a testimony to the House Committee on Financial Services on Wednesday, Fed Powell quelled investors’ fears about a rollback of the central bank’s easy policies anytime soon, even in the face of inflation.
U.S. Treasury Secretary Janet Yellen said she predicts prices could continue to rise for several more months before cooling off.
“I’m not saying that this is a one-month phenomenon. But I think over the medium term, we’ll see inflation decline back toward normal levels, but, of course, we have to keep a careful eye on it,” Yellen said.
At the finishing bell, on the New York Stock Exchange (NYSE), the broad-based Standard & Poor’s 500 Index finished the session -14.27 points lower, or -0.33%, to end at 4,360.03.
The technology-focused Nasdaq Composite Index fell -101.8 points, or -0.70%, to 14,543.1.
In contrast, the blue-chip Dow Jones Industrial finished its choppy session Thursday +53.79 points higher, or +0.15%, to 34,987.02, the second-highest close in its history.
Investors appeared to favour technology stocks again earlier this week, but those names drifted lower Thursday, with Amazon slipping -1.3%, while Google-parent Alphabet shares slid -0.9%, and Apple finished the session -0.4% lower.
In bond markets, the yield on the 10-year Treasury note continued its two-day decline to 1.297%, most in a week, from 1.356% Wednesday. Yields fall when prices rise.
Fresh figures on Thursday showed that the number of Americans who applied for first-time unemployment benefits fell to 360,000 in the week ended July 10, down from 386,000 in the week prior.
The U.S. Federal Reserve has said that inflation and the Labor market are two key factors it is monitoring to determine monetary policy.
Viewing the S&P/ASX 200 (XJO) daily chart, the Relative Strength Index (RSI) 3-daily ‘lookback’ indicator lacks momentum as it pierces beneath the 50-midway point, therefore, supports a weak negative signal.
Meanwhile, the Moving Average Convergence Divergence (MACD) holds a negative signal, although, should be monitored as it rises towards the 0.000 axes.
The Average Directional Movement Index (ADX) trend indicator decline suggests the presence of a trading market and the absence of a trend.
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 strengthens or weakens.
With a weaker opening expected, views a move to the short-term support at 7,285-95, with the near-term base located at 7,210-35.
The resistance is considered from 7,360 (minor), with 7,400-10 located above.
Daily outlook on the benchmark S&P/ASX 200
The tables reversed on Thursday, as the Australian share market finished narrowly lower, despite the unemployment rate dropping to a 10-year low of 4.9%.
At the closing bell, the benchmark S&P/ASX 200 index slid -18.8 points, or -0.26%, to 7,335.9, while the All Ordinaries lost -15.2 points, or -0.20%, to 7,616.6.
Apart from Materials, Utilities, nine sectors weighed on the index, with Health Care, Information Technology, Real Estate sinking over -1%.
On a bright note, according to the Australian Bureau of Statistics (ABS), the Australian June unemployment rate dropped from 5.1% to 4.9%, with almost 30,000 jobs created in June, its lowest level in more than a decade (December 2010).
Altogether, the unemployment rate has declined for eight months in a row.
In other data, growth in Chinese factory activity and retail sales declined less than expected last month from rebound-fuelled levels, but quarterly GDP narrowly missed expectations.
Second-quarter GDP rose 7.9% vs 8.0% forecast, after rising 18.3% previously, with June retail sales Y/Y rose 12.1% vs 10.8% expected, while Industrial production Y/Y rose 8.3% vs 7.9% expected, and Fixed assets ex-rural YTD Y/Y rose 12.6% vs 12% forecast.
ASX bumpy ride started with Health Care as it tumbles -1.40%, with Biotechnology giant CSL falling -1.67% to $275.15, while ResMed fell -0.36% to $33.40, Fisher & Paykel Healthcare slid -0.07%, to $28.68, and Cochlear lost -1.17%, to $239.99.
Technology stocks also gave the ASX some turbulence as ‘Buy-now-pay-later’ giant Afterpay plummeted -2.28%, to $104.56, while Zip Co drop -5.6%, to $6.91, while accounting software provider Xero lost -2.32%, to $134.46, Altium added +0.89%, to $37.59, EML lost -1.06%, to $3.72, and Nearmap ended -2.7% lower to $2.16.
Materials, however, shined on Thursday, with Rio Tinto leading the titans higher after climbing +2.23%, to $131.14, while BHP Group added +1.12% to $51.53, with Fortescue Metals Group gaining +2.06%, to $25.72.
Gold stocks were firmer, with Newcrest Mining rising +1.5% to $27.01, Northern Star Resources rose +2.07% to $10.85, and Evolution Mining Ltd added +2.7% to $4.95.
Travel stocks were weaker, with Qantas falling -0.64% to $4.68, with Sydney Airport added +0.13%, to $7.81, after knocking back a takeover proposal from a consortium of investors.
The board said the unsolicited, conditional, and non-binding offer of $8.25 per share undervalued the airport and was “not in the best interests of Securityholders”.
Meanwhile, Corporate Travel Management sliding -3.29%, to $20.57, Flight Centre ended lower after falling -2.58% to $14.71, Webjet fell -2.82%, to $4.83 while Regional Express lost -0.82% at $1.21.
As for our oil and gas producers, Woodside Petroleum slid -0.99% to $22.97, while Oil Search ended up +0.52% at $3.89, Santos rose +0.14% to $7.06, Beach Energy rose +0.78% to $1.285, and Worley lost -0.26%, to $11.48.
The Financial sector ended in negative territory with Westpac Banking Corp leading the “Fab Four” (banks) lower after settling at a -1.11% loss at $24.99, while Australia and New Zealand Banking Group fell -0.58% to $27.49,
Commonwealth Bank ended at $98.31, down -0.48%, National Australia Bank fell -0.91% to $26.02, and Macquarie Group tumbled -0.85% and settled at $153.71.
Supermarket giants Coles ended flat at $17.00, while Woolworths lost -0.49% to $38.33 and Endeavour Group rose +0.63%, to $6.34.
E-commerce group Kogan dropped -2.31% and settled at $11.41, while Seek fell -2.06% to $32.25.
Spark Infrastructure jumped +6.05% to $2.63 after confirming it had received and rejected two conditional, non-binding offers from a consortium including the Ontario Teachers’ Pension Plan Board and U.S. investment giant Kohlberg Kravis Roberts (KKR).