Australian shares are set to open higher, bolstered by gains on Wall Street, with the S&P 500 recording its best day in nearly four months, as investors stepped in to ‘buy the dip’, after yesterday’s sell-off, which was sparked from fears about inflation and the Delta variant of COVID-19.
The ASX futures ended up +49 points or +0.7%, at 7,210, while our local currency, the Australian dollar, is currently buying US$0.7332 (as of writing).
Worries about a rocky recovery for the U.S. economy were behind Monday’s rout after all three major indexes clawed back much of their losses.
At the finishing bell, on the New York Stock Exchange (NYSE), the blue-chip Dow Jones Industrial climbed +549.95 points, or +1.62%, to 34,511.99, following its -725 point decline Monday.
The broad-based Standard & Poor’s 500 Index finished the session +64.72 points higher, or +1.52%, to end at 4,323.06.
That marked that index’s biggest one-session gain since March 26 and nearly erased Monday’s -1.58% drop.
The technology-focused Nasdaq Composite Index added +223.89 points, or +1.57%, to 14,498.88.
U.S. airlines and cruise companies led the rebound with American Airlines and Delta Air Lines, which lost -4% in the sell-off, added +8% and +5%, respectively, on Tuesday, while Royal Caribbean gained more than +7%, after falling -4% on Monday.
U.S. bank shares bounced back, too, as bond yields climbed higher.
JPMorgan shares rose +1.8%, and Bank of America gained +2%.
Energy and industrial stocks — two of the hardest-hit groups from Monday — also rebounded, with Exxon Mobil climbing more than +1%, General Electric advanced +5%.
Apple shares also got in on the action and climbed +2.6%, erasing Monday losses.
In bond markets, the yield on the benchmark 10-year U.S. Treasury note edged up to 1.208%, after dropping to 1.181% Monday in its largest one-day decline since March 2020. Yields rise as bond prices fall.
Stocks, bond yields and oil prices tumbled heavily on Monday as investors focused on the potential for the Delta variant, a jump in inflation and strained U.S.-China relations to weigh on the global economic recovery.
In cryptocurrency, Bitcoin slipped below the $30,000 level on Tuesday, triggering selling across cryptocurrencies and another sign that speculation may be coming out of the markets.
The price drop didn’t lead to an extended sell-off, and the price held steady in the $29,000 range throughout the day.
On the economic front, is the release of the Westpac leading index June, Retail sales preliminary June
Viewing the S&P/ASX 200 (XJO) daily chart, the Relative Strength Index (RSI) 3-daily ‘lookback’ indicator is in oversold territory, while the Moving Average Convergence Divergence (MACD) holds a negative signal.
The Average Directional Movement Index (ADX) trend indicator is gaining to support a bearish 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.
Tuesday’s rebound from the short-term base at 7,210-35 now puts the (potential return) bullish sentiment for a rematch at 7,305 (minor), with 7,360-65 located above.
Daily outlook on the benchmark S&P/ASX 200
The Australian sharemarket sank further into negative territory for the second consecutive day and posted a fresh seven-week low of 7,205 as the COVID-19 Delta variant continues to rattle investors.
At the closing bell, the benchmark S&P/ASX 200 index finished -33.8 points lower, or -0.46%, to 7,252.2, while the All Ordinaries dropped -33.9 points, or -0.45%, to 7,525.8.
Most of the losses in the local market were focused on the Materials, Utilities, Energy, Industrials Telecommunication, Real Estate, and the Financials sectors.
The ASX tumbled heavily at the opening bell on Tuesday before losses were pared back later in the day.
Materials continue to weigh on the ASX 200 after falling -1.82%, with Monday’s losses down -2.44%.
Miners, Rio Tinto led the titans lower after plummeting -2.67%, to $124.42, while BHP Group dropped -2.5% to $49.24, and Fortescue Metals Group lost -0.98% to $25.17.
As for our oil and gas producers, Woodside Petroleum fell -1.93% to $21.90, while Oil Search surged +6.27%, at $3.90, Origin Energy lost +2.67%, to $4.37, Santos declined -4.98%, to $6.49, and Worley ended at a -1.79% loss at $10.95.
Gold miners struggled with Newcrest Mining falling -0.99%, to $26.11, Northern Star Resources fall -0.87%, to $10.20, and Evolution Mining Ltd dropped -2.1%, to $4.19.
The Financial sector was mixed with Australia and New Zealand Banking Group leading the “Fab Four” (banks) higher by +0.63%, to $27.32, while the National Australia Bank fell -0.7%, to $25.47, Commonwealth Bank slid -0.07%, to $97.61, Westpac Banking Corp lost -0.69%, to $24.52, and Macquarie Group tumbled -0.33% and settled to $153.21.
Technology stocks were mixed with ‘Buy-now-pay-later’ giant Afterpay climbing +1.64%, to $106.62, while accounting software provider Xero added +1.7%, to $141.00, Altium lost -1.76%, to $34.55, EML ended down -1.04% to $3.79, and Nearmap fell -2.78%, to $2.10.
Biotechnology giant CSL gained +1.32%, to $286.48, while ResMed lost -0.38%, to $34.39, Fisher & Paykel Healthcare rose +1.88%, to $29.82, while Cochlear fell -0.09%, to $241.11.
Travel stocks were weaker with Sydney Airport ending down -1.26% to $7.81, Flight Centre fell -1.31%, to $14.31, Webjet dropped -1.26%, at $4.69, Qantas shares lost -2.37%, to $4.54, and Regional Express rose +0.83%, to $1.215.