Between the Bells

A decline in bond yields paired with anticipation for the release of Nvidia’s quarterly results, fuelled Wall Street to close in positive territory overnight. The Nasdaq extended its rally into a third straight session, adding 1.6%, while the Dow Jones rose 0.5%, and the S&P500 gained 1.1%.

After the closing bell Nvidia, the chip making stock leading the AI hype in 2023, reported quarterly earnings including record revenue up 88% in Q2 from Q1 to US$13.51bn, and record data centre revenue up 141% on Q1 to US$10.32bn. Net income popped from US$656m in the three months ended July 31st, 2022, to US$6.188bn in the three months ended July 30th, 2023. 

The benchmark ten-year treasury yield that hit its highest level since 2007 on Monday, dipped more than 11 basis points overnight to 4.21% which increased investor appetite for equities.

Inflationary pressures and expected cooling consumer demand are weighing on apparel giants like Nike as the sports brand fell for a 10th straight session on Wednesday, while Footlocker tumbled 28% after reporting a decline in sales and lowering its forecast for the second time this year.

Over in Europe markets closed marginally higher across the region on Wednesday led by a jump in utilities stocks adding 1.1%. Germany’s PMI figures were released overnight showing a steep downturn in manufacturing output alongside a plunge in business activity. The STOXX600 rose 0.4%, Germany’s DAX added 0.15%, the French CAC lifted 0.08%, and in the UK, the FTSE100 rose 0.68%.

Locally yesterday, the ASX closed 0.38% higher as strong gains for consumer staples, materials and consumer discretionary stocks offset the tech sector’s near 5.3% decline. The reason for the tech sector slide was on the back of WiseTech Global tumbling 20% on weaker-than-expected guidance for FY24 and a return to acquisition growth strategy which will squeeze profit margins.

What to watch today:

• Ahead of the new local trading session today, the SPI futures are expecting the ASX to open 0.51% higher on the back of Wall St rallying overnight.
• On the commodities front this morning, oil is trading 1.24% lower at US$78.65/barrel, gold is up 1.03% at US$1917/ounce, and iron ore is up 3.21% at US$112.50/tonne.
• AU$1.00 is buying US$0.65, 93.87 Japanese Yen, 50.33 British Pence and NZ$1.08.

Trading Ideas:

• Bell Potter has downgraded the rating on Cedar Woods Properties (ASX:CWP) from a buy rating to a hold rating and have slightly increased the price target on the company from $5.20 to $5.30 following the release of the company’s full year FY23 results. For the year, Cedar Woods reported turnover increased to $391m which was stronger than expected due to higher settlements falling in June, a slight decrease in the full year dividend to 20cps from 26cps, and no guidance was offered for FY24. The reduction to a hold rating is on the back of Cedar Woods shares performing well in CY23, up 23% from December 31st 2022, and trading at a 9.9x FY24 expected EPS. The recent share price strength means Bell Potter expects shares to mark time until there is more certainty in the path of interest rates and guidance from the company.
• And Bell Potter has decreased the price target on Wisetech Global (ASX:WTC) and maintain a hold rating on the leading global provider of logistics services software following the release of the company’s FY23 results. While the FY23 results were in line or slightly above Bell Potter expectations and the company’s own guidance, the guidance for FY24 for EBITDA was below Bell Potter and market expectations driven by recent acquisitions thus changing the price target to factor in lower-than-expected margins as the company undertakes an acquisition growth strategy.

Wall Street closed mixed on Tuesday amid investor concerns over rising bond yields, sentiment wavering ahead of a key speech later this week from Fed Chair Jerome Powell and on key banking downgrades out of S&P Global. Several regional banks including KeyCorp and Comerica fell 4% on Tuesday after S&P Global cut credit ratings on several banks citing ‘tough operating conditions’ as the reason for the downgrade. The S&P500 fell 0.3% on Tuesday while the Dow Jones lost 0.5% and the tech-heavy Nasdaq posted a small gain at the closing bell.

Rising bond yields are placing pressure and adding further downside to equities in the US, with cash and short-dated bonds yielding 5% plus, thus attracting investors to the returns received from bonds over equities at these current levels.

And in Europe, markets closed higher across the region on Tuesday as a rise in technology stocks boosted gains across the board. French game maker Ubisoft Entertainment rose 9% after Microsoft said it would divest several gaming rights to the company as part of a new deal submitted to UK regulators for its takeover of Activision Blizzard, according to CNBC. Investors are also monitoring European natural gas prices which saw a sharp rise earlier this week amid threat of strike action in Australia which could disrupt 10% of the world’s LNG flows. The STOXX600 rose 0.7% on Tuesday while Germany’s DAX added 0.66%, the French CAC rose 0.59% and, in the UK, the FTSE100 lifted 0.18%.

The local market rose just 0.09% on Tuesday following a half a percent loss on Monday as the market volatility driven by global market moves and macroeconomic news out of China continues to impact investor sentiment. China’s sluggish recovery continues to go from bad to worse with weak retail sales and manufacturing output data providing further indication that the world’s second largest economy is struggling to regain momentum post pandemic. With no material stimulus to support recovery coming out of the Chinese government yet aside from some slight interest rate cuts and hub-support, the economy is looking to continue its deflation journey over months to come.

Heavy losses among consumer staples and information technology stocks on Tuesday were offset by strength in the consumer discretionary and energy sectors. IRESS tanked 36% while Premier Investments and Breville led the gains, adding 12% and 9% respectively.

What to watch today:

• Ahead of the local trading session here in Australia, the SPI futures are expecting the ASX to open the midweek session down 0.24%.
• On the commodities front this morning, oil is trading 0.38% lower at US$79.80/barrel, gold is up 0.18% at US$1897/ounce and iron ore is up almost half a percent at US$109/tonne.
• AU$1.00 is buying US$0.64, 93.68 Japanese Yen, 50.04 British Pence and NZ$1.08

Trading Ideas:

• Bell Potter has increased the price target on Mader Group (ASX:MAD) from $6.10 to $6.90 and maintain a hold rating on the leading provider of specialised contract labour for maintenance of heavy mobile equipment in the resources and civil industries, following the release of the company’s FY23 results including revenue up 51% YoY to $608.8m, EBITDA up 57% to $75.1m and underlying NPAT up 48% YoY to $38.5m. Mader Group also expects FY24 revenue of at least $770m and NPAT of at least $50m implying material growth in the new financial year.
• And Trading Central has identified a bullish signal on Terracom (ASX:TER) following the formation of a pattern over a period of 45-days which is roughly the same amount of time the share price may rise from the close of $0.48 to the range of $0.55 to $0.57 according to standard principles of technical analysis.

Wall St has ended mixed on Monday as the Nasdaq ended its four-day losing streak. The S&P 500 rose 0.69% while the Nasdaq added 1.56%. On the other hand, the Dow Jones closed marginally lower by 0.11%.

Earnings season continued on Monday with Palo Alto Networks releasing stronger-than-expected results, which saw its share price rise 14.5% on Monday. Tesla and Meta also climbed 7% and 2.4% respectively to rebound from recent losses.

The 10-year Treasury note yield has reached a high of 4.34%, its highest level since November 2007. This is usually bad for tech and growth stocks as it lowers their promised future earnings.

Over in Europe, markets closed marginally higher after hitting a six-week low at the end of last week. The STOXX 600 ended the day 0.1% higher, with auto stocks leading gains, up by 1.1%. Germany’s DAX finished the day up 0.19%, the French CAC rose 0.47% and, in the UK, the FTSE 100 ended the day marginally lower by 0.06%.

Locally yesterday, the ASX200 closed 0.46% lower as the consumer staples sector closed 1.34% lower followed by the info tech sector closing 1.32% lower. The heavy losses were partially offset by the consumer discretionary sector ending the day 0.83% higher.

What to watch today: 

• The Australian share market is set to open higher, with the SPI futures suggesting a rise of 0.24% at the open this morning.
• On the commodities front this morning, 
  • Oil is down 0.52% to US$80.82 a barrel as concern over China’s economy sparks a concern on market sentiment. 
  • Gold is up 0.35% to US$1894 an ounce as China premiums on gold hit its highest level since December 2016. 
  • And iron ore is up 0.93% to $US108.50 a tonne as steel hubs are yet to follow through on production cuts.

Trading Ideas:

• Bell Potter maintains a buy rating on Elders (ASX:ELD) but have raised the 12-month price target on the agriculture company by 15 cents to $7.40. Turnoff volumes have continued to recover from the lows experienced in the 2nd half of FY23 and cattle turnoff volumes are up 19% year-on-year.
• And Trading Central has identified a bullish signal in IGO Ltd (ASX:IGO), following the formation of a pattern over a period of 26-days which is roughly the same amount of time the share price may rise from the close of $12.48 to the range of $15.90-$16.70, according to the standard principles of technical analysis.

Wall Street ended mixed on Friday as gains in energy and defensive sectors like consumer staples and utilities offset weakness in large growth stocks on the Nasdaq. Alphabet and Tesla fell 1.9% and 1.7% respectively as investors fear interest rates could remain higher for longer which prompted the sell-off in technology stocks. The Dow Jones rose 0.07%, the S&P500 fell 0.01% and the tech-heavy Nasdaq lost 0.2%. Over the last 3 weeks, the Nasdaq has fallen 7.2%, its biggest decline since December. Beauty company Estée Lauder tumbled 3.3% on Friday after the company’s annual net sales and profit fell short of analysts’ expectations.

Over in Europe, markets closed lower across the region as investor sentiment slides on global economic concerns and further runway for tighter monetary policy. The STOXX600 fell 0.6%, Germany’s DAX lost 0.65%, the French CAC fell 0.38%, and, in the UK, the FTSE100 fell 0.65%.

Danish hearing aid manufacturer GN Store Nord fell 5.9% on Friday after JPMorgan cut its price target on the company following significant losses and weak second quarter results released on Thursday.

Locally on Friday the ASX rose just 0.03% as a 1.9% sell off among communication services stocks was offset by gains in the real estate and utilities sectors. For the week, the ASX fell 2.62% in line with the global market sell-off amid investor sentiment dampening on future rate hike outlook, slowing earnings growth out of reporting season results, and the Chinese economy continuing its sluggish growth post-pandemic.

What to watch today: 

• Ahead of the opening bell this Monday, the SPI futures are anticipating the ASX to open 0.32% lower.
• On the commodities front this morning, oil is trading 0.06% higher at US$81.30/barrel, gold is up 0.07% at US$1890/ounce, and iron ore is up almost 1% at US$108.50/tonne.
• Stocks trading ex-dividend today include Vicinity Centres (ASX:VCX) and Steadfast Group (ASX:SDF). If you’ve been thinking about these stocks, it might be worth considering buying in today as stocks trading ex-dividend generally trade lower on the ex-dividend date.
• AU$1.00 is buying US$0.64, 93.12 Japanese Yen, 50.04 British Pence and NZ$1.08. 

Trading Ideas: 

• Bell Potter has downgraded the rating on PWR Holdings (ASX:PWH) from a buy to a hold and maintain a $10.50 12-month price target on the leading provider of customised cooling solutions for the global automotive industry. The downgrade was following the release of FY23 results where revenue was a slight beat while gross profit and EBITDA were slight misses. The company also failed to issue any guidance for FY24 and cash at bank was lower than Bell Potter was expecting due to higher CAPEX.
• And Trading Central has identified a bullish signal on Piedmont Lithium (ASX:PLL) following the formation of a pattern over a period of 22-days which is roughly the same amount of time the share price may rise from the close of $0.72 to the range of $0.92-$0.96 according to standard principles of technical analysis.

The number of companies reporting results this week increased. The outlook for the healthcare sector seems to be slowing whilst in the technology sector, Life360 (ASX:360) surprised investors on the upside. The broader Aussie share market tumbled 2.64% (Mon-Thurs) as Chinese economic data and downgrade warnings for US banks weighed on sentiment. 

In this week's wrap, Grady covers: 

• (0:20) The major name sold off by investors
• (1:12) Why investors have fallen out of love with the healthcare sector
• (2:00) Margin contraction & income-investing
• (2:33) Life360’s (ASX:360) strong results
• (3:35) NAB’s (ASX:NAB) results and the crowd goes mild
• (4:10) Key takeaways for the week that was
• (5:36) Best performers
• (6:11) Most traded stocks & ETFs by Bell Direct clients
• (6:41) Three economic news items to watch out for

Read transcript article here.

Wall St fell for a third straight day as investors reacted to the latest round of earnings season results released. The Dow Jones dropped by 0.84%, the S&P 500 fell by 0.77% and the tech-heavy Nasdaq lost 1.17% overnight.

The 10-year treasury yield peaked, at its highest point since late 2022 on Thursday on outlook from the Federal Reserve’s July meeting minutes signaling further rate hikes may be required to control inflation in the region.

American retailer Walmart fell more than 2% after an earnings and revenue beat in the second quarter. This is continuing a trend with major averages in losing territory in August for stocks.

European markets fell on Thursday following the US Federal Reserve’s July meeting minutes which outlined further rate hikes may be on the horizon. The STOXX600 closed Thursday 0.90% lower, the German Dax followed suit falling 0.71% with the French CAC and FTSE 100 dropping 0.94% and 1.03% respectively. 

Locally yesterday, the ASX200 closed the day 0.68% lower with the industrial and health sectors taking the biggest hit while real estate and energy stocks rallied to offset some of the session’s heavy losses. 

What to watch today: 

• The Australian share market is set to open lower this morning, with the SPI futures suggesting a fall of 0.39% at the open this morning.
• On the commodities front this morning, oil is up 0.98% to US$80.16 a barrel, gold has fallen marginally lower by 0.11% to US$1889 an ounce and Iron ore is trading flat at US$104 a tonne.

Trading Ideas: 

• Bell Potter maintains a buy rating on Adacel Technologies (ASX:ADA) have decreased the 12-month price target from 80 cents per share to 75 cents per share. This is following a lower than forecasted profit before tax and gross profit outlined in the company’s FY23 results. FY23 revenue levels remained above expected which supports the maintenance of the buy rating.
• And Trading Central has identified a bearish signal in The Lottery Corp (ASX:TLC) indicating that the stock price may fall from the close of $5.18 to the close of $4.91-$4.97 over the pattern formed over 16 days, according to the standard principles of technical analysis.

Wall Street extended its red run into Wednesday as investors digested the latest FOMC meeting minutes that included some Fed officials saying further rate hikes may be needed to bring inflation down to the target. The meeting minutes also outlined the current robustness in the economy shown through recent third quarter GDP estimates and retail sales data are not what the Fed wants to see. The Dow Jones fell just over half a percent on Wednesday, the S&P500 lost 0.76% and the tech-heavy Nasdaq fell 1.15%.

TJX Companies rose 4% after the discount retailer beat Wall St expectations for Q2, while Target rallied 4% even after the retailer cut its full-year earnings forecast and second quarter sales fell short of expectations.

Over in Europe, markets closed lower in the region as investors assessed the latest inflation data out of the UK. The reading of inflation came in at 6.8%, which was a sharp decline from 7.9% in June mainly due to a slump in fuel prices. This reading was in line with expectations which poses a headache for the Bank of England as inflation is showing signs of cooling but wages growth yesterday continues to rise.

Locally, the ASX fell 1.5% on Wednesday after taking lead from the US on Tuesday and as investors digested the latest slew of poor economic data out of China indicating the economic recovery in the region remains sluggish. Information technology stocks took the biggest hit locally yesterday, though every sector closed the midweek session in the red.

Endeavour Group fell over 4% on Wednesday despite the company reporting FY23 results that fell short of analysts’ expectations. Investors may have sold out after the company failed to issue outlook for FY24 but FY23 turned out strong with NPAT up 6.9% to $529m and the full year dividend up 7.9% to 21.8cps.

What to watch today:

• Ahead of the local trading session the SPI futures are anticipating the ASX to open 0.32% lower, extending yesterday’s losses into Thursday’s trading session.
• On the commodities front this morning oil is down 1.99% at US$79.38/barrel, gold is down 0.53% at US$1891.55/ounce and iron ore is up almost half a percent at US$104/tonne.
• AU$1.00 US$0.64, 93.95 Japanese yen, 51.22 British pence and NZ$1.08.

Trading Ideas:

• Bell Potter has increased the price target on Life360 (ASX:360) from $9.25 to $10.50 and maintain a buy rating on the location services and hardware technology company following the release of the company’s first half results including revenue and adjusted EBITDA beating Bell Potter expectations. Life360 also announced total paying circles were up 62,000 quarter-on-quarter which nearly doubled what BP was expecting and cash as at June 30 was $64.2m which also beat forecasts.
• And Trading Central has identified a bullish signal on Australian Clinical Labs (ASX:ACL) following the formation of a pattern over a period 58-days which is roughly the same amount of time the share price may rise from the close of $3.27 to the range of $3.71 to $3.81 according to standard principles of technical analysis.

In New York overnight, US equities closed lower as investors concerns over the state of the global economy, particularly in China, sparked a sell-off in equities, in addition to banking stocks weighing down the market. The Dow Jones fell 1.02%, the S&P500 lost 1.16% and the tech-heavy Nasdaq fell 1.14% on Tuesday. 

In Europe, markets closed lower on Tuesday as wages data in the UK weighed on investor sentiment. The UK median monthly wage, excluding bonuses, rose 7.8% in July from the prior corresponding period which is the largest annual growth rate since the records began in 2001, and provides further reason for the bank of England to continue raising interest rates to tackle inflation in the region. Unemployment in the UK also rose unexpectedly though from 4% to 4.2% in the three months to June. 

The RBA’s meeting minutes were released yesterday which could have boosted investor sentiment as the key takeaways were the slowing economy and acute pressure on household finances were behind the latest rate pause. We are not out of the woods yet though as the RBA did say at the latest meeting that further monetary tightening may be required to ensure inflation reaches the target 2-3% range within a reasonable timeframe.

Lake Resources (ASX:LKE) soared 25% yesterday, extending the rally this week after the lithium explorer released an update on its flagship Kachi Project. The update outlined the company reported successful stage 1 extraction and injection testing at the site to support the production of high purity battery grade lithium carbonate at the Kachi Lithium brine Project.

The market rally yesterday may also have been driven by the release of Australia’s annual Wage Price Index data for Q2 coming in at growth of 3.6% which was lower than expectations of 3.7% growth, in a sign wages inflation is starting to ease.

Iron ore slipped below US$100/tonne yesterday to near its lowest intraday level since June following China’s surprise 15-basis point interest rate cut on the one-year medium-term lending facility, alongside further economic data that indicated the economy’s recovery remains sluggish.

China’s industrial production data came in at a 3.7% rise for July, down from a 4.4% rise in June and below economists’ expectations of another 4.4% rise for July. The softest manufacturing activity was reported in mining output as well as electrical machinery and apparatus output. Chinese retail sales data was also released yesterday which broadly missed expectations as consumer spend on retail in the region rose by 2.5% in July from a year ago, below expectations of a 4.5% rise.

What to watch today:
• Ahead of the local trading session here in Australia the SPI futures are expecting the local index to open 1.04% lower amid the global market sell-off overnight.
• On the broader commodities front this morning, oil is trading 1.77% lower at US$81/barrel, gold is down 0.23% at US$1903/ounce, and iron ore is down 1.9% at US$103.50/tonne.
• AU$1.00 buying US$0.65, 94.16 Japanese Yen, 51.22 British Pence and NZ$1.08.

Trading Ideas:
• Bell Potter has increased the price target on Pro Medicus (ASX:PME) from $67 to $70 and maintain a hold rating on the leading health imaging IT provider following the release of the company’s FY23 results including revenues increasing by 34%, and EBIT increased 34%, both of which beat expectations. Bell Potter sees the drivers of growth remain firmly in place i.e. too few radiologists, and more managed care leading to more need for diagnostic imaging.
• And Trading Central has identified a bearish signal on Goodman Group (ASX:GMG) following the formation of a pattern over a period of 66 days which is roughly the same amount of time the share price may fall from the close of $19.89 to the range of $17.90 to $18.20 according to standard principles of technical analysis.

Wall St closed higher on Monday as big tech names and chip stocks posted strong results. The S&P 500 finished the day 0.58% higher, the tech heavy Nasdaq followed suit posting a 1.05% gain, and the Dow Jones closed marginally higher by 0.07%.

Software company Nvidia ended the day 7.1% higher, rebounding from an 8.5% sell off last week. This was further boosted with Morgan Stanley touting Nvidia as a ‘top pick ahead of earnings’.

Over in Europe, there was a mixed reaction in markets after several down sessions last week. The Stoxx 600 closed marginally higher by 0.1% with retail stocks and financial services leading the way. The German DAX finished the day up 0.46% and the French CAC also finished the day 0.12% higher. However the FTSE 100 ended Monday 0.23% lower.

Locally yesterday, the ASX200 ended the first trading session of the week down 0.86% as a sharp sell-off in materials stocks weighed on the key index. The communications services, energy and info tech sectors were the only sectors to close higher on Monday. 

Lake Resources led the winning stocks on Monday, jumping 7.7% while Carsales.com added 7% on strong FY23 results. Syrah Resources and Elders fell 6.85% and 6.10% respectively yesterday.

What to watch today: 

• The Australian share market is set to open flat this morning.
• In terms of economic data, the RBA minutes meeting will be released today at 11:30am AEST.
• On the commodities front this morning, crude oil is down 0.88% to US$82.45 a barrel. Gold is down 0.33% to US$1907 an ounce after mounting pressures from a strong dollar and iron ore is up 1.93% to US$105.50 a tonne.

Trading Ideas:

• Bell Potter maintains a buy rating on Beach Energy (ASX:BPT) with a 12-month price target of $2. Beach Energy has a strong fully funded growth outlook diversified across five energy basins and four separate gas markets. The company is also rolling off peak capex into a step change in production and expects free cash flow in FY25-26.
• And Trading Central has identified a bullish signal in Super Retail Group (ASX:SUL) indicating that the stock price may rise from the close of $12.85 to the range of $13.70-13.90 over a pattern formed in 53 days, according to the standard principles of technical analysis.

Wall Street closed mixed on Friday with the Nasdaq posting a second weekly loss for the first time in 2023 as semiconductor stocks weighed on the tech heavy index. Over the week, the Dow Jones added 0.6%, while the S&P500 and Nasdaq each dropped 0.3% and 1.9% respectively.

July producer price index data was released in the U.S. on Friday and confirmed inflation remains sticky in the region. The data showed a rise of 0.3% on June which was above the 0.2% economists were expecting. 

News Corp shares rallied on Friday after the media company reported an earnings beat in Q4.

Over in Europe, markets closed lower on Friday as investors continued to digest corporate earnings results alongside the release of unfavourable PPI data in the U.S. The STOXX600 fell 1.1% on Friday while Germany’s DAX lost just over 1%, the French CAC fell 1.26%, and in the UK, the FTSE100 fell 1.24%.

On Friday, UK economic output data was released showing economic output grew by 0.5% in June, which was higher than the expected growth of 0.2%.

Locally on Friday, the ASX200 fell 0.24%, weighed down by a sharp sell-off in the energy sector, while consumer discretionary and health care stocks offset some of the heavy losses to end the week higher. The sell-off on Friday was driven by investors responding to a slew of earnings results released including Baby Bunting dropping almost 2% after profit fell 51% and the full year dividend was slashed by 52% in addition to cost-cutting measures announced in the FY23 results.

What to watch today: 

• Ahead of the local trading session here in Australia, the SPI futures are expecting the ASX to open 0.41% lower to start the new trading week in the red.
• On the commodities front this morning, oil is trading 0.3% lower at US$82.96/barrel, gold is up 0.08% at US$1915/ounce and iron ore is up 1.93% at US$105.50/tonne.
• Stocks trading ex-dividend today include EUROZ Hartleys Group (ASX:EZL) and Suncorp Group (ASX:SUN). If you’ve been thinking about these stocks, it might be worth considering buying in today as stocks trading ex-dividend generally trade lower on the ex-dividend date.
• AU$1.00 is buying US$0.65, 94.14 Japanese Yen, 51.35 British Pence and NZ$1.08. 

Trading Ideas: 

• Bell Potter has initiated coverage on Task Group Holdings (ASX:TSK) with a buy rating and a 12-month price target of $0.62. Task Group is an end-to-end Transaction Management and Customer Engagement platform that delivers a B2B Software as a Service solution to high quality enterprise clients including McDonalds, Starbucks and Compass Group in Australia, to manage the experience for customers from pre-order to payment. Bell Potter sees Task is trading at a 20% discount to global industry peers and the buy recommendation is based on the company’s exposure to future-facing growth and profitability.
• And Trading Central has identified a bullish signal on Harvey Norman (ASX:HVN) following the formation of a pattern over a period of 34-days which is roughly the same amount of time the share price may rise from the close of $3.87 to the range of $4.35 to $4.45 according to standard principles of technical analysis.