Between the Bells

Wall Street retreated in the first trading session of the week in the US as rising interest rates continue pressuring investor sentiment, in addition to investors reacting to the latest batch of retail earnings raising concerns over how the consumer is faring the rising interest rate environment. The Dow Jones ended Tuesday’s session down 2.06%, the S&P500 lost 2% and the tech-heavy Nasdaq closed the day down 2.5%. The benchmark 10-year Treasury yield climbed to 3.9%, while the 2-year rate advanced to 4.7%, building on from last week’s gains as investors grappled with hotter-than-expected inflation data. Leading domestic homewares retail chain Home Depot fell 5.4% to a three-month low on Tuesday after warning of weakening demand and issuing a soft profit forecast for 2023, while Walmart, the world’s largest retailer, fell 0.2% after it forecast full-year earnings below analysts’ expectations and issued a warning of hotter-than-expected food prices squeezing profit margins.

In Europe, markets closed lower as investors weighed corporate earnings results against the potential for the US Fed to remain hawkish which enhances the fear of a recession in the coming months. Germany’s DAX fell 0.52%, the French CAC lost 0.37% and, in the UK, the FTSE100 shed 0.46% despite the UK government posting a surprise budget surplus for January. Credit Suisse shares fell on Tuesday following reports that remarks made by the company’s Chairman, Axel Lehmann regarding outflows from the lender, are being reviewed by the Swiss financial regulator on the grounds of potentially being misleading.

What to watch today:

• In commodities, it’s a red run across the commodities board this morning with oil down 1.16% at US$76.28/barrel, gold is down 0.28% at US$1836/ounce, but iron ore is up 1.96% to US$130/tonne.
• Ahead of the local trading session here in Australia, the SPI futures are anticipating the ASX to open 0.62% lower on the global sell-off overnight.
• Stocks going ex-dividend today include Netwealth Group (ASX:NWL), AGL Energy (ASX:AGL) and Commonwealth Bank (ASX:CBA). If you’ve been thinking about these stocks it might be worth considering buying in today as stocks going ex-dividend generally trade lower on the ex-dividend date.
• The Aussie dollar is buying US$0.69, 92.51 Japanese Yen, 57.30 British Pence and NZ$1.10.

Trading Ideas:

• Bell Potter has increased its rating on Costa Group (ASX:CGC) from a Hold to a BUY and maintains a $3/share price target on the company following the release of full year earnings for CY22, where the company outlined non-recurring quality issues in on-year in citrus should support material recovery in CY23 earnings and the company will benefit from a 19% uplift in productive hectares in the international division.
• Trading Central has identified a bullish signal on AMA Group (ASX:AMA) following the formation of a pattern over a period of 114-days which is roughly the same amount of time the share price may rise from the close of $0.24 to the range of $0.33-$0.35 according to standard principles of technical analysis.

Please note: US markets were closed overnight.
The major US benchmarks closed mixed to end last week, with energy stocks down the most, while yields on the 10-year and 2-year Treasury bonds also weighed on equities. European equities were higher however, boosted by gains in mining stocks. 

Coming up this week – the thinking behind monetary decisions at the Fed will be under the spotlight on Wednesday as the US central bank releases the minutes of its latest meeting, while Friday’s release of US Personal Income and PCE, the Federal Reserve’s preferred inflation measure will be closely watched for signs of whether inflationary pressures will re-accelerate or become less intense. Also, US earnings season is also full swing a few big names announcing Q4 results during this week. 

What to watch today:

• Our local market is poised to open lower this morning, with the SPI futures suggesting a 0.38% drop. 
• It’s another busy day in reporting season – these reports are causing a lot of movement in markets this month. So today we’ll be watching out for AMA Group, BHP, Coles, G8 Education, Tabcorp and Viva Energy. 
• BHP Group (ASX:BHP) earnings will be one of the most watched today. Goldman Sachs are expecting underlying EBTDA US$13.7b, NPAT of US$6.9b, and an 88 US cents per share interim dividend, compared to the consensus estimate of 98 US cps. 
• In commodities, the oil price is higher, rebounding from an almost two-week low of around US$75 touched last week, as investors weighed optimism about a recovery in Chinese demand against rising US supplies and persistent worries about a global economic slowdown. Gold has steadied after hovering near its weakest levels in seven weeks after hawkish comments from the Fed and strong eco data weighed down on gold, while iron ore has extended its rebound, so keep your eye on iron ore miners this week, such as Champion Iron (ASX:CIA), Fortescue Metals (ASX:FMG), and Rio Tinto (ASX:RIO). 

Trading Ideas:

• Following the H1 results for The a2 Milk Company (ASX:A2M) announced yesterday, Bell Potter have reiterated their Buy rating, after A2M reported underlying NPAT ahead of Bell Potter’s expectations. There price target has been increased from $6.80 to $7.65, which at its current share price of $6.49, implies 18% share price growth in a year. 
• Trading Central have identified a bearish signal in Metals X (ASX:MLX) indicating that the stock price may fall from the close of $0.33 to the range of $0.23 to $0.25 over 34 days.

The local market closed almost 1% lower on Friday as a sell-off in technology stocks weighed on the key index, with investors fleeing growth stocks in fear of further rate hikes out of the RBA and Federal Reserve.

Baby Bunting (ASX:BBN) fell over 6% on Friday after reporting a 66.5% drop in net profit for the first half, while QBE (ASX:QBE) insurance rallied over 7% on strong first half results including NPAT up 3%.

The winning stocks from Friday’s session were led by QBE (ASX:QBE) Insurance adding over 7%, while A2 Milk Company (ASX:A2M) rose 6.3%, and Corporate Travel Management (ASX:CTD) rallied 4.5%. And on the losing end Block Inc (ASX:SQ2) fell 7.76%, while New Hope Corporation (ASX:NHC) dropped 5.8%, and Centuria Industrial REIT (ASX:CIP) fell 5.76%.

The most traded stocks by Bell Direct clients on Friday were led by the Commonwealth Bank of Australia (ASX:CBA), Magellan Financial Group (ASX:MFG) and Woodside Energy (ASX:WDS).

Wall Street closed mixed on Friday as investor fears of further rate hikes to come from the Fed intensified last week on the back of a few economic reports coming in stronger than expected.

Yields on the 10-year and 2-year U.S. Treasury bonds hit levels not seen since November which weighed on markets during the last trading session or the week.

The Dow Jones rose 0.39%, while the S&P500 fell 0.28% and the Nasdaq closed the day down 0.58%. The Dow Jones notched out a third straight week of losses, and the S&P500 fell for a second week but the Nasdaq rose 0.59% for the week.

Over in Europe, markets closed lower on Friday following a week of economic data released that weighed on investor sentiment. The STOXX600 fell 0.2%, Germany’s DAX lost 0.33%, the French CAC shed 0.25% and, in the UK, the FTSE100 fell 0.1%.

What to watch today:

• Taking a look at commodities, it’s a red start to the week with oil down 2.74% at US$76.34/barrel, coal is down 2.68% at US$214/tonne, gold is up slightly at US$1842.39/ounce and iron ore is up 0.4% at US$127.50/tonne.
• Ahead of the local trading session here in Australia the SPI futures are anticipating the ASX to open flat on the back of the mixed session on Wall St on Friday.
• Stocks going ex-dividend today include Zimplat Holdings (ASX:ZIM), Ansell (ASX:ANN), Vicinity Centres (ASX:VCX) and Wesfarmers (ASX:WES). If you have been thinking about these stocks it might be worth considering buying in today as stocks going ex-dividend generally trade lower on the ex-dividend date.
• The Aussie dollar is buying 69 Us cents, 92.15 Japanese Yen, 57.30 British Pence and 1 New Zealand dollar and 10 cents.

Trading Ideas:

• Bell Potter has increased its price target on OreCorp (ASX:ORR) to 93 cents, from 84 cents, and maintains a speculative buy rating on the company following a number of catalysts coming through including de-risking and the achievement of key milestones at its Nyanzaga Gold Project in Tanzania. The NGP has emerged as an attractive, significant scale, new gold project with strong financial performance metrics in a region that is experiencing a resurgence in investment by the world’s largest mining companies.
• Trading Central has identified a bullish signal on Rumble Resources (ASX:RTR) following the formation of a pattern over a period of 24-days which is roughly the same amount of time the share price may rise from the close of 23 cents to the range of 28 cents to 30 cents according to standard principles of technical analysis.

The Aussie share market fell 0.31% (Mon-Thu), weighed down by US CPI data and investor reactions to reporting season results. An increase to the unemployment rate was also announced this week, strengthening investor appetite for growth stocks.

In this week's wrap, Grady covers:

• (0:29) What the big banks focused on this reporting season
• (2:25) Wesfarmers & Whitehaven Coal's corporate earnings
• (4:26) The best performing stocks in the ASX200
• (5:25) The most traded stocks & ETFs by Bell Direct clients
• (5:55) Two economic news items to watch out for

Wall Street slipped on Thursday to close lower as another piece of economic data was released coming in stronger than expected. For the month of January, US PPI or producer price index rose 0.7% MoM which is the highest growth in 7-monthsand much higher than market forecasts of 0.4%. Goods prices jumped 1.2%, the largest increase since June 2022. The data is another sign this week that the Fed’s aggressive rate hike stance has had little effect in slowing economic growth over recent months. US retail sales also rebounded sharply in January with the largest jump in almost 2 years, climbing 3% for the month which easily topped analysts’ expectations and add further support for the fed to keep raising interest rates to cool inflation in the US. The Dow Jones fell 1.26%, the S&P500 lost 1.38% and the tech-heavy Nasdaq dropped 1.78% on Thursday.

Over in Europe markets closed slightly higher after a choppy session on Thursday as investors digest a slew of economic data released this week giving mixed signals about the Fed’s rate hike pathway moving forward. The STOXX600 rose 0.2%, the French CAC touched an all-time high during the session before retreating to close 0.89% higher, Germany’s DAX added 0.18% and, in the UK, the FTSE100 also rose 0.18%.

What to watch today:

• In commodities oil is trading 0.19% lower at US$78.44/barrel, gold is up 0.29% at US$1841.43/ounce and iron ore is up 1.61% at US$126.50/tonne.
• The Aussie dollar is buying US$0.69, 92.22 Japanese Yen, 57.10 British pence and NZ$1.10.
• Ahead of the local trading session the SPI futures are anticipating the local market to open 0.25% lower.
• Stocks going ex-dividend today include Lendlease Group (ASX:LLC) and Macquarie Group (ASX:MQG). If you have been thinking about these stocks it might be worth considering buying in today as stocks going ex-dividend generally trade lower on the ex-dividend date.

Trading Ideas:

• Trading Central has identified a bullish signal on Qantas (ASX:QAN) following the formation of a pattern over a period of 32-days which is roughly the same amount of time the share price may rise from the close of $6.57 to the range of $7.25 to $7.45 according to standard principles of technical analysis.
• Trading Central has identified a bearish signal on NRW Holdings (ASX:NWH) following the formation of a pattern over a period of 68-days which is roughly the same amount of time the share price may fall from the close of $2.80 to the range of $2.41 to $2.49 according to standard principles of technical analysis.

US equities advanced overnight as investors consider the strong retail sales data along with the latest US inflation data, and what this means for the Fed’s interest rate hiking campaign. In the prior session US inflation came in slightly above expectations, with headline year-on-year CPI dropping to 6.4% in January. The data drove yields higher across the curve, with the 20-year yield jumping 10 basis points on the day and 38 basis points in the past month. Moves were more muted further out on the curve, with the 10-year yield rising 4 and 24 basis points respectively, yesterday and in the past month. 

Equities had a positive run overnight however; the Dow gained 0.1%, the S&P500 gained 0.28% and the Nasdaq gained 0.9%. 

Stocks also moved higher in Europe. The STOXX 600 blue-chip index reversed the morning losses, closing half a percent higher, with most sectors in the green. Construction stocks led gains, while European banking stocks declined. And the UK’s FTSE 100 hit another record high, reaching 8,000 points for the first time. So while economic forecasts for the UK haven’t been too positive, many of the FTSE 100 firms derive their revenue from overseas. The index has seen investors attracted to financials, energy and commodities firms, as well as dividend-paying defensive stocks. 

What to watch today: 

• The SPI futures are suggesting the Aussie market will open 0.49% higher this morning. 
• In commodities, 
  • Oil prices are trading in the red at around US$78 per barrel, extending losses for a second session amid lingering concerns about weak demand. The latest report from the Energy Information Administration showed that US crude inventories jumped by 16.283 million barrels to 842.973 million last week, which was the highest level since early October. And oil prices have already been under pressure after the US government announced plans to release 26 million barrels of oil from strategic reserves. So keep watch of energy stocks such as Santos (ASX:STO) and Beach Energy (ASX:BPT). 
  • Meanwhile gold has falled to a one-month low after the US dollar strengthened. So watch gold miners such as Regis Resources (ASX:RRL) and Evolution Mining (ASX:EVN). 
  • And iron ore has jumped 1.2% higher to US$124.50 per tonne, while seaborne iron ore is just 0.1% higher. 
• As for reports to watch out for today, NAB is set to release a Q1 update, plus a long list of companies are set to release their half year results. Some of the names reporting today include AMP, Evolution Mining, Telstra, Goodman Group, Magellan Financial, Newcrest Mining, South32 and Whitehaven Coal just to name a few. 
• And in economic data, at 11:30am today January’s unemployment rate will be announced, expected to remain unchanged at 3.5%. 
• The Aussie dollar is buying US$0.69, 57 British Pence, and NZ$1.10. 

Trading Ideas:

• Bell Potter maintain a BUY rating on DroneShield (ASX:DRO) and have lowered their price target to $0.40. At DRO’s current share price of $0.31, this implies 29% share price growth in a year. 
• Trading Central have identified a bearish signal in Bendigo and Adelaide Bank (ASX:BEN) indicating that the stock price may fall from the close of $9.61 to the range of $9.02 to $9.12 over 30 days according to the standard principles of technical analysis. 

The ASX fell 1.06% today following the release of stronger-than-expected CPI data out in the US overnight which sent shockwaves through investor confidence, renewing fears of the Fed continuing its aggressive rate hike stance. Investors sold out of financial stocks today amid fears of increasing doubtful debts on bank balance sheets resulting from further rate hikes anticipated. Reporting season also continued today with a number of big names releasing results.

The Commonwealth Bank of Australia (ASX:CBA) reported first half results today that included 10% growth in NPAT, an interim dividend of $2.10/share, Net Interest Margin up 18-basis points to 2.10% and operating performance up 18%. Investors sharply sold out of CBA shares today though after the bank increased its loan impairment expense by 77.1% which management blamed on current macro conditions including rising interest rates and prolonged inflationary pressures.

Australian conglomerate Wesfarmers (ASX:WES) also released first half results today including revenue jumping 27% on the PCP to $22.558bn, 114% increase in Kmart EBIT, overall NPAT up 14% to $1.4bn, and the company declared an 88 cents per share dividend. Wesfarmers’ Chemicals, Energy and Fertilisers revenue jumped 30.2% to $1.4bn, but the company’s Catch business softened to report a $108m loss. Overall, investors were impressed with the results, sending the Wesfarmers share price up 1.8% today.

The winning stocks from today’s session were led by Star Entertainment Group (ASX:SGR) rallying 14.40%, while G.U.D Holdings (ASX:GUD) added 8.10% and Cochlear (ASX:COH) rose 7.75% on the back of first half results. And on the losing end Brainchip Holdings (ASX:BRN) fell 13.56%, Corporate Travel Management (ASX:CTD) lost 8.7% and Treasury Wine Estates (ASX:TWE) dropped 6.91%.

The most traded stocks by Bell Direct clients today were Commonwealth Bank of Australia (ASX:CBA), Beach Energy (ASX:BPT) and Melbana Energy (ASX:MAY).

On the commodities front today, the price of oil took a dive today to just below US$79/barrel after an industry report showed US crude inventories rose by 10.5m barrels last week, well above the expected 321,000 barrel rise. Gold is trading down 0.43% at US$1846/ounce and iron ore is up 1.22% at US$124.50/tonne.

The Aussie dollar is buying US$0.69, 92.23 Japanese Yen, 57.34 British Pence, and NZ$1.10.

US equities were sold-off in the hour of trade following the release of the highly anticipated January CPI report which showed inflation in the US remains stubbornly hot. For January, US inflation came in at a rise of 0.5% which translated to an annual gain of 6.4%, which was above economists’ expectations of a decline in CPI to 6.2% YoY. The way inflation has remained stubbornly high is further support for the Fed to continue raising interest rates for a little while to come in order to cool inflation to the target range of around 2%. Stocks recovered in afternoon trade though to close mixed with the Dow Jones ending the day down 0.46%, while the S&P500 fell just 0.03% and the Nasdaq closed up 0.57%. The winning stocks in the US today were Boeing adding 1.25%, Nike rallying 0.83% and Chevron climbing 0.77%. Coca-Cola and Home Depot each fell 1.6% on Tuesday.

Over in Europe on Tuesday markets closed mostly higher but pared back early gains as investors digested the mixed US inflation data for January that may prompt the Fed to announce further rate hikes. The Stoxx 600 closed 0.1% higher, Germany’s DAX fell 0.11%, the French CAC rose 0.07% and, in the UK, the FTSE100 rose 0.08%.

What to watch today:

• On the commodities front, oil is trading 1.4% lower at US$79/barrel, gold is down 0.28% at US$1848/ounce and iron ore is down 2.38% at US$123/tonne.
• Ahead of the local trading session, the SPI futures are anticipating the ASX to open 0.01% higher following the recovery on Wall St in afternoon trade.
• Reporting season continues today with some big names releasing results today including Commonwealth Bank (ASX:CBA), Wesfarmers (ASX:WES) and Fortescue Metals Group (ASX:FMG).
• The Aussie dollar is buying US$0.70 US cents, 92.84 Japanese Yen, 57.45 British Pence and NZ$1.10.

Trading Ideas:

• Trading Central has identified a bullish signal on Camplify (ASX:CHL) following the formation of a pattern over a period of 11-days which is roughly the same amount of time the share price may rise from the close of $2.05 to the range of $2.47 to $2.57 according to standard principles of technical analysis.
• Trading Central has identified a bearish signal on Hansen Technologies (ASX:HSN) following the formation of a pattern over a period of 61-days which is roughly the same amount of time the share price may fall from the close of $4.82 to the range of $4.24 to $4.34 according to standard principles of technical analysis.

The local market recovered from Monday’s sell-off on Tuesday to close the session 0.18% higher as investor optimism was boosted by Aussie business confidence jumping for January after dropping at the tail end of 2022. Investors piled into tech stocks today with the sector rising 1.3% at the closing bell as investor appetite for growth stocks increases with every ease in rate hike announcements.

Economic data out today showed Aussie business mood has bounced back rising 6 points in January led by a sharp rise in mining and wholesale sectors. Consumer confidence on the other hand fell 6.9% to 78.5 in February, the weakest level in 3-months as the cost-of-living pressures and interest rate hikes in Australia continue weighing heavily on Aussies.

Reporting season continued to make waves today with investors again very responsive to the provision of first half results.

James Hardie Industries (ASX:JHX) shares came under pressure today after the global building materials company and fibre cement product manufacturer released Q3 results that disappointed investors, driven by a downturn in the US and Australian housing markets. For the quarter, James Hardie reported global net sales declined 4% to US$860.8m, adjusted net income declined 16% to US$129.2m and the company revised its adjusted net income guidance range to US$600m to US$620m, down from the prior range of US$650m to US$710m.

Challenger (ASX:CGF) on the other hand soared 4.41% after also reporting first half results that impressed investors. For the half, the company confirmed its guidance for the full financial year, reported record half year Life division sales of $5.5bn, up 11% driven by record annuity sales growth, normalised NPAT rose 5% to $250m, while statutory NPAT was down at $123m, a 4% increase in the company’s interim dividend to 12cps was also announced, and total assets under management of $99.4bn.

The winning stocks from today’s session were led by Sims (ASX:SGM) adding over 7%, while Domain Holdings (ASX:DHG) and Coronado Global Resources (ASX:CRN) each gained 5.46% and 4.46% respectively.

And on the losing end, Star Entertainment Group (ASX:SGR) tanked almost 13.5% today a day after releasing disappointing first half results, while Ansell (ASX:ANN) fell 8.72% today and Sayona Mining (ASX:SYA) shed 6.12%.

The most traded stocks by Bell Direct clients today were led by Pilbara Minerals (ASX:PLS), Core Lithium (ASX:CXO) and Syrah Resources (ASX:SYR).

We’ve seen lots of movement on the commodities front in recent times amid reports Russia is going to cut oil production and on the back of China’s reopening. Today, crude oil is trading 1.13% lower at US$79.22/barrel, gold is up 0.23% at US$1857/ounce and iron ore is down 2.38% at US$123/tonne.

The Aussie dollar is buying 70 US cents, 91.95 Japanese yen, 57.39 British Pence and 1 New Zealand dollar and 10 cents.

US equities rallied overnight, regaining ground after the S&P500 and the Nasdaq suffered their worst weekly decline in nearly two months. The Dow Jones traded 376.66 points higher or 1.11%, the S&P500 climbed 1.14% and the Nasdaq jumped 1.48%. And the energy minerals sector was the biggest laggard across US markets, with oil and gas companies such as EQT Corporation and Marathon Oil weighing on the sector the most. 

European markets also advanced in the first session of the week, as investors braced for US inflation data and a euro zone GDP estimate. The STOXX 600 closed 0.9% higher, Germany’s DAX up 0.6%, France’s CAC up 1.1% and the FTSE100 up 0.8%. 

What to watch today:

• The SPI futures are suggesting our local market will open 0.67% higher this morning. 
• Reporting season is well underway, with a long list of companies set to release their half year results today. Some big names reporting today include Breville (ASX:BRG), Challenger (ASX:CGF), Charter Hall (ASX:CHC), CSL Limtied (ASX:CSL), Dexus (ASX:DXS), James Hardie (ASX:JHX) and Seek (ASX:SEK), to name a few. 
• Suncorp (ASX:SUN) is set to go ex-dividend, which may see its share price fall as investors take their profits. 
• In economic data out today, NAB will release its business confidence data for January at 10:30am and Westpac will release its data on consumer confidence for February 11:30am AEDT. Then tonight we’ll be watching out for the unemployment rate out in the UK and CPI out in the US. 
• In commodities, 
• Oil prices are slightly lower after rebounding at o above US$80 per barrel in the late hours of trade, after falling much of the session as investors balance supplies from Turkey and Russia while awaiting the US CPI report. 
• Gold is down 0.5% and is sliding toward its lowest levels in five weeks and is remaining under the pressure.  
• Iron ore is 0.5% higher at US$126 per tonne. 

Trading Ideas:

• Bell Potter maintain a BUY rating on Beach Energy (ASX:BPT) following the release its half year earnings, which saw underlying EBITDA of $491m and NPAT of $191m, both consistent with Bell Potter’s estimates. The company also declared a 2cps fully franked dividend. The energy company has strong, fully funded production growth outlook, diversified across five energy basins and across four separate gas markets. Bell Potter have lowered their price target from $2.25 to $2.21 and at BPT’s current share price of $1.52, this implies 45.9% share price growth in a year. 
• Trading Central have identified a bearish signal in CSR Limited (ASX:CSR), indicating that the stock price may fall from the close of $5.04 to the range of $4.98 to $5.09 over 23 days, according to the standard principles of technical analysis.