Investors remain hesitant to buy up the Tech sector after the Nasdaq hit a 10% correction earlier in the week. Higher than expected inflation yesterday will have many investors on edge whilst everyone is trying to predict how hawkish the FED will be this year. In this environment, Growth will likely underperform as Value stocks will be more favoured.
Markets have somewhat priced this in with expectations that the FED could raise rates 4 times this year. Bond yields continued to fall overnight which will help ease the mood on the Nasdaq stocks. If this continues then buying will come back in fairly quickly, expect a lot of volatility in this space this year. The FED meets next on the 25th of January, with many analysts predicting a rate rise in March.
US reporting kicked off last night with Delta Airline which beat on profit and revenue and reaffirmed full-year guidance, sending its shares up more than 2%. Shares of homebuilder KB Home rallied more than 16% after reporting better-than-expected earnings. We will see some of the large US banks report tonight. Not many Tech stocks report early in the season with only Netflix reporting next week. The week starting the 24th will have many of the big tech names. If reporting is strong, the Tech sector will come back into favour for the rest of January.
The Omicron variant continues to see consumers and investors nervous as it continues to spread very quickly around the world. We are seeing the highest recorded weekly cases locally and worldwide of any variant so far. The Worldwide case numbers are almost double the highest on record jumping from 6 million a week to 10 million. The silver lining here is that the weekly deaths attributed to covid are dropping.
Cases in Australia continue to rise. NSW started to record rapid tests as of yesterday which sent them up to over 90K cases. 90K is just catching up on the Rapid testing. The focus is on the hospitalisation numbers rather than daily cases. There is no real clear indication of what’s to come if this spike in cases continues to climb. The ICU numbers still seem low but are climbing with NSW at 175 with 1,550 beds available. VIC is 112 with 1,476 beds. We will be keeping an eye on these numbers as an indicator for potential further locks downs.
Our market continues to whipsaw as we continue to range trade. The uptrend on our market is becoming less and less clear the more time we spend in the channel.
There is also a short-term uptrend line in play which our market should bounce off this morning. This is somewhat forcing our market into the point of a triangle and typically we would expect the underlying uptrend to win. This feels less certain because the uptrend line has only been in play for a month or so, whereas the more sidewards pattern has been dominant for much longer.
Miners continue to outperform in the short term with the strength seen in Iron Ore and other industrial commodities.
US shares fell overnight, with technology stocks again leading the major indices lower. Substantial falls were seen on the NASDAQ and SP500 indices, while the DOW JONES saw only modest selling. This appears to be a delayed response to the US CPI data from the prior session and the belief that this will lead to tighter monetary policy. The understanding is now that the US Federal Reserve will start to tighten monetary policy in the coming months, and that this will make technology and other growth stocks less attractive. Overnight US economic data showed slightly lower producer prices than expected, while initial jobless claims were higher than expected; the increase jobless claims is not ideal in an economy that was expecting to be in a full-recovery mode by now. Three of the eleven sector groups closed slightly higher for the SP500, while eight sectors closed lower. Technology stocks fared the worst, followed by Discretionary, and Healthcare stocks.
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