Growth stocks fall as Value rises

Overnight the Nasdaq fell 1.22% led by Netflix which closed 35% lower, other streaming services also took a hit, as did many other Tech and Discretionary stocks. The value-based Dow Jones index pushed higher. All sectors were green overnight apart from Tech, Discretionary and Communication services. The weak guidance from Netflix has made investors wary of buying into this space ahead of reporting. Instead, what we are likely to see in this reporting season is traders jumping into stocks that are outperforming their peers.

Commodities continue to take a breather this week with crude falling to $102.38US a barrel. Copper closed lower again, with Agricultural commodities mixed overnight. It seems for now most commodities are starting to stabilise which raises the question of whether we have seen the worst of the inflation?

It was another strong night for reporting, with most stocks beating earnings expectations. But for share prices to rise here we will need to see strong commentary and forward guidance from companies. Tesla reported aftermarket with aftermarket trading up almost 5%, which will reverse the falls from the live session. Procter & Gamble was up 2.66%, Abbott Laboratories up 2.22%, Anthem Inc up 2.48% and Kinder Morgan Inc up 0.87%, which are just some of the larger companies that reported during the live session overnight.

Locally we will see BHP report quarterly production this morning, we will be eager to see if it comes in better than RIO, which missed market expectations. RIO has fallen since the report and will likely be lower again today after trading down in its ADR overnight.

We saw yields in the bond market fall overnight for the most in weeks which is showing some buying in this space. Bond markets have moved a lot in the last few months indicating rate rise expectations are getting a bit out of hand. This is indicating that central banks may rise too quickly. There is much debate on whether the central bank’s intervention will solve the issue which seems to be more supply based. Demand has come back after much of the world has come out of Covid lockdowns, but there are still many supply disruptions that need fixing. Adding the War in Ukraine, lockdowns in China and now protests at Libya’s oil fields, markets still have a lot to digest.

Australian Outlook

The XJO is expected edge higher on open this morning following a meek fall in the U.S overnight. Their futures have started to move into the green which is helping our market hold ground.

Yesterday, our strong opening rally saw us meet the all-time high at roughly 7,625. By close though, we had rebounded off it intraday, and give up almost all the gains to finish fairly flat. It’s clear that our market doesn’t feel confident enough yet to push through. Though, with the recent independent strength our market has shown since the lows in early March, don’t be surprised if we have another go in the coming days or weeks.

We may need to see strength remain in the U.S for us to properly push through. Last night tech betrayed their previous night’s strong rebound. The strong momentum left their market, leaving ours wanting.

If we fail here, like we did the last time we tested 7,625 back in Jan, the top and bottom of the recent consolidation range (7,550; 7,450) should prove fist lines of defense.

US Markets

US shares closed flat to lower overnight, with selling in technology stocks dragging the NASDAQ index lower. The NASDAQ was strongly lower after NETFLIX shares fell 35% following a disappointing earnings report. However, after US markets closed, Tesla reported better than expected earnings, and their shares were about five percent higher in after-market trading. In other US reporting, Proctor & Gamble rose strongly, as did a suite of Healthcare stocks following better than expected earnings results. In US economic reporting there were slightly fewer existing home sales than expected in March, while US crude inventories faced another massive drawdown. Eight of the eleven sector groups of the SP500 closed higher, with Real Estate, Staples, and Healthcare stocks faring the best. Communications and Discretionary stocks fell the most.