Overnight buying came eagerly back into the tech space seeing the Nasdaq close 3.69% higher. Tech was 3.41% higher and Discretionary up 3.80%. The move higher in this space is likely a result of Bond yields topping out and the positive sentiment towards the US $1,400 stimulus cheque.
We saw a change in the theme, with Tech and Discretionary seeing most of the buying, but Gold and Silver also came back into favor. Gold was up around 2.10% and Silver 2.91%. With this, we saw Crude pull back, along with Copper and other metals. Iron Ore was also off around 5%.
So, with the rotation back into Tech, we may see some weakness around stocks that have been flying high recently. Banks, Miners, and Industrials may hold back a little here as short-term traders move back to Tech and Discretionary.
But in this environment of expected economic recovery and reopening, one would expect value stocks to continue to shine in the medium to long term. We will need to watch the 10-year bond yields hold around current levels, and commodities also hold.
Gold Miners are extremely cheap at this level. If this is the start of the move back into gold keep an eye on NCM which has Gold and Copper exposure. They reported very well with many analyst targets around $30.00. NST is also very cheap at current levels.
Australian Outlook
The XJO is expected to open higher this morning following a strong move in the U.S last night. The open this morning puts us near 6800, a level we have failed to hold twice now.
The past two days our market has retreated from highs, not willing to hold gains. With the renewed vigor in the U.S overnight, hopefully we are able to hold strength through our session, though we will likely need to see the U.S hold its strength in their futures during our session.
US Markets
US shares continued higher overnight, with the tech sector bouncing strongly after severe weakness across the past fortnight. US shares were spurred on by treasury yields dropping back overnight; rising yields had been a worry for many in the share market.
There was little in the way of economic data overnight, but a report did show a large build-up in US oil inventories, which could be bearish for oil prices. Technology stocks were the strongest performers overnight, while Utilities, Health Care stocks, and Basic Materials stocks all performed well. Oil & Gas, Telecoms, and Financials stocks all closed lower on average.
Tim Michaelides is the Head Trader at Emerald Financial Group.
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