US markets closed lower on Friday, Amazon was a large contributor closing 7.56% lower after missing on revenue and releasing weak forward guidance. Inflation data and GDP came in weaker than expected last weak indicating that the US economy has rebounded but perhaps not as hot as many thinking.
The positive here is that perhaps the FED has taken the right stance on monetary policy; staying extremely accommodative despite signs of inflation. Markets should remain overall positive despite the uncertainty of growth in the second half of the year. But we are likely to see more and more volatility coming into the market with all the differing views emerging between analysts.
Progress was also made on the infrastructure stimulus bill, with the US senate voting to advance parts of President Biden’s package to congress. This deal is for around $US1trn in funding, which is much smaller than some of the earlier proposals, with President Biden stating ‘neither side got everything they wanted.’
Domestically, it looks like Sydney will see a longer lockdown than originally anticipated, with some suggesting that it could extend all the way in 2022. It remains to be seen whether this will be the case, or whether increasing rates of vaccination will allow an earlier than expected reopening. At present, there doesn’t appear to have been too much impact on the market from the recent lockdowns.
Our market is heading into a reporting season, which will kick off on the 9th of August, expectations are high that our mining stocks will deliver some of the best reports ever. Already we have seen RIO TINTO declare record earnings and dividends, but there are plenty of other miners set to do the same. Reporting from other sectors of our market is expected to be a bit more mixed.
The XJO is expected to open higher this morning near 7,430. This is despite a pullback in the U.S on Friday. Our strength on open this morning may be coming from green futures across the board, including the U.S and Asia. It may also be helped by continued stimulus and promise from the federal government and our RBA.
The expected open will put us back towards our all-time high near 7,450. This has also been the top of a tight consolidation range we have been trading in the past few days, with the previous key resistance at 7,375 as the support. It is unlikely we push through today as we are seeing a similar pattern from the U.S and we will likely wait for them to break first.
Reporting will continue in the U.S this week. Locally we have a couple kicking off our reporting season which will begin in earnest next week.
The RBA will announce its interest rate decision tomorrow at 2:30. Of course, rates are expected to remain unchanged, but the market will instead focus on the sentiment of the RBA statement. We have retail sales numbers on Wednesday and U.S unemployment numbers on Friday.
US shares closed lower on Friday, with the major US indices all finishing in the red. US shares were dampened by a negative earnings report from Amazon, which fell 7.4 percent after announcing a weaker than expected forward outlook. US economic data was also mostly weaker than expected on Friday, with wages weaker than expected, though other pricing data also came in weak, suggesting that inflation worries are overdone in the short-term. Consumer Discretionary stocks were the weakest performers on Friday, while Energy stocks also fell off strongly. Materials and Real Estate stocks were the strongest sectors on Friday, though the gains were fairly small for these sectors.