Shares drift lower, RBA to come

The XJO is expected to edge lower on open this morning following a small pullback in the U.S overnight. Their futures are flat this morning.

Yesterday we pulled back and held on to most of the day’s losses into the close. This morning, we should open near 7,600, and retest the lows of yesterday.

We have a revision of the December retail sales numbers today at 11:30 (AEDT) but more importantly, the RBA rate decision at 14:30 (AEDT). The RBA will almost certainly hold rates, but the market will be looking for a dovish tone from Bulluck’s future guidance. The stance will likely still be “wait and see”. The announcement this afternoon could easily be a trigger for our market, or it could just as easily blow over with little to no change. Each RBA announcement heading into the inevitable cuts will be increasingly important, with the market preemptively pricing in and reacting to the announcements.

We are tracking near the top of the range. The banks continue to help hold our market up, whilst the miners have started pricing in the retracement of iron ore over the past few sessions. Ultimately, without shocks from the RBA, we will likely continue following the U.S.

US Markets

US shares closed lower overnight, with each of the three major indices closing in the red. The selling came after Jerome Powell spoke ahead of Monday’s US open and stated that there would likely be fewer rate cuts in 2024 than markets expect. This, coupled with some mixed earnings results overnight sent US markets lower. The major negative report overnight came from McDonalds, who fell just under 4 percent after missing revenue forecasts. US shares have rallied on the back of hopes of plenty of rate cuts in 2024, as well as strong reporting from a handful of large tech stocks, unless data continues to weaken for US markets, there is a fair chance that rate cut hopes are pushed out, which could trigger some profit taking in the current bullish move.

Nine of the eleven sector groups of the SP500 closed lower overnight, with Technology and Healthcare the only gainers. Materials, Utilities, Real Estate, and Discretionary were the weakest performing sectors.

The SP500 stalled overnight but also retracted much of its losses by the close. The index is still on an uptrend after breaking above several key resistance levels. Friday’s peak of roughly 4,960 is now the mark to beat for further gains to look likely. Should the index fall from here, the recent trough at 4,850 will need to break before further selling looks likely.

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