Australian shares are poised to open higher after US stocks gained Friday, when a surge by Apple countered losses in consumer discretionary stocks dragged lower by an ominous sales warning from e-commerce behemoth Amazon.
ASX futures were 92 points or 1.35% higher at 6868 by 7:00am AEDT on Monday, indicating a rise at the open.
In the US, the tech-stock heavy Nasdaq Composite Index was up 309.78 points, or 2.9%, at 11102.45, recovering after two days of losses. The S&P 500 rose 93.76 points, or 2.5 percent, to 3,901.06, and the Dow Jones Industrial Average gained 828.52 points, or 2.6 percent, to 32,861.80. All three indexes posted weekly gains, with the recent run-up in the Dow industrials leaving it off less than 10% for the year to date.
Octobers are notoriously unlucky for traders because they mark the anniversaries of the 1929 stock-market crash and Black Monday. But the Dow industrials are up more than 14 percent this year … until the sell-off, that was the strongest month since January 1976.
This week’s gains also showed how the group of companies known as FAANG — Facebook parent Meta Platforms, Apple, Amazon, Netflix and Google parent Alphabet — no longer dominate the performance of major stock indexes as they did for years. All of those firms’ shares have slumped this year, and Meta, Amazon and Alphabet all tumbled this week after disappointing earnings reports were released.
In commodities, Brent crude oil was 1.23% weaker at $US95.77 a barrel, gold slipped 1.1% to US$1,644.
Local bond markets saw yields on the Australian 2 Year government bond fall to 3.2% and the 10 Year yield fell to 3.73%. Overseas, the yield on 2 Year US Treasury notes gained to 4.41% and the yield on the 10 Year US Treasury notes was higher at 4.01%.
The Australian dollar had slumped to 64.12 US cents from 64.6 at the previous close. The Wall Street Journal Dollar Index, which measures the U.S. currency against 16 others, ticked up to 103.04.
Asia
Chinese shares were hit by a wave of selling, with negative sentiment continuing to weigh on the market as the country sticks with its zero-Covid policy, putting a dent in the economy. The Shanghai Composite Index fell 2.3% to 2915.93, and is now down 20% year to date. Nearly all sectors dropped, with auto makers and developers especially under pressure. China’s largest electric-vehicle maker, BYD, fell 5.9% and China Fortune Land Development 5.6%. The liquor maker Kweichow Moutai dropped 2.9 percent, taking its losing streak to a 10th day. The Shenzhen Composite Index fell 3.4 percent and the ChiNext Price Index was 3.7 percent lower.
The Hang Seng Index in Hong Kong dropped 0.4% to 15361.35. Persistent Covid-19 uncertainties could still weigh on sentiment as the threat of new Covid restrictions still linger, says IG market strategist Yeap Jun Rong in a note. Some bounce in U.S. dollar and U.S. equity futures indicating the red may result in a tepid session for Asian markets, says the analyst. Among decliners, China Mengniu Dairy drops 8.4%, Longfor Group is off 4.3% and Alibaba Health Information Technology sinks 3.6%. Among the companies with shares expected to trade actively in Monday’s session are Wuxi Biologics (Cayman) Inc., which was up 2.6%.
Japanese shares closed in negative territory, with electronics and shipping shares leading the declines as earnings and global economic concerns linger. Mitsubishi Electric fell 2.9% after its net profit for the second quarter fell 3.9% on year and missed analysts’ expectations. The Nikkei Stock Average dropped 0.9%.
Europe
In late trading, the pan-European Stoxx 600 index added 0.1% to 410.72, supported by advances on U.S. stock indexes. But U.K. stocks lag, with the FTSE 100 down 0.5%, led lower by a 9.2% drop for NatWest following earnings and as other banks followed.
Strong figures from the oil giants Chevron and Exxon have lifted U.S. stocks, but worries about earnings are sure to come back, says Chris Beauchamp, chief market analyst at online trading platform IG. “The 4Q weak forecast carol is not going away and will be making another round across markets in the beginning of the earnings season deceleration,” he said.
The DAX in Germany added 0.2 percent, and the CAC 40 in France was up 0.5 percent.
North America
Stocks in the US were slightly higher on Friday, as big gains for Apple helped offset some heavy declines for consumer discretionary stocks, after a sales warning from the e-commerce giant Amazon.
The tech-heavy Nasdaq Composite Index added 309.78 points, or 2.9%, to 11102.45, snapping a two-day losing streak. The S&P 500 gained 93.76 points, or 2.5 percent, to 3,901.06 and the Dow Jones industrial average rose 828.52 points, or 2.6 percent, to 32,861.80. All three indexes ended the week in the black, and the recent rally in the Dow industrials has it now off by less than 10% from the start of the year.
Octobers are routinely given bad character by traders, given that the stock-market crash of 1929 and Black Monday all occurred during that month. The Dow industrials, however, are still on pace to end October up over 14% this year, which would be its best single-month gain since January 1976.
Amazon shares dropped $7.55, or 6.8 percent, to $103.41 Friday after the company offered downbeat guidance for its current quarter, which covers the critical holiday shopping period. Shares of Meta rose $1.26, or 1.3 percent, to $99.20 after tumbling nearly 25 percent on Thursday on poor quarterly results. Apple was the rare positive for the markets and the Dow industrials, which was led higher by Apple and rose 0.9%, or 216.84 points, to 24,573.04, and on track to end three straight weeks of losses. Apple shares surged 16.2%, or $10.94, to $155.74.
Real estate, financials and staples were meanwhile among the largest contributors to the indexes’ weekly gains. All but one sector of the S&P 500 were higher for the week; the lone loser was communication services stocks. None of the sectors saw losses on Friday except for consumer discretionary.
“You’ve had this colossally huge rally in tech stocks since the financial crisis backed by a mix of ultra cheap energy, ultra low interest rates and a massive acceleration in the move to digital services,” said Peter Garnry, head of equity strategy at Saxo Bank. “And now, on the other side of this pandemic, you’ve got interest rates and inflation suddenly out of the bottle — and so tech stocks have been dramatically repriced. Many investors are starting to second guess their portfolio.”
Investors are concerned that a US economic slowdown is starting to set in as consumers and businesses pull back on spending in the face of stubbornly high inflation and tighter central-bank policy.
“I have a feeling in my bones that tech companies are realizing this ahead of other companies, which will follow suit over the next few months,” said Dan Boardman-Weston, chief executive officer of BRI Wealth Management.
It hasn’t all been bad news for third-quarter earnings. Apple reported record revenue in its latest quarter, and on Friday, two oil giants, Exxon Mobil and Chevron, reported some of their biggest quarterly profits ever. A handful of US banks and industrial bellwether Caterpillar each reported surprisingly resilient results.
Even so, it says something that with about half of the latest quarter’s earnings reports in, the numbers so far have been underwhelming. The combined earnings growth rate for the companies in the S&P 500 in the third quarter, which includes both actual results and estimated results that have yet to come in, is 2.2 percent, according to FactSet. That would be the slowest annual growth rate in earnings for the index since 2020.
Recent readings on the state of the US economy have been a mixed bag. Data on Friday showed the last strong monthly increase in consumer spending in September. The Fed’s preferred measure of inflation, the core personal-consumption expenditures index, inched down last month from August. A separate report revealed that worker pay and benefits increased 5 percent in the third quarter from a year earlier, a slight deceleration from the previous quarter.
