- Local shares close +0.2% higher today ahead of the Fed Reserve meeting
- Analysts believe the Fed will pause this month
- Tech stocks surged today as the Nasdaq hit its highest level since April 2022
Local traders bought tech stocks ahead of the Fed Reserve rates decision due for release on Wednesday (US time).
The market has priced in a rate pause this month, but believes the Fed will wait until the release of today’s CPI report before making any firm decisions. Bond traders have also priced in an 80% chance the Fed will raise rates again by 25bps in July.
Erik Weisman, Chief Economist of MFS Investment Management believes the Fed is right where it should be right now.
“Congratulations are in order, as the central bank has managed to increase interest rates to its desired target and largely price out cuts for the rest of the year without toppling the US economy, at least not yet,” he said.
Weisman added the market would like to hear a more definitive Fed chair speak with conviction, offering remarks that are less about what could happen, and instead be more in line with where we are today.
“If the central bank allows the market to think rate cuts are just around the corner, it will send the wrong signal to the equity market before we ever get an anticipated economic slowdown or recession in the US.”
Beware of the current rally in stocks – expert
On the ASX, Tech stocks climbed 3.5% following a rally overnight that saw the Nasdaq index touch its highest level since April 2022. The energy sector meanwhile was down -1.5%.
Some experts say that we’ve entered a new bull market, while others called for calm, saying that several elements such as rising bond yields and a steeper US Treasury yield curve inversion should signal concerns about the sustainability of this bull run.
The inverted US Treasury yield curve, which is measured by the 10-year minus the 2-year yields, has continued to plummet lower to -0.84%. the steepest inversion level since July 1981. An inverted yield curve is usually a leading indicator of a recession.
Kelvin Wong, a senior analyst at Oanda, believes the the recent optimistic earnings upgrade from analysts has been contrasted with a potentially higher cost of funding in the second half of the year.
“With further economic weakness ahead, there could be a risk of earnings downward revisions that may put downside pressure on the S&P 500 due to overoptimistic expectations,” he warned.
BIG CAP WINNERS
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| Code | Name | Price | % Change | Volume | Market Cap |
|---|---|---|---|---|---|
| PDN | Paladin Energy Ltd | 0.76 | 9.71 | 25,743,608 | $2,071,201,781 |
| XRO | Xero Ltd | 114.14 | 4.64 | 386,602 | $16,490,699,892 |
| 360 | Life360 Inc. | 6.82 | 4.60 | 416,716 | $1,296,746,454 |
| DHG | Domain Holdings Aus | 3.36 | 4.19 | 270,072 | $2,033,936,033 |
| AUB | AUB Group Ltd | 26.37 | 4.11 | 355,212 | $2,730,080,521 |
| WTC | Wisetech Global Ltd | 78.84 | 3.90 | 285,202 | $25,181,279,946 |
| BOE | Boss Energy Ltd | 3.25 | 3.83 | 1,859,071 | $1,103,571,838 |
| NXT | Nextdc Limited | 12.61 | 3.79 | 2,223,132 | $6,252,956,627 |
| NAN | Nanosonics Limited | 4.79 | 3.68 | 526,639 | $1,396,698,811 |
| MP1 | Megaport Limited | 7.33 | 3.68 | 838,156 | $1,121,253,684 |
| TLX | Telix Pharmaceutical | 10.66 | 3.65 | 826,258 | $3,274,522,211 |
| MMS | McMillan Shakespeare | 16.14 | 3.33 | 854,353 | $1,087,824,035 |
| ARB | ARB Corporation. | 28.35 | 3.15 | 76,599 | $2,256,088,737 |
| QAN | Qantas Airways | 6.37 | 2.91 | 4,354,351 | $11,246,339,711 |
| LOV | Lovisa Holdings Ltd | 18.73 | 2.88 | 333,939 | $1,962,539,907 |
Qantas (ASX:QAN) rose 3% as the airlines conducted a market buyback.
Resolute Mining (ASX:RSG) rose 4% after disclosing that fund manager Vanguard Group has bought a 5.015% stake in the company.
Healthco Healthcare and Welnness REIT (ASX:HCW) lifted 4% after announcing that its June preliminary unaudited net valuation gain was $71m, a +4.5% increase on the proforma Dec-22 portfolio value. The REIT has also affirmed its FFO/unit payout guidance of 6.9c.
BIG CAP LOSERS
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| Code | Name | Price | % Change | Volume | Market Cap |
|---|---|---|---|---|---|
| EMR | Emerald Res NL | 1.88 | -8.17 | 802,004 | $1,220,697,034 |
| DMP | Domino Pizza Enterpr | 42.83 | -7.41 | 861,065 | $4,121,321,997 |
| NIC | Nickel Industries | 0.91 | -7.14 | 7,384,458 | $2,963,772,128 |
| BGL | Bellevue Gold Ltd | 1.27 | -6.30 | 5,198,030 | $1,525,742,364 |
| DEG | De Grey Mining | 1.29 | -5.15 | 2,831,895 | $2,123,187,004 |
| KAR | Karoon Energy Ltd | 1.90 | -5.00 | 2,382,676 | $1,126,220,198 |
| CIA | Champion Iron Ltd | 6.03 | -4.44 | 1,140,208 | $3,263,488,625 |
| YAL | Yancoal Aust Ltd | 4.50 | -4.05 | 1,453,307 | $6,192,860,960 |
| PRU | Perseus Mining Ltd | 1.79 | -3.90 | 2,383,211 | $2,544,455,541 |
| MIN | Mineral Resources. | 67.50 | -3.27 | 586,240 | $13,550,751,813 |
| RRL | Regis Resources | 1.98 | -3.19 | 2,324,483 | $1,540,252,887 |
| SMR | Stanmore Resources | 2.61 | -3.16 | 1,880,274 | $2,424,743,495 |
| BAP | Bapcor Limited | 5.94 | -3.10 | 877,107 | $2,080,598,625 |
| WBT | Weebit Nano Ltd | 6.47 | -3.00 | 453,509 | $1,244,223,401 |
| A2M | The A2 Milk Company | 5.07 | -2.78 | 1,747,490 | $3,761,496,075 |
| DDR | Dicker Data Limited | 8.33 | -2.69 | 76,603 | $1,542,205,543 |
| PSI | Psc Insurance Ltd | 4.75 | -2.46 | 31,215 | $1,732,180,695 |
Domino’s Pizza (ASX:DMP) tumbled 7% after saying that same store sales were up only 0.2% in the H2, and 2% in Q4.
The company said it will exit the Danish market by end of FY23, and reduce its overall corporate store network by around 15% to 20%. Other cost cutting measures include closing its construction and supply subsidiary in Australia
Mineral Resources (ASX:MIN) fell 3% after reporting a fatality incident at its Onslow Iron Project.
“MinRes is saddened to advise that at approximately 4pm on 12 June 2023, an incident occurred at the Onslow Iron project which tragically resulted in the fatality of an employee of a contractor at the Ken’s Bore site,” said the statement. The Department of Mines, Industry Regulation and Safety (DMIRS) and WA Police have been notified and are making their way to the site.
Champion Iron (ASX:CIA) lost 4% despite announcing the resumption of railway services from its Bloom Lake mine to the port of Sept-Îles, following recent forest fires north of Sept-Îles, Québec.