ASX starts the week more than 1 per cent higher as tech stocks jump
By Emma Koehn, Alex Veiga, Stan Choe and Damien Troise
Australian shares kicked off the week with a more than 1 per cent jump in early trading as investors prepare for major economic news in the coming days, including another Reserve Bank decision on interest rates.
The S&P/ASX200 index was trading 1.1 per cent higher shortly after 10:30am AEDT, gaining 72.6 points to 6,858.30, having touched highs of 6869.2 in the first 20 minutes of the session.
Technology stocks took a strong lead, with accounting software platform Xero up 3.9 per cent to $77.50 in the first ten minutes of the session, while WiseTech global was 3.3 per cent higher to $58.07, and jobs platform Seek 3.6 per cent ahead at $21.98.
The gains came after Wall Street closed out last week on a high as solid results from Apple and Intel helped calm investors nerves after a rocky earnings season for big tech.
Materials was the only sector on the ASX in the red at the start of the day as mining heavyweight BHP declined 1.3 per cent to $36.99. Gold miner Northern Star Resources lost 1.1 per cent to $8.84.
The Australian dollar was trading at 63.9 US cents, a drop of just under 0.2 per cent.
Investors will see a steady stream of economic data out this week, including retail trading figures on Monday, as well as a decision from the RBA on the cash rate on Tuesday afternoon, followed by the US Federal Reserve’s rate decision on Wednesday.
In Friday’s trading on Wall Street, the S&P 500 rose 2.5 per cent and posted its first back-to-back weekly gains since August. The Dow Jones Industrial Average rose 2.6 per cent and the tech-heavy Nasdaq composite climbed 2.9 per cent.
Apple’s latest quarterly results showed the iPhone maker made even fatter profits during the Northern Hemisphere summer than expected. Its shares rose 7.6 per cent and led a rally in technology stocks that had largely been beat up a day earlier.
Intel jumped 10.7 per cent after delivering much bigger profit than analysts forecasted even though it said it saw “worsening economic conditions.”
Investors were also encouraged by a US report on consumer spending that came a day after new data showing the world’s largest economy grew modestly in the third quarter and inflation eased.
“You have an economy that almost refuses to keel over, an economy that at its core is resilient, but at the same time inflation is easing and that is what the Fed wants and that’s obviously what the market wants,” said Quincy Krosby, chief equity strategist for LPL Financial.
That’s helped fuel hopes on Wall Street for a “pivot” by the Federal Reserve, where the central bank dials down the big interest-rate hikes that have shaken the market. Such a move could boost the market, though many analysts say such hopes may be overdone.
The US central bank has been very clear about its plan to err on the side of going too far in order to tame inflation, which means the big gains on hopes of a pullback seem premature, said Liz Young, chief investment strategist at SoFi.
“This rally has now gotten a bit irrational and fragile at this level,” Young said.
Many big US companies have been reporting stronger earnings than expected, though the bag remained decidedly mixed.
Solid earnings on Friday helped offset a 6.8 per cent drop for Amazon, which offered a weaker-than-expected sales forecast. It was the latest Big Tech company to take a beating last week after reporting some discouraging trends. It’s a sharp turnaround after the group dominated Wall Street for years with seemingly unstoppable growth.
Earlier last week, Facebook’s parent company Meta Platforms lost nearly a quarter of its value after reporting a second straight quarter of revenue decline amid falling advertising sales and stiff competition from TikTok. Microsoft and Google’s parent company also reported slowdowns.
Such woes have created a sharp split on Wall Street, between lagging Big Tech stocks and the rest of the market. Rising interest rates have also hit Big Tech stock prices harder than the rest of the market, and the pressure increased on Friday as bond yields climbed.
“The markets still seem to not want to believe that we might end up in a place where an earnings recession is possible,” Young said.
The yield on the two-year US Treasury, which tends to track expectations for Fed action, rose to 4.42 per cent on Friday from 4.28 per cent late Thursday.
The 10-year yield, which helps set rates for mortgages and many other loans, climbed to 4.01 per cent from 3.93 per cent.
AP
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