ASX inches closer to record high

By Sumeyya Ilanbey
Updated

Tech stocks buoyed the Australian sharemarket on Tuesday, which edged closer to a record high, following the positive lead of Wall Street.

The S&P/ASX 200 lifted 42.5points, or 0.56 per cent, to 7620.9 about 10.55am. It is eight points away from beating its record closing high of 7628.9 on August 13, 2021.

The ASX is closing in on a record high.
The ASX is closing in on a record high.Credit: Daniel Munoz

The tech sector was the best performing after stocks rallied 2.31 per cent. Mega-caps Wisetech (up 0.9 per cent), Xero (up 2.01 per cent), NEXTDC (up 0.9 per cent), Altium (up 1.4 per cent) and TechnologyOne (up 0.76 per cent) were all trading higher.

The local tech rally comes as some of the largest tech stocks in the US, including Amazon and Meta , prepare to release their latest quarterly reports this week.

Energy was the only sector trading in the red after its shares dipped 0.4 per cent, led by declines in large-caps Woodside (down 0.44 per cent) and Santos (down 0.64 per cent), after Brent crude fell 1.2 per cent to $US82.53 a barrel.

Northern Star Resources (up 2.59 per cent) recorded the greatest advances among large-cap stocks, followed by Atlas Arteria Group (up 1.87 per cent), Xero and REA Group (up 1.63 per cent).

While Meridian Energy (down 1.32 per cent) recorded the greatest declines among large-cap stocks, followed by Infratil (down 1.19 per cent), Auckland International Airport (down 1.13 per cent) and Brambles (down 1.02 per cent).

In other news, December retail sales figures will be released at 11.30am AEDT. Iron ore lifted 1.3 per cent to $US135.6 a tonne, and the Australian dollar was trading 0.5 per cent higher to US66.09 cents.

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On Wall Street, the S&P 500 jumped by 0.8 per cent, the Dow Jones added 0.6 per cent and the Nasdaq jumped by 1.1 per cent.

Big Tech stocks are the main reason the S&P 500 has soared more than 35 per cent to a record since two autumns ago. A small handful of seven has been responsible for the majority of the index’s returns over that time, propelled by a furor around artificial-intelligence technology and expectations for continued dominance.

Five members of that group, which have been nicknamed “the Magnificent Seven,” will report their latest quarterly profits this upcoming week: Apple, Alphabet, Amazon, Meta Platforms and Microsoft.

Because they’re so much more massive in size than almost every other stock, their movements pack much more weight on the S&P 500 and other indexes. They’ll need to meet analysts’ expectations for growth to justify their huge recent moves.

And that’s not all that’s coming this week.

On Wednesday, the Federal Reserve will make its latest decision on what to do with interest rates. Traders expect it to make no move, but the hope is that it may cut interest rates at its next meeting in March. That would mark the first downward move since the Fed began dramatically raising interest rates two years ago to get inflation under control.

A wave of encouraging data has Wall Street believing its dream scenario can come true: The Fed will successfully conquer high inflation and soon deliver the cuts to rates that investors crave, while the economy skirts through without falling into a recession that seemed inevitable last year.

It’s a big week on Wall Street.
It’s a big week on Wall Street. Credit: Bloomberg

On Friday, an economic report could bolster or weaken beliefs in that dream. The government will release the latest monthly update on the job market, and economists expect it to show continued growth in hiring, but at a cooler pace. That’s exactly what the Fed would want to see because too much growth could mean upward pressure on inflation.

“This week could be key,” said Chris Larkin, managing director, trading and investing at E-Trade from Morgan Stanley. “If the market is going to sustain its latest breakout, it may need to avoid earnings disappointments from this week’s Big Tech lineup, get encouraging news from the Fed on interest rates, and see jobs numbers that are solid, but not too hot.”

This profit reporting season is expected to be lacklustre, with analysts forecasting a fourth drop in earnings per share for S&P 500 companies in the last five quarters. But it would be even worse without the Magnificent Seven.

Facebook’s parent company, Meta Platforms, is expected to be the single biggest contributor to growth for the overall S&P 500, according to FactSet. Nvidia is close behind, followed by Microsoft, Apple, Alphabet and Amazon.

Companies so far this reporting season have not been getting as big a boost to their stock price as usual after topping analysts’ forecasts.

Monday kicked off with a Hong Kong court’s decision to order the liquidation of China Evergrande, the world’s most indebted property developer. Chinese markets were mixed following the ruling, with stocks rising in Hong Kong and falling in Shanghai.

Chinese authorities also made moves to make it more difficult for some investors to “short” Chinese stocks, or bet that their prices will fall. China’s stock markets have been among the world’s worst so far this year amid worries about not only its trouble property industry but also its weak economic recovery.

With AP

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Source: Thanks smh.com