By Stan Choe
The Australian sharemarket has opened higher as most sectors made solid gains, following a widespread rally on Wall Street overnight.
The ASX 200 was 1.1 per cent higher shortly after midday, as sectors including banks, miners, tech companies, and health care all traded higher. Real estate was the best performing sector, rising more than 2 per cent, while financials were up 0.8 per cent.
Commonwealth Bank shares rose 0.7 per cent, after a drop of 2.9 per cent on Thursday, while mining giants were also trading higher, with BHP shares up 1.2 per cent and Rio Tinto shares up 0.8 per cent.
The best performing stock on the ASX 200 was Pinnacle Investment Management, up 9.2 per cent, while Genesis Minerals was up 5 per cent.
Overnight, Wall Street burst out of its hangover, as US stocks bounced back in a widespread rally following their worst day since September.
The S&P 500 gained 1.2 per cent to recover three quarters of its sharp loss from the day before. The Dow Jones rose 1 per cent, while the Nasdaq composite leaped 1.3 per cent.
Big Tech stocks led the way in a mirror reversal of the day before, when Alphabet and Microsoft sank despite reporting stronger profits than analysts expected. Microsoft climbed 1.6 per cent a day after falling 2.7 per cent. Google’s parent company, Alphabet, added 0.8 per cent after tumbling 7.5 per cent.
Big Tech stocks are Wall Street’s most influential because they’re the biggest, and they’re facing high expectations after soaring much more than the rest of the market last year.
Meta Platforms, the owner of Facebook and Instagram, was a star in after-hours trading, surging more than 14 per cent after topping analysts’ expectations for profit and revenue and saying it would start paying its shareholders a dividend.
Amazon also shone after-hours, jumping more than 9 per cent, while Apple was 2.5 per cent lower.
Stocks broadly got a boost following a suite of reports suggesting the economy remains solid, while pressures on inflation may be easing. Such data could give the Federal Reserve more of the evidence it wants of a slowdown in inflation before it will deliver the cuts to interest rates that investors crave. A day earlier, stocks fell sharply after the Fed’s chair warned it doesn’t have enough such evidence
Merck climbed 4.6 per cent after the pharmaceutical giant’s report in the morning delivered stronger profit and revenue for the latest quarter than analysts expected. Etsy jumped 9.1 per cent after it added a partner from Elliott Investment Management to its board, who said he sees opportunity to significantly increase the company’s value.
On the losing end of Wall Street, New York Community Bancorp fell another 11.1 per cent after plunging 37.7 per cent a day before, when it reported a much larger quarterly loss than expected and cut its dividend to build its financial strength. The surprising report caused stocks of other regional banks to tumble, reviving uncomfortable memories of the banking crisis last year that led to the collapses of Silicon Valley Bank, Signature Bank and others.
New York Community Bancorp had acquired much of Signature, and analysts say much of its struggles are related to that. But its losses tied to commercial real estate are a reminder of challenges that the entire industry faces. The KBW Nasdaq Regional Bank index fell 2.3 per cent, following Wednesday’s tumble of 6 per cent.
In the bond market, the yield on the 10-year Treasury fell to 3.86 per cent from 3.92 per cent late Wednesday.
It sank after one report showed that slightly more workers applied for unemployment benefits last week than expected. While no one wants workers to lose their jobs, the number is still low relative to history. And Wall Street wants to see a cooldown in the job market, which could keep a lid on inflationary pressures.
A separate report offered similar encouragement for traders. It said US workers were much more productive in the last three months of 2023 than expected, producing more stuff per hour worked. Strong growth in productivity could allow workers to get bigger raises in pay without adding more pressure on inflation.
Traders are increasingly betting the Federal Reserve will begin cutting interest rates in May, after pushing back expectations from March. Whenever it does begin, it would mark a sharp turnaround after the Fed hiked its main interest rate to the highest level since 2001 in hopes of getting inflation under control.
High interest rates intentionally slow the economy, and they undercut prices for investments.
In stock markets abroad, London’s FTSE 100 slipped 0.1 per cent after the Bank of England said it’s keeping its main interest rate at a near 16-year high as inflation in Britain unexpectedly rose to 4 per cent in December.
Indexes were mixed across Europe and Asia.
Source: Thanks smh.com