ASX pares back early gains; AGL jumps

By Sumeyya Ilanbey
Updated

The Australian sharemarket pared back some of its strong gains in early trade amid a slump in energy and communications services stocks.

The S&P/ASX 200 rose 25.8 points, or 0.34 per cent, to 7641.6 about 11.55am. A surge in AGL’s shares (up 11.28 per cent) helped make the utilities sector (up 1.93 per cent) the best performer on Thursday. The local bourse had hit an intraday high of 7664 at about 10.30am.

Wall Street was higher across the board on the back of a raft of strong earnings.
Wall Street was higher across the board on the back of a raft of strong earnings. Credit: Bloomberg

AGL reported a half-year underlying net profit of $399 million and upgraded its full-year earnings guidance towards the top end of its forecasts. It marks a sharp turnaround from its $1.26 billion loss last financial year.

Tech stocks (up 1.59 per cent) and real estate investment trusts (up 1.23 per cent) were also firmly in the green as all mega-cap companies in both sectors rallied.

Cochlear shares jumped 4.55 per cent after the medical devices giant upgraded its earnings guidance following better-than-expected growth in its implant revenues for the six months to December 2023. Underlying net profit for the 2024 financial year is now expected to be $385-$400 million, a 26-31 per cent increase on the year before.

Other strong mega-cap stocks were Meridian Energy (up 4.36 per cent), WiseTech (up 3.89 per cent) and IDP Education (up 3.02 per cent).

The worst performing sector is energy (down 0.53 per cent), as shares in Woodside (down 0.65 per cent) and Santos (down 1.01 per cent) slipped on the back of Wednesday’s news that the two companies had shelved merger talks.

Communication services (down 0.35 per cent) was also in the red, dragged down by REA Group after its shares fell 3.6 per cent after its results were released.

EBOS Group (down 2.21 per cent) and Resmed (down 2.12 per cent) rounded out the top three mega-cap decliners.

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The S&P 500 closed 0.8 per cent higher at 4995, having moved as high as a fraction of a point away from its latest milestone. The Dow Jones added 0.4 per cent and the Nasdaq composite was up 1 per cent.

A relatively calm day in the bond market helped keep things smooth for the stock market, despite some concerns about investors’ ability to digest a $US42 trillion ($64.4 trillion) auction of 10-year Treasurys by the US government.

Underneath the surface, though, were still some very sharp moves. New York Community Bancorp went from an initial gain to a steep loss of 14 per cent and back to a gain of 6.7 per cent. It’s the latest dizzying swing for the bank, which is still down nearly 60 per cent since rattling investors across the industry last week with a surprise loss.

It’s struggling with challenges related to its acquisition of Signature Bank, which was one of the banks that collapsed in last year’s mini-crisis for the industry. But New York Community Bancorp is also feeling pain from a problem dogging banks worldwide: weakness in commercial real estate.

Moody’s downgraded the bank’s credit rating late Wednesday to “junk” status from the lowest tier of investment-grade. Analysts also said they were concerned about the departures of key risk and audit executives for the bank.

New York Community Bancorp’s stock then went on a wild ride in off-hours trading, sinking and then rising after the bank said it had increased its deposits and gave details about how much cash it has on hand.

Stocks of other regional banks have been caught up in the drama, to a lesser degree, which has brought back uncomfortable memories of last year’s banking crisis. The KBW Nasdaq Regional Banking index swung from a loss during the day to a gain of 0.1 per cent.

UBS analyst Brody Preston said New York Community Bancorp’s latest quarterly loss and dividend cut are due to problems related specifically to it and “are not necessarily a proverbial canary in the coal mine for other banks in the space.” But attention is likely to remain on potential losses for banks tied to commercial real estate, particularly after Treasury Secretary Janet Yellen recently highlighted them as a concern.

Elsewhere on Wall Street, Chipotle Mexican Grill rose 7.2 per cent after reporting stronger profit and revenue for the latest quarter than analysts expected. Its restaurants sold more meals to customers than they did a year earlier.

CVS Health gained 3.1 per cent after it likewise topped expectations for both profit and revenue in the final three months of 2023. The drugstore chain and pharmacy benefits manager, though, also trimmed its forecast for full-year results.

Ford Motor climbed 6.1 per cent following its better-than-expected results, while Enphase Energy soared 16.9 per cent despite falling just shy of forecasts. Investors are hopeful that weakness in demand for the supplier of solar and battery systems is nearing a bottom.

They helped offset a 9.7 per cent drop for VF Corp., the company behind Vans, The North Face and other brands. It reported weaker results than analysts expected.

Snap tumbled 35.2 per cent after its fourth-quarter revenue fell short of analysts’ expectations. The company behind Snapchat also gave a tepid forecast for 2024 after saying on Monday that it was laying off 10 per cent of its workforce.

Wall Street was also trying to game out potential impacts from an announcement that ESPN, Fox and Warner Bros. Discovery are planning to launch a streaming platform for sports. Many details are still to be worked out, as is how it will impact prices for broadcasting rights with sports leagues. But fuboTV, a streaming service that offers sports, fell 22.7 per cent.

In the bond market, Treasury yields were holding relatively steady. The yield on the 10-year Treasury edged up to 4.10 per cent from 4.09 per cent late Tuesday. It’s been on a jagged run recently as signals of a remarkably resilient economy force traders to push back forecasts for when the Federal Reserve may cut interest rates.

With AP

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Source: Thanks smh.com