ASX set to jump despite mixed Wall Street session
The S&P 500 and the Nasdaq fell on Tuesday (US time) as excitement over signs of a first successful late-stage COVID-19 vaccine trial faded, while investors continued to pull money out of some Big Tech companies that have benefited most from the pandemic.
Amazon.com, Facebook and Microsoft, which have boomed during this year’s work-from-home shift and powered Wall Street to new highs, extended Monday’s losses and pulled the tech-heavy Nasdaq down about 1.3 per cent.
The tech, communication services and consumer discretionary indexes dropped sharply as investors moved to sectors expected to benefit from a full reopening of the economy, such as energy, industrials and materials.
In early afternoon trade, the S&P 500 is 0.2 per cent lower, the Dow Jones has added 0.6 per cent and the Nasdaq has lost 1 per cent. Despite the mixed lead, a bright start is ahead for the ASX, with futures at 5.04am AEDT pointing to a gain of 76 points, or 1.2 per cent, at the open.
“We are seeing a rotation away from growth areas, in particular tech and communication services, mainly because investors want to gravitate more toward the groups that have been underperformers until now,” said Sam Stovall, chief investment strategist at CFRA Research.
Value-linked stocks, which tend to outperform coming out of a recession, added 1 per cent, while growth stocks fell 0.8 per cent.
The main US indexes hit new peaks on Monday as encouraging data from a late-stage COVID-19 vaccine trial spurred bets of a swift economic recovery next year. Democrat Joe Biden’s projected victory in the US presidential election also added to the market cheer.
“Although great news, it’s just a plan and we need to see some practical things around it like how (the vaccine) is going to roll out, who’s going to get it,” said JJ Kinahan, chief market strategist, TD Ameritrade in Chicago.
Biden hailed the progress on the vaccine, but urged caution saying it would be “many more months” before widespread vaccination is available. Meanwhile, daily new US cases topped 100,000 for the sixth straight day.
The apparent breakthrough in a coronavirus vaccine weakens the case for another large US fiscal stimulus bill, but relief is still needed for struggling businesses, investors said.
Senate Majority Leader Mitch McConnell last week argued for a smaller coronavirus stimulus package after data pointed to a drop in US unemployment rate in October.
Amgen gained 3.6 per cent after its asthma drug, being developed in collaboration with AstraZeneca, met the main goal of a late-stage study.
Ulta Beauty topped gainers on the S&P 500, climbing 7.7 per cent after the cosmetics store chain signed a long-term deal with Target to open its own stores at the big box retailer’s locations. Target gained about 2 per cent.
Apple edged higher ahead of an event where it is expected to unveil new Mac computers using its own in-house processor chips.
Advancing issues outnumbered decliners for a 1.8-to-1 ratio on the NYSE and a 1.5-to-1 ratio on the Nasdaq.
The S&P index recorded 10 new 52-week highs and no new low, while the Nasdaq recorded 65 new highs and 20 new lows.
Reuters
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