US equity markets reversed early gains, to finish the trading session sharply lower.
By the close of the trading session, the S&P500 had shed 65.78 points (-1.48%) to close at 4,393.66, while the Nasdaq100 was down by a little under 2%, to close at 13,720.45. From the S&P500, the selling was broad based, with all eleven sectors closing in the red, led by energy which declined 3.10%. Telsa (TSLA) was one of the majors to buck the trend, closing the day 3.23% higher.
In US earnings, shares in Snap fell over 4%, despite reporting user growth on their Snapchat platform had beating analysts’ expectation. Looking ahead, the company predicted revenue growth of 20 to 25% for the second quarter. Meanwhile, shares in American Airlines (AAL) surged over 10% after the company reported a smaller than expected loss for Q1.
The sell-off in equities appears to have been at least partly driven by a sell off in bonds, with bond yields rising sharply across the curve. The yield on the US two-year rate gained 15 basis points to 2.73%, as traders are now pricing in 50 basis point rate hikes for the next three consecutive Fed meetings. The yield on the US 10 year gaining a little under 8 basis points to end the day at 2.90%. The continued surged in bond yields is weighing heavily on equities, particularly growth style companies who have previously relied on easy access to cheap credit to rapidly expand their operations.
*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.
Locally, the ASX200 gained 23 points (+0.31%) on Thursday to close at 7,592.79. There were plenty of stocks closing in the green, with the index weighted down by weakness in materials stocks, in particular the large, diversified miners, BHP and RIO, which fell 3.06% and 1.64% respectively. In overnight trading, the ASX SPI200 futures were weaker, declining 65 points, meaning traders and investors should be bracing for a weaker start to trade on Friday. Traders may be looking to cut some risk and exposure as we head into another long weekend in Australia, with the ASX reopening next Tuesday after Anzac Day.
To commodity markets, and energy prices were higher, with WTI Crude Oil gaining 1.57% to close at US$103.79, gasoline prices jumped 1.64%, while natural gas were also higher. Base metal prices were slightly weaker, with both nickel (-0.78%) and copper (-0.79%) ending lower, while spot gold prices closed largely unchanged at US$1,951.11 an oz.
The US Dollar was largely stronger across the board, lifting in response to higher US bond yields, gaining 0.20% against the Euro, and 0.30% against the British Pound. The Australian dollar weakened against the USD, declining over 1% to end the day at 0.7370.
This article was written by Oliver Gordon, Portfolio Manager, Rivkin Securities Pty Ltd. Enquiries can be made via info@rivkin.com.au or by phoning +612 8302 3632.
