It was a mixed trading session in the US, with larger cap industrial stocks doing well, while technology stocks were weak.
The Dow Jones Industrials closed 0.71% higher at 35,160.79, led by International Business Machines (IBM) which gained 7.10%. The broader S&P500 closed largely flat, down just 0.06% at 4,459.45, while the Nasdaq100 shed -1.49%, ending the day at 13,998.53. The Nasdaq was weighed down by Netflix (NFLX), which sunk over 35% following their Q1 earnings results. The chart below shows the performance of the company’s share price over the past 12 months, with prices down close to 70% from the peak back in November.
Looking at US earnings results and after the disappointing release from Netflix (NLFX), there was more positive news from Tesla (TSLA), which reported better than expected results, with profit coming in at US$3.22 per share, above average expectations of $2.27 per share. Revenues totaled $18.8 billion. The company’s shares closed the session down US$50.95 (-%) at US$977.20 a share, which equates to a market capitalisation of a little over US$1 trillion, however the results were released after the close, and prices have rallied over 5% in aftermarket trading. Interestingly, the company stated that supply chain issues remain their biggest impediment to growth at present.
US 10-year treasury yields retreated from recent highs, closing 10 basis points lower at 2.8320. Yields have been heading up in a straight line over the past five weeks, from the 1.70% level to a high of 2.97%, so a correction of pause is not unsurprising. The Fed released their latest ‘beige book’ on Wednesday, citing that “inflationary pressures remained strong since the last report, with firms continuing to pass swiftly rising input costs through to customers”. The base case is that the Fed will lift official cash rates by 50 basis points at their next meeting in May, while some Fed officials are even saying that 75 basis points may be considered.
The Japanese Yen (JPY) gained against the USD, closing at 127.94, after almost sinking as low as 130 yen to the dollar earlier in the week. The Bank of Japan (BOJ) reiterated their intention of maintaining an upper yield on the 10-year bond of 0.25%, achieved via repeated fixed-rate buyer operations. Expect the Yen to eventually weaken further if the BOJ continues down this path.
*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.
There is little to report for commodity markets, with relatively quite trading on Wednesday. WTI Crude Oil prices rose 0.2% to US$102.75 a barrel, while spot gold was little changed, at US$1957.66 an oz. Natural gas prices pulled back from recent highs, down 3.33%, while both copper (-0.10%) and aluminum (-0.75%) were weaker.
The Australian dollar rallied strongly in overnight trading, gaining a little over 1% to close at 74.50 US cents, while the June ASX SPI200 futures lifted 30 points higher (+0.40%) in overnight trading to 7570, suggesting a stronger open for Australian shares on Thursday.
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.
