Morning Market Wrap: US markets pull back from record highs

10 Feb 2020
Global profit taking resulted in the US markets closing lower on Friday amid reasonable US data…

Stock Markets

US markets appeared to follow profit taking trends seen across global markets prior to US session open as the Dow Jones lead declines with a 0.94% retracement. The declines seen however, appeared to be a natural and timely consequence of the two-day advance seen earlier in the week which drove all major US indices to new record highs. Profit taking may have also been exacerbated by US data released, which showed that average hourly earnings missed forecasts of 0.3% with a reading of 0.2% and a marginal increase in the unemployment rate from 3.5 to 3.6 per cent.

Another major concern impacting market movements is the continued advance of the coronavirus, which has now claimed more than 800 lives and has infected more than 37,000 people globally across 24 countries.

Despite most of the S&P500 sectors closing lower on Friday, led by Materials and Energy, the index was still able to record its strongest weekly percentage increase in 8 months. This was followed closely by the NASDAQ, which recorded its best weekly gain in more than a year.

The ASX200 ended a volatile week with a marginal decline of 26 points and a closing price of 7,022 as a continued selloff across Energy and Materials led the broader market lower. Declines were exacerbated by selling pressure seen as a result of apparent profit taking.

The decline seen on Friday resulted in a 0.08% weekly gain for the index as a 1.96 and 1.59 advance by Health Care and Information Technology, offset a 4.62 and 0.86 decline by Energy and Materials over the same period. Consequently, Financials experienced an identical advance to the index and closed 0.08% higher as RBA commentary reduced expectations of further interest rate cuts.

On the day, Real Estate and Consumer Staples were the only sectors to close in the black as decliners outpaced advancers 128 to 65 with 62% of the indexes market cap reducing in value. Energy was the worst hit with a 1.67% decline which saw all sector constituents move lower as a result of continued weakness in global oil prices.

The all ords gold index advanced 1.68% as markets appeared to take hedging positions and as gold continued to bounce back from 14-day lows recorded on Wednesday. As a result, gold miner Gold Road Resources Limited (GOR) was the best performing stock on the day with a 9.34% advance followed closely by Northern Star Resource Limited (NST) in third place with a 3.22% gain. The most impactful movements included a 0.86% gain by Commonwealth Bank of Australia (CBA), a 1.76% advance by Resmed (RMD) and a 3.10% jump by REA Group Limited (REA).

At the opposite end of the scale, a 1.95 and 3.30 per cent decline by BHP Group Limited (BHP) and Fortescue Metals Group Limited (FMG) appeared to offset advances. Additional selling pressure was caused by other market heavy weights such as, Westpac Banking Corp (WBC), Woodside Petroleum Limited (WPL) and Telstra Corporation Limited (TLS), which declined 0.60, 1.48 and 1.04 per cent respectively. The worst performer on the index was Orocobre Limited (ORE), which declined 7.03%. This appears to be down to profit taking after some strong gains earlier in the week.

*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.

Commodities and Currencies

Iron ore managed to find some support and climbed 0.5% higher to $US83.59 a tonne. Global oil prices continued to show weakness as Brent crude declined 0.8% to $US54.49 a barrel. An influx of profit taking saw gold prices climb 0.11% higher to $US1,570.32.

This article was written by Thomas Brunton – Investment Analyst, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3633.

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