ASX trades flat after mixed day on Wall Street

Utilities (down 0.8 per cent), real estate (down 0.8 per cent) and energy (down 0.3 per cent) weighed on the index, as heavyweight Woodside shed 1 per cent.

But materials miners comprised the bulk of the biggest large-cap decliners. IGO, Newcrest Mining and Northern Star Resources lost 2.8 per cent, 1.8 per cent and 1.7 per cent as gold and copper prices fell.

The lowdown:

TMS Capital portfolio manager Ben Clark said despite softening in the Australian market, investors were optimistic about earnings results and cooling inflation.

“It’s been a pretty solid earnings season so far leading into February with a number of companies coming out better than expected,” he said. “There’s also confidence building that inflation is rapidly normalising and that the rate cycle is close to peaking.”

While resources companies have weakened, Clark said they were still strong and that it largely reflected investors rotating towards growth sectors.

“Resources have sold off a bit, but BHP hit an all-time high and has been incredibly strong,” he said. “Investors are rotating out of last year’s winners into health and technology businesses.”

But Clark said Australian markets were largely driven by results coming out of the US, including earnings reports which have been mixed this month.

In New York, the Dow stumbled 1.1 per cent overnight as weak earnings from Goldman Sachs dragged the index lower, but a jump in Tesla shares helped keep the benchmark S&P 500 and Nasdaq near the unchanged mark.

Goldman Sachs slumped 6.4 per cent and was poised for its biggest one-day percentage drop since June 2020 after the bank reported a bigger-than-expected drop in quarterly profit. The decline in Goldman shares, the second-most expensive of the Dow Industrials, pulled the price-weighted index lower as the biggest drag.

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But a 7.4 per cent jump in Tesla shares helped keep the S&P 500 and Nasdaq afloat. The electric-vehicle maker’s January retail sales surged in China following recent price cuts on its top-selling models, data from China Merchants Bank International showed.

The Dow Jones Industrial Average closed 1.1 per cent lower at 33,910.85, the S&P 500 slipped 0.2 per cent to 3990.97 and the Nasdaq Composite rose 0.1 per cent to 11,095.11.

Morgan Stanley climbed 6.2 per cent as it beat analysts’ estimates for fourth-quarter profit as its trading business got a boost from market volatility.

Earnings from Goldman Sachs and Morgan Stanley closed out what was a mixed bag for big banks, many of which have stashed rainy-day funds to gird against a potential recession.

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Analysts expect year-over-year earnings from S&P 500 companies to decline 2.4 per cent for the quarter, according to Refinitiv data, compared with a 1.6 per cent decline at the start of the year.

Equity markets have gotten off to a strong start this year after a dismal performance in 2022, on hopes that easing inflation and a slowdown in the US economy, especially the labour market, would give the Federal Reserve the leeway to scale back the size of interest rate rises it has used to combat high prices.

The Dow snapped a four-session winning streak, while the Nasdaq posted its seventh straight gain, its longest streak since November 2021.

Money market participants are expecting a 25-basis-point interest rate rise from the US central bank in February and see rates peaking at 4.9 per cent in June, while the Fed’s projections are for over 5 per cent.

US-listed shares of Chinese companies declined, with JD.Com down 6 per cent and Baidu off 6.45 per cent after China’s economic growth in 2022 slumped to one of its worst levels in nearly half a century.

The Bank of Japan on Wednesday defied market expectations when it decided to maintain ultra-low interest rates, including a 0.5 per cent cap for the 10-year bond yield amid rising inflationary pressure.

Tweet of the day:

Quote of the day:

“A lot of these guys don’t have much growth and deals are a way to address that,” said Liberum analyst Ben Davis, in reference to the growing appetite for large, transformational mergers and acquisitions from mining giants.

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With Reuters