ASX edges down even as banks, energy climb

The laggards

Consumer discretionary companies dropped 1 per cent and staples fell 0.8 per cent. Wesfarmers (down 1.9 per cent), Treasury Wine Estates (down 2.3 per cent) and supermarket giants Woolworths and Coles (both down 0.6 per cent) all declined.

Shares in Qantas dropped 2.2 per cent despite the company forecasting a record underlying pretax profit of up to $2.48 billion in the 2023 financial year.

Sonic Healthcare (down 3 per cent) and Fisher & Paykel Healthcare (down 2.1 per cent) also weighed on the index.

The lowdown

Shaw and Partners senior investment adviser Adam Dawes said it was a quiet day for markets on Tuesday, but there were some movements in the healthcare space.

“There was a swing in CSL after UBS put a buy out on the stock,” Dawes said. “On the other hand, UBS put a sell rating on Sonic Healthcare.” Generally, Dawes added, stocks move when UBS makes a call.

Dawes said financials were stronger, with some buying coming back in banking stocks after they recently came off their dividends, and Macquarie “leading the charge”.

Technology stocks also had a good run, he said, as Xero continued performing after releasing positive results, and WiseTech shares hit a record high of $74.46.

But materials and consumer stocks were weaker, which Dawes said was a result of commodity prices and higher interest rates.

“Iron ore continued to be sold off, which kept the resources sector in check,” he said. “Consumer staples are what we call ‘expensive defensives’. They will continue to be strong but are expensive for where they are, especially as interest rates get higher, and it becomes tougher for consumers.”

On Wall Street, stocks drifted to a mixed finish, as the debt ceiling deadlock continues. After the close, President Joe Biden and House Speaker Kevin McCarthy announced no deal had been made to raise the US government’s $US31.4 trillion ($47.2 trillion) debt ceiling with just 10 days before a possible default that could sink the US economy, but they vowed to keep talking.

Speaker of the House Kevin McCarthy outside his office in Washington as the <a href=debt ceiling deadlock continues.” loading=”lazy” src=”https://static.ffx.io/images/$zoom_0.126%2C$multiply_0.7725%2C$ratio_1.5%2C$width_756%2C$x_0%2C$y_0/t_crop_custom/q_86%2Cf_auto/5a3ccfd90778edc32c95540f470bf91602dc7081″ height=”390″ width=”584″ srcset=”https://static.ffx.io/images/$zoom_0.126%2C$multiply_0.7725%2C$ratio_1.5%2C$width_756%2C$x_0%2C$y_0/t_crop_custom/q_86%2Cf_auto/5a3ccfd90778edc32c95540f470bf91602dc7081, https://static.ffx.io/images/$zoom_0.126%2C$multiply_1.545%2C$ratio_1.5%2C$width_756%2C$x_0%2C$y_0/t_crop_custom/q_62%2Cf_auto/5a3ccfd90778edc32c95540f470bf91602dc7081 2x”/>

Speaker of the House Kevin McCarthy outside his office in Washington as the debt ceiling deadlock continues.Credit: AP

The S&P 500 was at a virtual standstill after flipping between small gains and losses through the day. It edged up less than 0.1 per cent. The Dow Jones fell 0.4 per cent and the Nasdaq composite rose by 0.5 per cent, to 12,720.78.

The US stock market is near its highest level since August, but it’s been mostly remaining within a tight range for weeks as several big worries weigh. The biggest near-term risk is the possibility of a US default, something that could occur as soon as June 1.

That’s when Washington could run out of cash to pay its bills, unless Congress allows it to borrow more. Because Treasuries are seen as the safest investment on Earth, economists and investors say a default would likely trigger a recession for the economy and deep pain for financial markets.

Another worry that’s hung over the market is the strength of the US banking system, which has begun to crack under the weight of much higher interest rates. Three high-profile US failures have shaken confidence since March, and investors have been looking for the next possible weak link.

Much scrutiny has been on PacWest Bancorp. Its stock jumped 19.5 per cent after it agreed to sell a portfolio of real-estate construction loans with about $US2.6 billionin principal still outstanding to Kennedy Wilson.

PacWest is one of the smaller and mid-sized regional banks that Wall Street highlighted in its hunt for the next possible bank to suffer a drop in confidence. Other banks collapsed after depositors pulled their cash all at once to create debilitating runs. PacWest’s stock is still down 70.2 per cent for the year so far.

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Elsewhere on Wall Street, Micron Technology dropped 2.8 per cent as tensions heighten between China and the US. China’s government said on Sunday that Micron’s products have unspecified “serious network security risks” that could affect national security. It told users of sensitive computer equipment to stop buying Micron products.

Meta Platforms rose 1.1 per cent after shaking off news that European regulators hit it with a record $US1.3 billion privacy fine. Meta called the decision flawed and unjustified. It said it would appeal.

Meta has been on a tear this year, more than doubling in 2023 already. Other Big Tech companies have also had powerful leaps, much stronger than the rest of the market.

But that split in performance is worrying some market watchers. It’s left the index extremely top-heavy, meaning its performance is more dependent on a couple of handfuls of stocks than it’s been in decades.

In the bond market, the 10-year Treasury yield rose to 3.71 per cent from 3.68 per cent late Friday. It helps set rates for mortgages and other important loans. The two-year yield, which moves more on expectations for the Fed, rose to 4.32 per cent from 4.28 per cent.

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With AP

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