13th February 2024

Morning Bell - Grady Wulff

Wall Street closed mixed on Monday with the Dow Jones rising to a record close, building on the momentum of last week as investors responded to key earnings results and await the release of core inflation data out later this week to determine the broader picture of business and economic stability in the higher interest rate environment. The Dow Jones rose 0.33% to a record close of 38,797 points, the S&P500 fell 0.09% and the Nasdaq ended the day down 0.3%.

Salesforce weighed on the Dow Jones gains as the cloud-based software stock slid 1.4% while Diamond Energy rose 9.4% after revealing it will acquire oil and gas producer Endeavour Energy Partners.

European markets started the week in positive territory across the board as investors continue responding to corporate earnings results out in the region. The STOXX600 rose 0.5%, Germany’s DAX added 0.65%, the French CAC gained 0.55% and, in the UK, the FTSE100 ended the day just 0.01% higher.

The local market started the new trading week with a rollercoaster of a session as the key index rose and fell throughout the day before closing 0.4% lower as investors responded to key trading updates and reporting season results. Tech stocks took lead from the Nasdaq’s strong rally last week while consumer discretionary stocks rose on resilient results out of some big names.

Healthcare giant CSL weighed on the healthcare sector and ASX as a whole yesterday, with its shares falling over 5% on the announcement that the company’s top-line results from the Phase 3 trial evaluating the efficacy and safety of its CSL112 drug in reducing the risk of major adverse cardiovascular events in patients, did not meet its primary efficacy endpoint reduction at day 90, and that the company now has no near-term plans to file for regulatory approval of the drug candidate.

Reporting season ramped up yesterday with JB Hi-Fi rallying 7% during the session after posting results that topped analysts’ expectations. Despite revenue, profit and the company’s interim dividend all declining, investors bought into the tech retailer as the results were not as bad as were expected and reflected the company’s resilience amid the declining consumer spend environment.

Synlait Milk also disappointed investors yesterday, with shares dropping 14% after the company warned investors to brace for a net loss in the range of $17m-$21m for the six-month period ending 31st January mainly due to financing costs and changes in margins.

Rail freight operator, Aurizon, was the talk of the market yesterday after posting strong first half results including revenue up 16%, NPAT growth of 82% to $237m, EPS up 82% and increased its dividend per share by 39% to 9.7ps. Aurizon also reported a 169% rise in free cashflow, attributing the impressive first half results to a solid performance in the Network and Coal businesses and continued revenue and volume growth in Bulk and Containerised freight.

Reporting season continues today with Breville Group, James Hardie Industries, Seek and Seven West Media among the big names reporting today.

On the economic calendar today, NAB Business Confidence data for January and Westpac Consumer Confidence data for February are released this morning with the expectation of a rise in business confidence but a slide in consumer confidence.

What to watch today:

  • Ahead of the local trading session the SPI futures are expecting the ASX to open Tuesday’s session 0.26% higher.
  • On the commodities front this morning, oil is flat at US$76.80/barrel, gold is down 0.32% at US$2017/ounce, and iron ore is flat at US$128/tonne.
  • AU$1.00 is buying US$0.65, 97.62 Japanese Yen, 51.65 British Pence and NZ$1.07.

Trading Ideas:

  • Bell Potter has maintained a buy rating on Propel Funeral Partners (ASX:PFP) and have raised the 12-month price target on the company from $5.90 to $6.20 following the company’s successful raising of ~$90m via a $80m institutional placement and $10m non-underwritten share purchase plan at $5.15/share. Proceeds from the raising are to be used to pay down debt to provide financial flexibility to pursue further growth initiatives, including acquisitions.
  • Trading Central has identified a bullish signal on JB Hi-Fi (ASX:JBH) following the formation of a pattern over a period of 20-days which is roughly the same amount of time the share price may rise from the close of $60.58 to the range of $60.90 to $61.90 according to standard principles of technical analysis.