Market wraps 20th January 2022

Morning Bell - Paulina Peters

Yesterday the Aussie share market followed Wall Street’s lead, closing 1% lower, with the tech sector weighing down on the market the most. All four of the banks closed lower, with CBA posting the biggest loss, down 1.5%. Only the energy and utilities sectors managed to post small gains. 

On the ASX200 stock leaderboard, the best performing stock was artificial intelligence company, Appen (ASX:APX), up 3.9%. Harvey Norman (ASX:HVN) also performed well, gaining 3.2% after Credit Suisse upgraded the stock from neutral to outperform with a 3% increase in its price target to $5.62.  Meanwhile, Megaport (ASX:MP1) came under pressure yesterday, amid broad weakness in the tech sector, but also as investors were underwhelmed by its second quarter results update. The company reported a quarter-on-quarter increase of just 7% in its monthly recurring revenue (MRR) to $9.2 million. Some of the other worst performers included NOVONIX (ASX:NVX) and Allkem (ASX:AKE).

The most traded stocks by Bell Direct clients yesterday, once again software company, BrainChip (ASX:BRN) has made the list. The company is up a massive 213% so far this year, and pushed higher yesterday, following the announcement of another granted patent. The company now holds a significant market cap of over $3.5 billion. Other top traded stocks included Lake Resources (ASX:LKE), Fortescue Metals (ASX:FMG), CSL (ASX:CSL) and James Hardie (ASX:JHX).

In the US, all three benchmarks pulled back, despite several strong earnings reports, from companies such as Bank of America, Morgan Stanley, and Procter & Gamble. It comes as investors remain cautious amid elevated government bond yields. The 10-year Treasury yield topped 1.9% during the session, its highest level since December 2019. This session ended with the Dow falling over 300 points, the S&P500 down 1% and the tech-heavy Nasdaq closing 1.2% lower.

For today, despite the negative session in the US, the futures are suggesting the Aussie share market will open 0.14% higher.

What to watch today:

  • Block (ASX:SQ2) joins the ASX today, trading on a deferred settlement basis, replacing Afterpay, which has now officially been removed from the Aussie share market. In the US, Block’s share price closed 1.43% lower on Wednesday.
  • In economic news, yesterday consumer confidence for January fell 2% to 102.2, which was surprisingly solid, given the rapid spread of the Omicron variant. And today, the unemployment rate for December will be released. As a reminder, the unemployment rate came in at 4.6% in November. Consensus expects December’s reading to fall to 4.5%.
  • In commodities, oil prices lifted for the fourth day to a 7-year high, as an outage on a pipeline from Iraq to Turkey added to the tight supply outlook. The WTI crude oil price is currently up 1.18% to US$86.58 a barrel. The gold price lifted 1.5% to US$1,840 per ounce. The seaborne iron ore price is trading slightly lower at US$127 a tonne. And the silver, copper and platinum prices are all trading between 1.5% to 4.5% higher.
  • Both BHP Group (ASX:BHP) and Centuria Industrial REIT (ASX:CIP) are holding their AGM today.

Trading Ideas:

  • Citi has maintained its BUY recommendation on global lithium chemicals company, Allkem (ASX:AKE), with an increased price target of $13.40 (previously $12). Separately, Bell Potter has a HOLD rating on AKE with a price target of $11, while Credit Suisse has an Outperform rating and a price target of $13.70.
  • Trading Central has a bullish signal on Orica (ASX:ORI). This signal indicates that the stock price may rise from the close of $13.92 to the range of $17.50 - $18.40 in the next 80 days, according to standard principles of technical analysis.