Market wraps 22nd May 2024

Morning Bell - Grady Wulff

Wall Street ticked higher at the closing bell on Tuesday as investors anticipate the release of AI giant Nvidia to gauge how far the tech-rally and valuations can grow. The Dow Jones rose 0.17% on Tuesday, the Nasdaq added 0.22% to set a 10th all-time high this year, and the S&P500 ended the day up 0.25% to also set its 24th record close of 2024. Nvidia shares rose 0.6% prior to the release of its results which are due out on Wednesday, US time, with analysts expecting the semiconductor and AI giant to post another strong batch of results.

In Europe overnight, markets closed lower in the region ahead of the release of some key economic data later in the week including the UK inflation reading where it is widely expected to show a sharp decline in the headline inflation rate. The STOXX600 fell 0.21% on Tuesday, Germany’s DAX lost 0.22%, the French CAC fell 0.67%, and, in the UK, the FTSE100 ended the day down just 0.09%.

Across the Asia markets on Tuesday, it was a sea of red led by Hong Kong’s Hang Seng falling 2% amid declining materials and industrials stocks.

The local market overturned a recent rally to close 0.15% lower on Tuesday as communications services and materials stocks weighed on the key index, with heavy losses partially offset by a strong rally for tech stocks which took lead from the Nasdaq rising on Wall St on Monday.

Guidance and corporate updates have been dominating the market in recent sessions with building products giant James Hardie Industries tumbling 15% on Tuesday after missing guidance expectations in an update, while Sonic Healthcare weighed on the healthcare sector after its corporate update outlined currency exchange headwinds will lead to lower-than-expected profits for FY24.

Embattled casino operator Star Entertainment Group fell 8% on Tuesday after soaring on Monday amid investor concerns that rumoured takeover candidate, Hard Rock Hotels, has denied interest in acquiring the company.

Telstra shares fell 2.7% on Tuesday after the telco giant announced a series of cost cutting measures including the culling of up to 2800 jobs equating to 9% of its workforce and further expansion into AI.

The ASX is nearing record territory which has many investors questioning just how high the market can go, which is a similar concern over in the US as the Dow Jones reached a record high on Friday, however, with the recent earnings season indicating inflation on earnings, the rally still has some steam left as valuations continue rising.

What to watch today:

  • Ahead of the midweek trading session in Australia, the SPI futures are anticipating the ASX to open the day up with a modest rise of 0.27%.
  • On the commodities front this morning, oil is trading almost 1% lower at US$78.53/barrel, gold is down 0.3% at US$2419.5/ounce and iron ore is up 0.19% at US$117.24/tonne.
  • AU$1.00 is buying US$0.67, 104.07 Japanese Yen, 52.81 British Pence and NZ$1.09.

Trading Ideas:

  • Bell Potter has maintained a buy rating on Technology One (ASX:TNE) and increased the 12-month price target on the leading SaaS provider from $18.50 to $19.00 following the release of the company’s 1H24 results including revenue excluding interest growing 15% to $241m which beat BPe by 1% and profit before tax rose 17%. Technology One also surprised by issuing full year guidance of 12-16% profit before tax growth which topped typical historical guidance of 10-15%.
  • And Trading Central has identified a bullish signal on BHP Group (ASX:BHP) following the formation of a pattern over a period of 43-days which is roughly the same amount of time the share price may rise from the close of $46.04 to the range of $49.40 to $50.10 according to standard principles of technical analysis.