December 22, 2023

ASX rally runs out of steam despite Wall Street rebound

By Sumeyya Ilanbey
Updated December 22, 2023 — 5.47pmfirst published at 5.14am
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Welcome to your five-minute recap of the trading day, and how the experts saw it.

The numbers

The Australian sharemarket’s rally ran out of puff on the last trading day before Christmas and finished flat, despite early morning futures indicating the local bourse would rise in line with strong gains on Wall Street.

Wall Street has clawed back some of Wednesday’s heavy losses.Credit: AP

The S&P/ASX 200 fell 2.5 points, or 0.03 per cent, to 7501.6 at the close, led by gains in energy (up 0.6 per cent) and real estate (up 0.5 per cent).

The ASX will be closed on Monday and Tuesday for Christmas Day and Boxing Day. Trading will resume on Wednesday.

The lifters

Lynas Rare Earths led the large-cap advancers all day, its shares lifting 3.53 per cent despite China’s export ban on some rare-earth processing technology. Pilbara Minerals (up 2.6 per cent) and Whitehaven Coal (up 2.3 per cent) rounded out the top three.

Energy (up 0.6 per cent), mining (up 0.3 per cent), information technology (up 0.3 per cent) and real estate (up 0.5 per cent) were the only sectors trading in the green at the end of the day.

Just before midday, heavyweight Fortescue broke a historical top of $28.40 over expectations of healthy iron ore demand for winter restocking ahead of the Chinese New Year. The price of iron ore lifted 2.6 per cent overnight to $US137.35 a tonne. However, Fortescue finished the day slightly lower at $28.35.


The laggards


Consumer staples (down 0.4 per cent) and industrials (down 0.3 per cent) were the weakest sectors on the Australian sharemarket.

Mercury NZ led the large-cap declines, its shares falling 3.8 per cent, followed by EBOS Group (down 2.6 per cent)

Core Lithium plunged 21.2 per cent after announcing it was suspending works on its BP33 project in the Northern Territory and potentially halt production at its existing Grants mine.

The lowdown


Eightcap market analyst Zoran Kresovic said he expected the Australian sharemarket to hit record highs within the next two to three weeks, surpassing the current record of 7628.9 on August 13, 2021.

“We can see all the US markets breaking through all-time highs, and we can see the ASX about to test that level,” Kresovic said.

“Next week I expect the market to be muted because it’s between Christmas and New Year … but going into 2024, I expect the ASX to drive all the headlines.”

The S&P 500 climbed 1 per cent and is back within 1 per cent of its all-time high, a day after its worst tumble in nearly three months. The Dow Jones Industrial Average rose 322 points, or 0.9 per cent, and came close to setting a record for the sixth time in the last seven days. The Nasdaq composite jumped 1.3 per cent.

The Australian dollar was trading at 67.78 US cents at 4.30pm AEDT.

Micron Technology leapt 8.6 per cent for one of the market’s biggest gains after reporting stronger results for the latest quarter than analysts expected, and saying it sees business conditions improving throughout its fiscal year.

CarMax rose 5.2 per cent after it beat profit expectations, despite what it called “persistent widespread pressures in the used-car industry.” And cruise operator Carnival steamed 6.2 per cent higher after reporting better quarterly results than expected.

The trio helped lead a widespread rally where more than 90 per cent of the stocks within the S&P 500 climbed.

In the bond market, Treasury yields were mixed following a suite of reports on the economy. Mostly falling yields have been one of the main reasons the stock market has charged so high the last two months. They relax the pressure on the financial system, encourage borrowing and boost prices for investments.

After dipping in the morning, the yield on the 10-year Treasury edged up to 3.88 per cent from 3.86 per cent late Wednesday. In October, it had been above 5 per cent and weighing heavily on markets.

Yields have been dropping on hopes that inflation has cooled enough for the Federal Reserve to not only halt its hikes to interest rates, but begin cutting them sharply next year. The Fed has hiked its main rate to the highest level in more than two decades, but officials released projections last week showing they see some cuts to rates coming in 2024.

Reports on Thursday painted a mixed picture of whether the Fed can indeed pull off the long-odds tightrope walk that everyone is hoping for: a slowdown in the economy powerful enough to conquer high inflation, but not so strong that it causes a recession.

One report showed that slightly more US workers applied for unemployment benefits last week, but the number was still below expectations and low relative to history. The hope at the Fed and on Wall Street is that the job market can cool by just the right amount so that it doesn’t cause mass layoffs but also doesn’t add upward pressure on inflation.

Another report showed manufacturing in the mid-Atlantic region is weakening by more than expected. Manufacturing has been one of the hardest-hit areas of the economy. And a third report said the US economy’s growth during the summer wasn’t quite as powerful as earlier estimated.

They “weren’t earth-shattering numbers, but they were still in line with the narrative that a cooling economy will keep the Fed on track to cut rates in the not-too-distant future,” according to Chris Larkin, managing director of trading and investing at E-Trade from Morgan Stanley.


“Right or wrong, that sentiment has played a big role in the market’s recent surge, even though the Fed has been doing its best to temper expectations.”

Wall Street has been ebullient about the possibilities for a slew of rate cuts and a resilient economy in 2024, which would both help buoy stock prices. The S&P 500 has charged 15 per cent higher in roughly two months anticipating those twin supports, and the index is on track for an eighth straight week of gains.

That’s despite Fed officials having penciled in far fewer rate cuts for 2024 than Wall Street. Critics say the number of rate cuts traders are expecting is unlikely unless the economy falls into a recession, which some still see as an inevitable consequence of all the rate hikes already instituted by the Federal Reserve.

That’s raised criticism that stocks have gone too far, too fast and become too expensive relative to profits that companies are earning. Even before Wednesday’s 1.5 per cent drop for the S&P 500, several strategists on Wall Street were forecasting at least a pause in the rally in the short term.

On Thursday, the S&P 500 rose 48.40 points to claw back more than two-thirds of that loss and closed at 4,746.75. The Dow gained 322.35 to 37,404.35, and the Nasdaq jumped 185.92 to 14,963.87.

In stock markets abroad, indexes were mostly lower in Europe and Asia. China was an exception, with stocks ticking 0.6 per cent higher in Shanghai to trim its loss for the year by a bit. It’s one of the few markets globally that has not climbed sharply in 2023 amid hopes for easing inflation.

Tweet of the day

Quote of the day

Sacked ABC host Antoinette Lattouf claims the broadcaster’s managing director, David Anderson, ordered an abrupt end to her short-term radio contract, in legal proceedings filed with the Fair Work Commission.

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With AP

The Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon.

Sumeyya Ilanbey is a business journalist for The Age and Sydney Morning HeraldConnect via Twitter or email.


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