The XJO is expected to edge higher on open this morning despite a small pullback in the U.S overnight.
The U.S largely pulled back on tech as the Fed signaled once again they are no longer in a rush to cut rates. Financials and Materials were marginally in the red, and coupled with positive U.S futures this morning, helps explain our muted open.
Yesterday our market opened meekly higher, retesting the recent highs of the past few sessions at roughly 8,430. However, at 11:30am (AEST), local CPI came in weaker than expected across the board. Both headline and core CPI fell slightly more than expected for both YoY and QoQ. This lit a fire under our market, with the prospect of our economy finally joining the rest of the developed world and cutting rates. By the afternoon, we had broken key resistance at roughly 8,450 and set sights on all-time highs at roughly 8,500. However, we were unable to commit, and retreated back to the safety of 8,450. This we should test it again, potentially using it as a support.
The reaction last night in the U.S was mild, especially considering the Fed’s neutral tone. Tech continues to be the focus, which is not well represented in our market. Perhaps we will continue to consolidate as they whip around, but it still seems more likely to expect another bout of volatility before markets become tired.
US Markets
US shares closed lower overnight as the US FED kept interest rates unchanged. Fed Chair Jerome Powell was non-committal in his speeches, suggesting that they wanted to see more signs that inflation is continuing to fall, but also that they won’t rule out cutting in the coming meetings. Regardless, US investors expect the path of rates to be heading lower this year, and that should be enough to maintain the bullishness (as long as inflation doesn’t rise, the US economy doesn’t see recession, and US government spending stays at ridiculous levels). US markets even seem to have shaken off the negative news around Chinese AI and other Trump related disruptions. For the moment, we therefore have to assume things remain bullish. After US markets closed, earnings reporting from Microsoft, Facebook, and Tesla came out, with Microsoft lower on its results, while Tesla and Facebook traded higher in aftermarket trading; Tesla even rose despite lower than expected revenues and earnings.
Technically, The SP500 recently bounced off the 6,000 point level and now looks bullish to the all-time high at 6,100. Should the index break through this level, it would indicate further gains. A continued hold below this level could proceed a period of selling.
Four of the eleven sector groups of the SP500 closed higher overnight, with no sector making notable gains. Real Estate and Technology shares saw the most selling.
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