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ASX to drop, US stocks retreated on debt ceiling negotiations - 17/05/23

Market Wrap

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  • 9 out of 11 sectors in the S&P 500 finished lower, with energy and real estate leading losses, down 2.54% and 2.61%, respectively. Technology and communication services are the only sectors that ended in the green, buoyed by big tech companies.
  • Amazon joined the generative AI race, planning to integrate a ChatCPT-like bot into its online store. The e-Commerce giant said it would plug an interactive conversational experience that helps users to answer questions and give personalized product suggestions. The new technology is similar to Alibaba’s Tongyi Qianwen, which was announced in early April.
  • Home Depot’s shares fell 2% following the first quarter earnings report.  The retailer reported earnings per share at $3.82 vs. $3.80 expected. The revenue was at $37.26 billion vs. $38.28 billion expected. The company expects sales revenue to decline between 2% and 5% for the fiscal year, down from a flat forecast previously. 
  • Tesla’s CEO Elon Musk expects the challenging economic environment to persist for the next 12 months. He believes that Tesla is well positioned during this period and Tesla Model Y will be the best-selling car globally this year.
  • Chinese offshore Yuan tumbled to the lowest level against the US dollar since December 2022 following the disappointing Chinese economic data in April. USD/CNH rose to just under 7, a critical psychological resistance of the pair. The strengthened USD may be supported by risk-off sentiment broadly on Wall Street
  • Gold prices fell due to a firmed USD and a jump in the US bond yields. Gold futures fell nearly US$30 per ounce to 1,993, the lowest seen in early May. Gold may continue to retreat once breaking down the potential near-term support of a 50-day moving average at 1,970.

 

Equities

US indices retreated Tuesday with debt-ceiling negotiations remaining at a standstill, though growth stocks made some gains.

The S&P 500 slipped 0.6%, the Nasdaq Composite gained 0.2% and the Dow Jones Industrial Average dropped 1.0%, weighed down by Home Depot shares. The S&P 500's consumer discretionary, communication services and tech sectors rose.

Retail sales data released before the open showed Americans increased their spending modestly in April as inflationary pressures eased. Home Depot cut its forecasts for the year, sending its stock down 2.1%.

Warnings around the debt ceiling are growing louder. Treasury Secretary Janet Yellen has said the US could become unable to pay its bills as soon as June 1 if Congress fails to raise the federal borrowing limit. She doubled down on the severity of a potential debt ceiling mishap in Tuesday remarks to community bankers.

Investors say a default could have far-reaching and unpredictable effects for a financial system already trying to contain stress at regional banks, though a deal is still expected to avert that scenario.

Shares of Google parent Alphabet rose 2.6%, propping up the Nasdaq. A securities filing late Monday showed billionaire Bill Ackman's hedge fund, Pershing Square Capital Management, built a billion-dollar stake in the company during the first quarter.

 

Broker Upgrades/Downgrades

(ALL) Aristocrat Leisure Target Price Raised 3.7% to A$40.50/Share by Jarden
(APX) Appen Price Target Cut 7% to A$1.77/Share by Wilsons
​(APX) Appen Price Target Cut 25% to A$2.10/Share by Jefferies
(GNC) GrainCorp Price Target Raised 5.2% to A$9.15/Share by Jefferies
(JHX) James Hardie Price Target Raised 9.6% to A$43.30/Share by Goldman Sachs
(JHX) James Hardie Price Target Raised 22% to A$32.70/Share by Jefferies
(360) Life360 Price Target Raised 6.4% to A$8.35/Share by Goldman Sachs
(PGH) Pact Target Price Cut 15% to A$1.15/Share by Jarden
(SZLDA) Sezzle Price Target Raised 5.5% to A$48.10/Share by Ord Minnett
(TLS) Telstra Target Price Raised 4.5% to A$4.60/Share by UBS
 

 

Today's Announcements

  • Japan’s Q1 GPD
  • Australian Q1 Wage Price Index q/q
 
 
(All news & data sourced from Aspect Huntley / AFR / The Australian / Bloomberg / Reuters / CNBC / Wall Street Journal / Morningstar / OPTO / Trading Economics)ASX 


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