Evening Wrap: ASX 200 dips on Telstra and James Hardie results, metals stocks keep chugging along

The S&P/ASX 200 closed 12 points lower, down 0.15%.

On the surface a quiet day – but do a little digging and it was far from thus!

Results from Telstra, Technology One, ALS, and James Hardie saw big moves in each of those stocks, while base metals stocks kept chugging along driven by ever-spiralling prices on the London Metals Exchange.

Beaten down lithium and critical minerals stocks bounced back.

Let's dive in!

Markets

ASX 200 Session Chart

The S&P/ASX 200 (XJO) finished 12 points lower at 7,851.7, 0.24% from its session high and just 0.13% from its low. Despite the decline, in the broader-based S&P/ASX 300 (XKO), advancers beat decliners by 145 to 128.

The Information Technology (XIJ) (+0.72%) was the best performing sector today, likely in response to a swathe of strong performances among its major constituents. The sector leader was undoubtedly Technology One (ASX: TNE), which popped 4.5% on the back of its Half Year FY24 Results.

Today's best ASX tech stocks

Also doing well today was the Industrials (XNJ) (+0.66%) sector. Again, it was major constituent-specific news to blame for the strength here, this time ALS (ASX: ALQ) which rose +5% after releasing its Full Year FY24 Results.

No doubt, Qantas Airways (ASX: QAN) tidy 3.3% gain also had a great deal to do with the XNJ's performance today. No news on QAN, but I do note it's chart is picking up nicely with a well-established short term uptrend and a long term trend that appears to be transitioning from down to up 🔎📈.

QAN's long term trend that appears to be transitioning from down to up

Today's best industrial stocks

Doing it tough today was the Communication Services (XTJ) (-1.1%) sector. The sector is heavily influenced by Telstra Group (ASX: TLS) which is its second largest constituent by market capitalisation.

TLS dipped 2.2% after it announced would likely cut 2800 jobs to facilitate the "reset" of its Enterprise business. This would result in restructuring costs of $200-$250 million. TLS reaffirmed its FY24 profit guidance and further provided FY25 guidance of $8.4-$8.7 billion for EBITDA.

While the market didn't appear to cheer the update, major broker UBS liked it, noting the "Mobiles business continues to perform strongly", and that "FY25 guidance suggests company is expecting Mobiles to continue to be a driver of growth". UBS retained their BUY rating on the stock along with their $4.40 valuation.

Also underperforming, especially given yesterday’s strong performance, is the Materials (XMJ) (-0.72%) sector. It looks a great deal worse than it actually was here, though, with most of the damage coming from a massive 14.8% plunge in James Hardie Industries (ASX: JHX) after it reported disappointing Q4 FY24 Results.

James Hardie had a tough day today

Outside of JHX's demise (that chart has long term trend change written all over it 🔎📉), there was plenty of strength in resource stocks focused on base metals and even several lithium and critical minerals stocks.

Today's best mining stocks

The Gold (XGD) sub-index was also pretty average today, it fell 0.58%.

ChartWatch

NASDAQ Composite Index

I put to you the above chart is in a state of excess demand

The last time we checked up on the S&P/ASX200 and the NASDAQ Composite Index, or “the Comp” as the latter is more commonly known, was in the ChartWatch of the Evening Wrap on 15 May.

Starting with the Comp, it remains a picture of excess demand. This means there’s absolutely nothing in the technicals of this chart which gives me any cause for concern. Zero. Nada. Bupkis.

But, given that I am unfortunately able to tell the future, I can’t say that 'a something' won’t appear as soon as tonight’s candle.

This is the essence of my philosophy on markets and on investing. I can’t predict the future, so why concern myself with it? 🤷‍♂️

What will be will be, and whatever is: The candles will tell me everything I need to know.

I put to you the above chart is in a state of excess demand. Therefore there's just 3 possibilities from here:

1. It continues in some version of its present state (i.e., prices will keep going up at some rate)

2. Supply increases and or demand decreases sufficiently to cause a transition to a state of equilibrium (i.e., prices will go sideways)

3. Supply increases and or demand decreases to cause a transition to state of excess supply (i.e., prices will go down)

Supply manifests itself in the following forms:

• Black candles and or upward pointing shadows

• Falling peaks (supply reinforcement) and falling troughs (demand removal)

That’s it.

Until I see supply, there’s nothing to worry about (at least with respect to the markets, but I did read this today, and it’s quite concerning!).

S&P/ASX 200 (XJO)

Excess demand, but not as good as the Comp's

Assuming that 50% of the audience have now shifted uncomfortably in their chairs, it's time to bring it back home and take a look at the local benchmark.

The first thing you'll notice is that we haven't yet printed our record high. The good news is, (not being able to tell the future and all), I can’t see any reason in the technicals why we can’t do so – as early as this week.

Short and long term trends are very much intact, and even appear to be gaining strength. The price action is rising peaks and rising troughs, and the candles are predominantly demand-side in nature (i.e., white bodies and or downward pointing shadows).

Obviously, we need to knock out any latent supply lurking around the 7911 all time high.

There are likely to be those on the demand-side who are waiting for confirmation this level is dealt with before moving in, and equally on the supply-side who wish to know 7911 isn’t the zenith, and therefore it’s worth holding on for more.

I prefer a close above, not a tickle. That is, simply trading above 7911 on an intraday basis is insufficient confirmation it's been appropriately dealt with.

Looking at points of demand, I note 7815 is a minor point, with 7714 likely to be the key area to watch. I suggest that as long as the XJO continues to close above 7714 the short term uptrend remains intact.

Economy

Today

• AUS Westpac Consumer Sentiment

  • -0.3% to 82.2% in May vs -2.4% April

  • Vs 100% = consumers neither optimistic or pessimistic

  • Households are concerned about persistent inflation

  • Survey was pre-budget, so June likely to be different

• AUS Monetary Policy Meeting Minutes

  • "Members agreed that it was important to convey that recent data and other information had signalled that the risks around inflation had risen somewhat"

  • "A higher cash rate might also be required, even with ongoing weakness in aggregate demand, if other factors slowed the pace of disinflation."

Later this week

Thursday

• 04:00 USA FOMC Meeting Minutes

• 09:00 AUS Flash Manufacturing PMI (49.6 previous) & Flash Services PMI (53.6 previous)

• 17:15 (from) EU Various countries Flash Manufacturing and Services PMIs

• 23:45 USA Flash Manufacturing PMI (50.1 forecast vs 50.0 previous) & Flash Services PMI (51.5 forecast vs 51.3 previous)

Friday

• 22:30 USA Core Durable Goods Orders April (+0.1% forecast vs +0.0% March)

Latest News

Interesting Movers

Trading higher

• +17.7% OFX Group (OFX) - FY24 Results Presentation, rise is consistent with prevailing short term uptrend, long term trend is transitioning from down to up 🔎📈

• +12.3% Omni Bridgeway (OBL) - No news, bounced after massive sell off

• +7.7% Redox (RDX) - No news, rise is consistent with prevailing short term and long term uptrends 🔎📈

• +6.5% Ioneer (INR) - No news, generally stronger small-cap lithium/critical minerals stocks today, rise is consistent with prevailing short term uptrend, long term trend is transitioning from down to up 🔎📈

• +5.8% Vulcan Energy Resources (VUL) - Corporate Presentation - May 2024, generally stronger small-cap lithium/critical minerals stocks today, rise is consistent with prevailing short term uptrend, long term trend is transitioning from down to up 🔎📈

• +5.1% Syrah Resources (SYR) - No news, generally stronger small-cap lithium/critical minerals stocks today

• +5.0% ALS (ALQ) - ALS Full Year Results FY24, rise is consistent with prevailing short term and long term uptrends 🔎📈

• +4.7% Mesoblast (MSB) - No news, generally stronger small-cap lithium/critical minerals stocks today

• +4.6% Technology One (TNE) - Half Year Accounts, rise is consistent with prevailing short term and long term uptrends 🔎📈

Trading lower

• -14.8% James Hardie Industries (JHX) - Q4 FY24 Results Announcement, rise is consistent with prevailing short term uptrend, long term trend is transitioning from up to down 🔎📉

• -12.2% Sayona Mining (SYA) - No news, fall is consistent with prevailing long term downtrend 🔎📉

• -9.9% Jupiter Mines (JMS) - Sale of Jupiter Shares by AMCI Group

• -7.4% The Star Entertainment Group (SGR) - Further response to media articles, fall is consistent with prevailing long term downtrend 🔎📉

• -6.0% Sonic Healthcare (SHL) - Sonic Healthcare Earnings Update, fall is consistent with prevailing short and long term downtrends 🔎📉

• -5.8% Infratil (IFT) - Infratil Full Year Results and Proposed issue of securities

Broker Notes

• ALS (ALQ) retained at neutral at UBS; Price Target: $13.30

• AUB Group (AUB) retained at outperform at Macquarie; Price Target: $33.34

• Bowen Coking Coal (BCB) retained at buy at Shaw and Partners; Price Target: $0.24 from $0.23

• Car Group (CAR) retained at neutral at Citi; Price Target: $34.70

• CSL (CSL) retained at overweight at Morgan Stanley; Price Target: $310.00

• Dicker Data (DDR)

  • Upgraded to buy from overweight at Jarden; Price Target: $11.38 from $12.61

  • Retained at neutral at UBS; Price Target: $9.65 from $11.80

• Domain Holdings Australia (DHG) retained at buy at Citi; Price Target: $3.85

• Elders (ELD)

  • Retained at buy at Bell Potter; Price Target: $9.30 from $9.10

  • Retained at buy at Citi; Price Target: $8.50

  • Downgraded to outperform from buy at CLSA; Price Target: $8.75 from $9.00

  • Downgraded to neutral from outperform at Macquarie; Price Target: $8.35 from $8.25

  • Retained at buy at Shaw and Partners; Price Target: $9.10 from $9.00

• Galan Lithium (GLN) retained at neutral at Macquarie; Price Target: $0.25 from $0.35

• GTI Energy (GTX) retained at buy at Shaw and Partners; Price Target: $9.10 from $6.90

• Harvey Norman Holdings (HVN) upgraded to outperform from neutral at Macquarie; Price Target: $5.30 from $5.10

• JB HI-FI (JBH) upgraded to outperform from neutral at Macquarie; Price Target: $63.00 from $61.00

• James Hardie Industries (JHX) retained at buy at UBS; Price Target: $66.50

• Lendlease Group (LLC) retained at neutral at Citi; Price Target: $6.90

• Mirvac Group (MGR) retained at equal-weight at Morgan Stanley; Price Target: $2.35 from $2.41

• Michael Hill International (MHJ) retained at outperform at Macquarie; Price Target: $0.85 from $1.05

• McMillan Shakespeare (MMS) retained at buy at Bell Potter; Price Target: $22.20 from $22.52

• New Hope Corporation (NHC)

  • Retained at neutral at Citi; Price Target: $4.85

  • Retained at underweight at Macquarie; Price Target: $4.10 from $4.00

• Nuix (NXL)

  • Retained at overweight at Morgan Stanley; Price Target: $2.50

  • Retained at buy at Shaw and Partners; Price Target: $3.00 from $2.40

• Pointsbet Holdings (PBH) retained at buy at Bell Potter; Price Target: $0.63

• PYC Therapeutics (PYC) initiated at buy at Bell Potter; Price Target: $0.17

• REA Group (REA) retained at neutral at Citi; Price Target: $192.60

• Scentre Group (SCG) upgraded to outperform from neutral at Macquarie; Price Target: $3.37 from $3.03

• Steadfast Group (SDF) retained at outperform at Macquarie; Price Target: $6.40

• The Star Entertainment Group (SGR) retained at neutral at Macquarie; Price Target: $0.50

• Telstra Group (TLS) retained at buy at UBS; Price Target: $4.40

• Telix Pharmaceuticals (TLX) retained at buy at UBS; Price Target: $19.30

• Technology One (TNE) retained at neutral at UBS; Price Target: $16.40

• Wesfarmers (WES) retained at neutral at Macquarie; Price Target: $65.40 from $64.60

Scans