Evening Wrap: ASX 200 falls, Domino's Pizza shares crash, Origin receives a lower bid

The local sharemarket closed off session lows but still red, Domino's Pizza cops a -24% haircut after a slump in first-half profits, Origin receives a revised but lower takeover offer, market breadth continues to suffer and an educational segment on reporting season.

Let's dive in.

ASX 200 Session Chart

Another red session that closed off session lows (Source: TradingView)

Markets

Another challenging session following a weak US lead. The ASX 200 managed to close well-above session lows of -0.93% but the intensifying downtrend continues. Sector performance was all over the place due to reporting season and major announcements.

• Utilities rallied after Origin Energy (+12.7%) received a revised takeover bid of $8.90 per share

• Consumer Staples was higher thanks to a better-than-expected half-year result from Woolworths (+2.0%) and a bounce for A2 Milk (+6.3%)

• Energy was lifted by Santos' (+3.1%) half-year results

• Discretionary was the opposite, with Domino's Pizza (-23.8%) amid a disappointing first-half and profit plunge

Economy

Australia's seasonally adjusted Wage Price Index (WPI) rose 0.8% in the December quarter, up 3.3% annually.

• The hourly wage increase for the December quarter was lower than the increase in the September quarter, according to the ABS

• However, higher than any December quarter increase in the last decade

The Bank of Japan maintained its ultra-loose monetary policy but cautioned that inflation could overshoot expectations.

• "We're now in a phase where we need to scrutinise whether Japan can achieve a positive wage-inflation cycle. As such, it's appropriate to maintain monetary easing for now." - Board member Naoki Tamura, Reuters reported

Latest news

Market Insights

Market breadth under pressure

Last Thursday, I noted how the breadth for my stock scan was deteriorating rather quickly.

The scan looks for companies trading above their 200-day moving average and the share price has to be above 10 cents. (I then manually go through every chart as part of my screening process but that's for another day).

The number of stocks appearing in the scan is down to 247 from:

• 341 at the beginning of February

• 311 in the second week

• 253 last Thursday

As you can imagine, the massive January rally pushed a lot of stocks above the key 200 day moving average. But now, breadth is taking a turn for worse. Choppy times indeed.

Results from a techno-fundamental lens

Normally, I'd go through some sectors of interest. However, given current market conditions, there's not a whole lot going on (unless your short).

Instead, we're going to look at some results from a technical and fundamental lens (with an educational spin).

Better-than-expected earnings often push stocks higher and on abnormal volumes as well. But the following days are just as important. For larger cap stocks, a better-than-expected result could see a positive response from brokers.

QBE is a good example. As an insurer, its poised to benefit from a rising interest rate environment. Its results beat expectations and its shares rallied 7.4% on Friday, 17 February.

Shortly after, 5 brokers (CSLA, Morgan Stanley, Goldman, JP Morgan and Jarden) raised their price targets. As you can imagine, the flurry of positive broker notes and higher share price targets prompts more buying activity. QBE is now up 4.6% since its result.

QBE price chart (Source: TradingView)

The opposite narrative takes place for CBA. Its earnings (more so the guidance) were a bit soft and triggered a sharp -5.7% sell off on Wednesday, 15 February, on massive volumes of 7.1m shares (vs. 20-day average of 2.1m). As you can imagine, lots of retail and institutional investors sold their shares.

This was followed by several share price target downgrades. Across 16 major brokers, 75% were Sell rated and 25% a hold. The average target price was cut by 3.1% to $92.06.

A -5.7% selloff for CBA is steep and places the stock in rather oversold territory, however, it would continue to fall another -2% over the next two days.

CBA price chart (Source: TradingView)

With that in mind, how will a name like Domino's Pizza perform tomorrow? Can it bounce from an oversold level? Or will the analyst ratings and damaged sentiment send it lower?

Interesting news and movers

Trading higher

• +12.7% Origin Energy (ORG) – Revised proposal

• +9.2% Service Stream (SSM) – 1H results

• +6.5% McMillan Shakespeare (MMS) – 1H results

• +6.3% A2 Milk (A2M) – Bounce after down 14% last two sessions

• +4.1% Ramelius (RMS) – 1H results (Tuesday)

• +3.1% Santos (STO) – 1H earnings

• +1.6% Alkane Resources (ALK) – Tomingley gold extension government approval

Trading lower 

• -23.8% Domino’s Pizza (DMP) – 1H earnings

• -10.9% St Barbara (SBM) – 1H earnings

• -8.2% Costa Group (CGC) – Downgraded by multiple brokers

• -6.8% Coronado Global (CRN) — FY23 capex guidance 

• -4.7% Judo Capital (JDO) – 1H earnings (Tuesday)

• -4.6% Spark New Zealand (SPK) – 1H earnings

• -3.9% Hansen Technologies (HSN) – 1H earnings

• -3.2% ARB Corp (ARB) – 1H earnings (Tuesday)

• -2.1% Reece (REH) – 1H earnings

• -1.2% G8 Education (GEM) – Downgraded to Neutral from Buy at UBS

• -0.7% Flight Centre (FLT) – 1H earnings 

Broker updates 

Broker notes are taking a break today.

Scans