Evening Wrap: ASX 200 falls, tech stocks sell off, rising bond yields cast doubt over market rally

The S&P/ASX 200 closed 49 points lower, down -0.67%. 

The Index sold off on Monday after a weak lead from Wall Street, a closer look at current choppy market conditions and seasonality, revisiting stocks that experienced abnormal rebalancing movements last Friday and UBS' take on China.

Let's dive in.

ASX 200 Session Chart

ASX 200 falls intraday to finish near session lows (Source: Market Index)

Markets

• The ASX 200 sold off intraday to finish near worst levels

• Every sector was red, led by growth and cyclical sectors

• Technology was the worst performing sector, led by losses from Xero (-4.1%), Life360 (-3.8%), Iress (-2.8%) and Wisetech Global (-2.5%)

• Risk-off in technology stocks was in-line with overnight weakness for the Nasdaq as well as factors such as Arm selloff, TSMC's demand concerns and rising bond yields

• Energy pulled back , with Woodside down 1.4%

• Aussie bond yields ticked higher, with the 10-year up 5 bps to 4.2%

Economy

No major economic announcements.

Latest news

Choppy Markets

Bond yields are on the verge of breaking out and that's been a major drag on markets. The ASX 200 pulled back sharply on Monday, rejecting the below trendline.

ASX 200 daily chart (Source: TradingView)

From a seasonality perspective, we're still working our way through choppy conditions. Historically, things tend to stay that way until the first week of December.

ASX 200 seasonality

Last Minute Rebalancing Pt 2

The Morning Wrap noted how there were a few abnormal rallies in the closing auction last Friday (this refers to trades between 4:00 pm and 4:15 pm).

The example we used was Washington H Soul Pattinson (ASX: SOL):

• At 4:00 pm the stock closed 3.7% higher to $34.78

• By 4:15 pm the stock closed 6.6% higher to $35.82

• The price and volume spike at the closing auction suggests funds were rebalancing their weightings for WHSP

• Stocks have the tendency to fall back to the 4:00 pm close price

So what happened today?

• WHSP opened 3.0% lower at $34.74

• Sold off intraday to finish 5.3% lower at $33.92

This price action does not always result in a selloff (or often times a short-lived selloff). Here's an example of one that didn't quite work out – Service Stream (ASX: SSM)

• At 4:00 pm last Friday the stock closed 2.3% higher at 89.5 cents

• At 4:00 pm the stock closed 5.1% higher at 92 cents

• On Monday the stock opened breakeven and briefly sold off 2.7% to 89.5 cents but closed 1.1% higher at 93 cents

Quite clearly, rebalance days is something worth taking note of.

On a separate note, how does one observe such price changes between 4:00 pm and 4:15 pm – Spark is a relatively niche tool used by intraday traders to assess market depth as well as powerful scanning tools (e.g. ones that can capture such moves between 4:00 pm and 4:15 pm).

Full disclosure this is not an ad and at $150 per month it's probably not worth it unless you're a hardcore day trader.

Interesting news and movers

Trading higher

• +20.5% Red5 (RED) – 12% stake in block trade

• +11.4% Next Science (NXS)

• +8.9% Sheffield Resource (SFX) – Thunderbird project update

• +2.1% Kingsgate Consolidated (KCN) – Chatree operations to recommence

Trading lower

• -12.3% Azure Minerals (AZS) – Assay results

• -8.3% Silver Lake (SLR) – Speculation that SLR is behind Red block trade 

• -6.5% Alpha HPA (A4N)

• -6.3% Zip (ZIP) – CFO steps down

• -5.3% Washington H Soul Pattinson (SOL)

• -5.1% Vulcan Steel (VSL) – Initiated underperform at BofA

• -4.9% Genesis Minerals (GMD) – Rumoured to be buyer of Red block trade

• -4.2% Duretec (DUR)

• -3.4% Costa Group (CGC) – Revised takeover at $3.20 per share

Broker notes

UBS on China:

• Growth improved in August: "Most of August economic activities improved modestly from weak readings in July, with retail sales, industrial production and exports better than market expectations."

• Growth momentum likely bottoming out: "Growth momentum seems stabilising in early September despite a mixed picture, including narrower decline of property sales in major cities, elevated subway passenger turnover, and better auto sales."

• Property to stabilise: "Looking forward, we expect property sales volume to stabilize gradually at low levels in the coming months, infrastructure investment to grow at a robust but slower pace on a high base ..."

• GDP growth to moderate: "We maintain our real GDP growth forecast of 4.8% for full-year 2023. Development of property downturn and the magnitude & pace of policy easing still remain the biggest uncertainty for future growth trajectory."

Scans