Evening Wrap: ASX 200 is 2% away from all-time highs, Zip flops, tech stocks try to bottom

Welcome back to Evening Wrap number 2. We're still warming up, so expect more insights to be added over the next couple of weeks. The ASX 200 rose for a fifth consecutive session led by tech, real estate and miners, Australian manufacturing and services PMI fell into contraction territory in January, BNPL stocks briefly rallied then flopped and a few notable broker downgrades.

Let's dive in.

MARKETS

The ASX 200 is honing in on a fresh all-time high, now less than 2% away from the 7,633 level it hit last August. The V-shaped move has seen the market close green in 13 of the last 15 sessions.

• Tech continues to lead to the upside, with most large cap names closing higher, including Altium (+0.9%), Wisetech (+1.3%), Xero (+3.3%) and Block (+5.7%)

• Real estate stocks also rallied thanks to weakness in bond yields and risk-on attitude, with heavyweight Goodman Group rallying 2.7%

• Miners continued to trend upwards, with large cap iron ore, gold and lithium generally higher

ECONOMY

The Judo Bank Australia Composite PMI Output Index rose to 48.2 in January from 47.5 last December. This marks the fourth consecutive month of private sector contraction but the slowest in three months. Some highlights from the report include:

• "Lower output was recorded at the start of 2023, attributed to both softer service activity and lower manufacturing production"

• "Foreign demand for services likewise saw a renewed growth in January"

• "Input costs continued to climb in January with panelists linking higher prices to raw material, energy and staff costs increases"

Source: Judo Bank

Australian business conditions eased for a third straight month in December. Business confidence rose 3 points to -1, which is well below historical averages. Some key notes from NAB's survey include:

• "Overall, the survey continues to point to a healthy level of activity with above average conditions and elevated capacity utilisation but a slowing in momentum with most indicators pulling back over the past three months"

• "With confidence still in negative territory and well below average, and forward orders moderating further in the month, there are signs that conditions may ease further"

Latest news

Post market brief

Moving some of the general ASX 200 commentary to the 'Markets' header and make this section more idea oriented - whether that be technicals, fundamentals or in my case, both.

BNPL: The BNPL resurgence has come to a halt. Zip was the most notable candidate, with a wild trading session on Tuesday. The company posted its Q2 results at 9:48 am AEDT - which isn't a lot of time for traders and analysts to run the ruler. The stock managed to rally 10.8% in the first ten minutes of trade but it was all downhill from there, finishing the session -15.6%. The move was also on 46.6m volume or 370% higher than its 20-day average. That's a lot of churn.

(Source: TradingView)

Tech: Growth and tech names are in focus after a big rally for the Nasdaq in the last two sessions. There's been renewed buying interest in megacap tech names off the back of positive broker notes and a low bar for upcoming earnings. The Betashares ATEC ETF is trying work through those October and December lows, now closing above the 200-day moving average for the first time since January 2022.

Betashares Atech ETF (Source: TradingView)

Xero (Source: TradingView)

Interesting news and movers

Trading higher

• Codan (CDA) +17.9% – H1 trading update

• Cettire (CTT) +10.7%

• Breville (BRG) +7.5% – Upgraded to overweight by Barrenjoey

• Life360 (360) +6.95%

• Block (SQ2) +5.7% 

• Myer (MYR) +5.3% – Trading update

• Mineral Resources (MIN) +5.3% – Upgraded to Buy by UBS

• Premier Investments (PMV) +3.6% – Upgraded to Overweight by Morgan Stanley 

Trading lower 

• Zip (ZIP) -15.6% – Q2 trading update

• OFX Group (OFX) -6.7% – Q3 trading update 

• Mincor (MCR) -5.2% – Downgraded to Neutral by Macquarie

• Neuren Pharma (NEU) -3.7% – Downgraded to Hold by Jefferies

Broker updates 

Lots of downgrades but share price targets were inched higher. In the next few days, I'll be looking to revamp this sector to move from a table to something a little more in-depth regarding each broker note.

Scans