Evening Wrap: ASX 200 slumps as November rate hike near-certain, Wesfarmers drops as Ramsay Health pops

The ASX 200 fell sharply as yesterday's inflation shock was compounded this morning by Australian household spending data showing a 1.1% monthly jump — nearly three times the forecast — across all nine ABS spending categories. The combination all but confirmed an RBA rate hike possibly as soon as next month, hammering consumer-facing stocks.

Be sure to click/scroll through for the usual reporting of the major sector and stock-specific moves, the broker responses to them, as well as all the key economic data in tonight's Evening Wrap. Also, I have detailed technical analysis on the Nasdaq Composite and the S&P/ASX 200 in today's ChartWatch.

Let’s dive in!

The S&P/ASX 200 (XJO) finished 89.6 points lower at 9,038.2, 1.0% from its session high and just 0.1% from its low. In the broader-based S&P/ASX 300 (XKO) advancers lagged decliners by a dismal 63 to 222.

Health Care (XHJ) (+0.2%) was the session's lone positive sector — and given the macro backdrop, holding above water at all constituted a meaningful achievement. Ramsay Health Care (RHC) (+13.7%) was the primary driver, delivering a full-year result that surpassed expectations and highlighted how decisively the hospital operator's recovery from the post-COVID staffing crisis has taken hold.

Ansell (ANN) (+1.7%) extended its post-results surge. CSL (CSL) (+0.8%) and Telix Pharmaceuticals (TLX) (+0.6%) were also modestly higher. Healthcare's defensive earnings characteristics — revenues that don't depend on household confidence or mortgage affordability — are precisely what investors reach for when nerves are rattled!

Energy (XEJ) (-0.2%) was the next closest to flat, with coal names gaining, and oil producers holding ground even as ICE Brent crude futures fell 1.6% to US$85.54/bbl. Yancoal Australia (YAL) (+1.2%), Whitehaven Coal (WHC) (+0.6%), and New Hope Corp. (NHC) (+0.5%) were the best in coal. Majors Woodside Energy (WDS) (+0.3%) and Santos (STO) (+0.1%) were essentially flat.

Financials (XFJ) (-0.7%) underperformed the broader market's decline — a relative win driven by defensive crowding into the sector's size and dividend yield. Perpetual (PPT) (+3.3%) was the standout, but Insurance Australia Group (IAG) (+1.0%) and QBE Insurance (QBE) (+0.6%) both firmed. Commonwealth Bank (CBA) (-0.3%) was solid all things considered re rates outlook...

Consumer Discretionary (XDJ) (-3.2%) was hardest hit. The July household spending data was both reassuring about the economy's resilience and deeply alarming about the inflation implications — a 1.1% monthly jump in real (inflation-adjusted) spending across all nine categories surveyed tells the RBA precisely what it doesn't want to hear: demand is not cooling. Pricing of short-term interest rate futures now imply roughly an even-money bet for a 0.25% increase to the RBA's cash rate at their 28-29 September meeting, and if not then — a near 100% chance at the subsequent 2-3 November meeting.

Wesfarmers (WES) (-4.6%) bore the heaviest losses, compounded by full-year results that disappointed relative to elevated expectations across its Bunnings and Kmart divisions. JB Hi-Fi (JBH) (-4.5%) was next, followed by Temple & Webster (TPW) (-4.1%). Lovisa (LOV) (-2.6%) fell after its FY results, having entered the session with elevated expectations following Wednesday's 5.2% pre-result surge.

Consumer Staples (XSJ) (-1.4%) was caught in the same inflation-repricing. Defensive staples stocks typically hold up in rate-hike environments, but not today... Metcash (MTS) (-2.3%), Woolworths (WOW) (-1.6%), and Coles (COL) (-1.2%) all retreated from recent results-driven highs.

Information Technology (XIJ) (-2.4%) extended its correction as WiseTech Global (WTC) (-3.3%) continued to slide post-results — now down more than 13% across two sessions. Catapult Sports (CAT) (-2.9%), Technology One (TNE) (-2.7%), and Xero (XRO) (-2.6%) were all caught in the sector-level selling.

The Gold Sub-Index (XGD) (-1.5%) pulled back as COMEX gold futures fell 0.9% overnight before easing a further 0.1% to US$4,650/oz in Asian trade — gold struggling to hold its gains key benchmark bond yields edged higher again overnight. Westgold Resources (WGX) (-4.0%), Ramelius Resources (RMS) (-3.2%), and Genesis Minerals (GMD) (-2.9%) were all lower. Northern Star Resources (NST) (+1.0%) was the notable exception, bucking the sector's negative tone.

Materials (XMJ) (-1.2%) entered its second consecutive session of pullback as COMEX copper futures fell 1.7% overnight before easing a further 0.5% to US$6.564/lb in Asian trade — the metal pulling back from its recent record highs on fears that higher benchmark rates could pressure global economic growth. Sandfire Resources (SFR) (-3.6%), BHP (BHP) (-1.5%), and Rio Tinto (RIO) (-0.5%) were all lower. South32 (S32) (+1.4%) was a positive exception on solid results.

Lithium stocks extended their losing run despite GFEX lithium carbonate futures barely moving — down just 0.1% to CNY 152,020/t. Elevra Lithium (ELV) (-4.9%), Liontown Resources (LTR) (-4.6%), Core Lithium (CXO) (-2.7%), Pilbara Minerals (PLS) (-2.6%), and Mineral Resources (MIN) (-2.3%) were all lower.

Analysis

Candles and price action (lack thereof for both) are screaming equilibrium. ⚖️

Neither the demand, nor supply side, want to commit here.

Which is actually a good thing if you’re cheering the Comp higher – because in the very short term, there’s arguably more evidence of supply side control than there is of equilibrium (let alone demand side control!).

You’ll have to zoooommmm right in on last night’s candle to see that it has a very small white body with roughly equal small shadows poking out either side.  🔬

Small candle = lack of motivation among demand- and supply sides.

Miniscule volume = neither party sees the current price as completely unreasonable.

(Think about that last bit… because if one party really felt the price was way too expensive / cheap – then they’d be selling / buying the you-know-what out of it!).

Price action (peaks and troughs) have also compressed. The short term trend ribbon is amber... 😴

Only the long term uptrend ribbon affords us any evidence of control (demand side!).

So, considering our Analysis, the Accept really must be to sit on one’s hands.

This is why my current Act on the Comp = 1/2RP.

View

1/2RP on US stocks. I still think we're MOTN P ⬆️ here, but who cares what I think – it only matters what the market does. (RP = Risk Position — it reflects my personal allowable capital allocation limit for my investments in US stocks. So 1/2RP is 50%, 2/3RP is 67% and FRP is 100%).

Key Levels

26863 is the key point of supply vs 25910 and then the long term trend ribbon (presently 24071-24967) is the key point / zone of demand.

Analysis

Yep. That's about right. I am now banned from referring to the S&P/ASX 200 as the Golden Le Creuset. 🚫

It is not a Le Creuset. Golden or otherwise.

It is an Old Tin Pot. And we shall therefore refer to it as such.

At the time of writing, Comp futures are up 0.5% and S&P500 futures are 0.3% higher. Asian markets were mixed, China up, Kospi and Nikkei up/flat.

It's not like there's something brewing in overseas markets that we just haven't seen the headlines for.

This is just plain earnings related stuff. We know that in the US, Europe and parts of Asia, earnings growth among their stocks is plus-double digits, and in some cases, over 20% p.a. (past, and forecast over the next 12-months).

Tomorrow marks the end of our reporting season – and with our earnings growth forecast closer to mid-single digits (ex-resources) – it looks like the global big fund managers have cast their vote today.

But that's a narrative. The bit that I concern myself with: D vs S = P doesn't care for narratives. It just cares about which party, D or S is winning the battle for P.

And looking at today, I think we can safely assume it was a case of S > D = P⬇️!

What I must now consider:

Lower peaks

• Before I taught you this stuff, you wouldn't have paid any attention to yesterday's candle with its long upward pointing shadow and above average volume and volatility. Today, you look at today's long black candle, with a close near its session low and say: Yep, that's about right ☹️!

• The tip of yesterday's shadow, at 9221, is where latent supply in the system – likely more than just an echo of the supply that created that 9297 peak – overwhelmed what looked like promising demand. 9221 is now a lower peak to 9297 = building supply, a distinct lack of FOMO, and a disturbing departure from HOFU ⚠️

Candles

• In combination with yesterday's warning signal that the supply side was taking control of the market, today's long black candle confirms it. 👎

• The close near the session low (it would have been at the session low if not for a +0.1% pop in the closing juicing auction 🧃) – and within such proximity to what is supposed to be a point of demand at 9019 – smacks of a demand side that is unwilling to engage (i.e., NUTE!), or is unable to engage (they're already all-in!). It also speaks to the committed nature of the supply side. 👎

Points of demand / supply

• The short term trend ribbon did its job well at 9019, but it looks like it can no longer hold the supply back...

• The next point of demand is 8940, but failing that, it's next at the long term uptrend ribbon at 8786-8859.

View

The Analysis doesn't look great here either. I Accept that my optimism got the better of me (again! 🤦). As for Acting, I'm going to heed the warning signs and cut my portfolio risk back to 2/3RP. 🪓

Key Levels

9221-9297 is the key zone of supply to contend with, while 9019 is the go-no-go point for the current short term uptrend.

(Glossary of acronyms! Old Tin Pot (OTP): S&P/ASX 200 | MOTN: More Often Than Not | FOMO: Fear Of Missing Out | HOFU: Holding On For Upside | BTD: Buy The Dip | NUTE: No Urgency To Enter | FOHO: Fear Of Holding On | STR: Sell The Rally | RP: Risk Position | FFS: Fund Flow Shenanigans!)

***CHARTWATCH LIVE WEBINARS — NEW VIDEO DROPPED!!! 📺🍿***

Copper is rising, ASX copper stocks are surging – how high can BHP, RIO and SFR go? Plus: Lithium 🔋

TODAY

• AUS July Household Spending

  • Result:

    • +1.1% m/m vs +0.4% m/m forecast and +0.8% m/m in June

    • +7.0% p.a. with spending increased for all nine spending categories surveyed by the ABS

    • These are inflation adjusted (also seasonally adjusted) numbers — so the spending increase isn't simply higher prices... it's Aussies opening their wallets! 💰💰💰

    • The RBA keeps warning of "too much demand chasing too few goods and services"... well after yesterday's CPI inflation shocker... they'll be likely taking a very dim view at next month's Board meeting (% = ⬆️!)

LATER THIS WEEK

FRIDAY

• ALL DAY USA Day 1 Jackson Hole Symposium

SATURDAY

• ALL DAY USA Day 2 Jackson Hole Symposium

  • 12:00 Fed Chairman Warsh Speaks