Evening Wrap: ASX 200 slumps as tanty over rate cuts hits tech, discretionary and property, uranium stocks higher

Thump. That's the sound of Aussie stocks coming back to earth. And most of us would probably say: Well...Duh!

I mean, hands up if you actually thought the Federal Reserve in the US was going to cut rates three times this year? Yeah, just as I thought. Nobody.

But this is what markets do...they get all excited about something (usually interest rate cuts), and then all miserable when reality suddenly sets in.

Oh well...it's time for your daily dose of reality...so...

Let’s dive in!

Markets

ASX 200 Session Chart

The S&P/ASX 200 (XJO) finished 105.4 points lower at 7,782.5, 1.45% from its session high and just 0.15% from its low. In the broader-based S&P/ASX 300 (XKO), advancers beat decliners by 41 to 235.

So, it was a sizeable and broad-based move which closed relatively near the low of the session. This is usually a good indication there's more selling to come.

Only Utilities (XUJ) (+0.16%) and Energy (XEJ) (+0.05%) escaped the carnage today, but neither was up very much, and to be fair, there’s plenty of overlap across these sectors.

Looking at the two sectors' best performers, uranium and coal stocks featured. Uranium stocks are following a similar path as global sector leader Cameco (NYSE: CCJ), whilst coal stocks are enjoying a bounce in key coal futures contracts.

More generally, the sector is being helped by rising crude oil prices which are now trading at 5-month highs, and a third straight session of gains in natural gas prices.

Today’s best of the best

Hardest hit today were the Information Technology (XIJ) (-3.9%), Real Estate Investment Trusts (XPJ) (-3.3%), and Consumer Discretionary (XDJ) (-2.1%) sectors. Why were these three in particular so harshly dealt with?

US benchmark bond yields, and therefore market rates have risen in the last two sessions, hurting stock prices

That’s easy, they’re the three most interest rate sensitive. Market yields, particularly in the USA, are back on the rise over the last couple of sessions due to a paring back in the expected pace and magnitude of Federal Reserve interest rate cuts. This means stocks with typically high PE's or no PEs (tech), reliant on consumer spending (discretionary), or just plain have a great deal of debt (property), are on the chopping block.

Today’s worst of the worst

ChartWatch

S&P/ASX 200 (XJO)

Big black candles are never a good look...

Big black candles are never a good look, particularly those which wipe out a few day's gains. But, we've had these in the recent past and have recovered from them.

The short term trend remains up, as does the long term trend. The price action is still rising peaks and rising troughs, which indicates supply removal and buy the dip – both are consistent with prevailing demand-side control.

I suggest there's no need to panic until we see an increase in the frequency and severity of supply-side candles (i.e., those with black bodies and or upward pointing shadows), a transition to falling peaks and falling troughs (i.e., indicating a switch to sell the rally and demand removal), and/or a close below the short term trend ribbon.

Slightly bigger picture, the key historical demand zone between 7585 and 7591 is key. A close below here and the short term trend is well and truly transitioned to down. 7911 is now the key point of supply. The party is on hold until we can close back above this level.

Tomorrow's candle is also important. Ideally we see a swift demand-side response to today's selling, and manifest this as a large white candle with a close at or near the high of the session.

We don't want to see a confirming black candle(s) or candle(s) with an upward pointing shadow(s), particularly if this high and the highs of subsequent sessions cannot breach above today's mid-point.

Economy

Today

• CHN Caixin Services PMI

  • 52.7 vs 52.5 forecast and 52.5 previous

  • Readings above 50 indicate growth, i.e., growth was better than expected

  • Follows on from stronger than expected Caixin Manufacturing PMI on Monday (51.1 actual vs 51.0 forecast and 50.9 previous)

Later this week

Wednesday

• 20:00 EU Core CPI (+3.0% forecast vs +3.1% previous)

• 23:15 USA ADP Non-Farm Employment Change (148K forecast vs 140K previous)

Thursday

• 01:00 USA ISM Services PMI (52.8 forecast vs 52.6 previous)

• 03:10 USA Fed Chair Powell Speaks

Friday

• 23:30 USA March employment data

  • Non-Farm Employment Change (+205K forecast vs 275K previous)

  • Unemployment Rate (3.9% forecast vs 3.9% previous)

  • Average Hourly Earnings m/m (+0.3% forecast vs +0.1% previous)

Latest News

Interesting Movers

Trading higher

• +7.1% Pantoro (PNR) - No news, rise is consistent with prevailing short term trend, long term trend is transitioning from down to up

• +7.0% Integral Diagnostics (IDX) - No news, rise is consistent with prevailing short term trend

• +5.2% Ramelius Resources (RMS) - Record quarterly gold production for Ramelius, rise is consistent with prevailing short term trend, long term trend is transitioning from down to up

• +5.2% Qoria (QOR) - No news, rise is consistent with prevailing short term trend, long term trend is transitioning from down to up

• +5.1% West African Resources (WAF) - WAF 2023 Sustainability Report, rise is consistent with prevailing short and long term uptrends

• +4.4% Brainchip Holdings (BRN) - No news, trying to bounce off long term trend ribbon

• +3.9% Resimac Group (RMC) - No news, trying to bounce off long term trend ribbon

• +3.8% WA1 Resources (WA1) - No news, extending bounce from yesterday, trying to re-establish short term uptrend

• +3.8% Lotus Resources (LOT) - No news, broad ASX uranium sector strength reflecting strength in Cameco (NYSE: CCJ) on Tuesday and small rise in uranium futures price, rise is consistent with prevailing short and long term uptrends

• +3.7% Clinuvel Pharmaceuticals (CUV) - No news, extending bounce from yesterday

• +3.4% Regal Partners (RPL) - No news, rise is consistent with prevailing short term trend, long term trend is transitioning from down to up

• +3.2% Pacific Current Group (PAC) - No news, rise is consistent with prevailing short and long term uptrends

• +2.9% Bannerman Energy (BMN) - No news, broad ASX uranium sector strength reflecting strength in Cameco (NYSE: CCJ) on Tuesday and small rise in uranium futures price, rise is consistent with prevailing short and long term uptrends

• +2.7% Red Hill Minerals (RHI) - No news, rise is consistent with prevailing short and long term uptrends

• +2.7% Servcorp (SRV) - No news, rise is consistent with prevailing short and long term uptrends

• +2.6% Emerald Resources (EMR) - No news, rise is consistent with prevailing short and long term uptrends

Trading lower

• -14.8% Westgold Resources (WGX) - Q3, FY24 Production Update

• -7.0% Playside Studios (PLY) - No news, general tech sector weakness, closed below short term uptrend ribbon

• -6.8% Mesoblast (MSB) - No news, modest pullback after yesterday's monster 71% gain

• -6.5% Sigma Healthcare (SIG) - Change in substantial holding from HMC (decrease)

• -6.2% Credit Corp Group (CCP) - No news, general weakness in interest rate sensitive stocks (like tech, consumer discretionary, property etc.)

• -5.8% Stanmore Resources (SMR) - No news, fall is consistent with prevailing short term downtrend, long term trend is transitioning from up to down

• -5.7% Xero (XRO) - No news, general weakness in interest rate sensitive stocks (like tech, consumer discretionary, property etc.)

• -5.5% Ridley Corporation (RIC) - Ex-dividend 4.4 cents fully franked

• -5.4% Latin Resources (LRS) - No news, fall is consistent with prevailing short term downtrend, long term trend is transitioning from up to down

• -5.4% Arcadium Lithium (LTM) - No news, fall is consistent with prevailing short and long term downtrends

• -5.2% Codan (CDA) - No news, general weakness in interest rate sensitive stocks (like tech, consumer discretionary, property etc.)

• -5.2% Neuren Pharmaceuticals (NEU) - No news, high PE / no PE growth stocks out of favour today

• -5.1% OOH!Media (OML) - No news, general weakness in interest rate sensitive stocks (like tech, consumer discretionary, property etc.)

• -5.1% IPD Group (IPG) - No news, fall is consistent with prevailing short and long term downtrends

• -5.0% Wisetech Global (WTC) - No news, general weakness in interest rate sensitive stocks (like tech, consumer discretionary, property etc.)

Broker Notes

• Ainsworth Game Technology (AGI): Retained at outperform at Macquarie; Price Target: $1.45

• Aristocrat Leisure (ALL): Retained at outperform at Macquarie; Price Target: $48.50

• ANZ Group (ANZ): Retained at underperform at Macquarie; Price Target: $27.00

• APM Human Services International (APM): Retained at accumulate at Ord Minnett; Price Target: $2.00

• Bendigo and Adelaide Bank (BEN): Retained at underperform at Macquarie; Price Target: $8.50

• Bellevue Gold (BGL): Downgraded to neutral from overweight at Barrenjoey; Price Target: $1.85 from $1.80

• Bank of Queensland (BOQ): Retained at underperform at Macquarie; Price Target: $4.75

• Beach Energy (BPT): Retained at outperform at Macquarie; Price Target: $2.05 from $1.95

• Commonwealth Bank of Australia (CBA): Retained at underperform at Macquarie; Price Target: $95.00

• Capricorn Metals (CMM): Upgraded to overweight from neutral at Barrenjoey; Price Target: $5.60 from $5.00

• Emerald Resources (EMR): Upgraded to neutral from underweight at Barrenjoey; Price Target: $3.00 from $2.90

• Gold Road Resources (GOR): Downgraded to neutral from outperform at Macquarie; Price Target: $1.70

• Insurance Australia Group (IAG): Retained at outperform at Macquarie; Price Target: $6.40

• Judo Capital Holdings (JDO): Retained at underperform at Macquarie; Price Target: $1.00

• Light & Wonder (LNW): Retained at outperform at Macquarie; Price Target: $176.00

• National Australia Bank (NAB): Retained at underperform at Macquarie; Price Target: $32.50

• Nufarm (NUF): Retained at accumulate at Ord Minnett; Price Target: $7.70

• Orora (ORA):

  • Retained at buy at Citi; Price Target: $2.86 from $3.16

  • Downgraded to neutral from positive at E&P; Price Target: $2.61

  • Retained at buy at Goldman Sachs; Price Target: $3.00 from $3.40

  • Retained at outperform at Macquarie; Price Target: $2.75 from $3.17

  • Retained at neutral at UBS; Price Target: $2.56 from $2.90

• Paladin Energy (PDN): Retained at buy at Bell Potter; Price Target: $1.65 from $1.60

• Synlait Milk (SM1):

  • Retained at hold at Bell Potter; Price Target: $0.66 from $0.75

  • Retained at underperform at Macquarie; Price Target: NZD$0.60 from NZD$0.68

• Strike Energy (STX): Retained at neutral at Macquarie; Price Target: $0.22 from $0.21

• Suncorp Group (SUN): Retained at outperform at Macquarie; Price Target: $17.00

• Treasury Wine Estates (TWE):

  • Retained at underweight at Barrenjoey; Price Target: $11.00 from $10.00

  • Retained at overweight at Jarden; Price Target: $14.50 from $12.90

  • Retained at buy at Jefferies; Price Target: $16.00 from $14.00

  • Retained at overweight at JP Morgan; Price Target: $14.30 from $12.60

• Westpac Banking Corporation (WBC): Retained at underperform at Macquarie; Price Target: $26.00

• Whitehaven Coal (WHC): Upgraded to overweight from neutral at Barrenjoey; Price Target: $7.70 from $7.15

Scans