Market Wraps

Evening Wrap: ASX 200 swept up in global markets tantrum over Fed interest rates pivot, gold, tech, banks, mining stocks smashed

Thu 19 Dec 24, 6:10pm (AEDT)

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Share article

The S&P/ASX 200 closed 141.2 points lower, down 1.70%.

You've no doubt read the headlines as to how the market has reacted poorly to the Federal Reserve's FOMC meeting last night, where interest rates were cut by 0.25% (typically something the market cheers). However, there was plenty of stuff in the revised December Economic Projections which spooked investors.

We have full and detailed analysis of exactly what occurred in markets over the last 24-hours, both good and bad for stocks, and why the sharp downturn in share prices was both sensible and appropriate.

Click/scroll through for the usual reporting of the major sector and stock-specific moves, the broker responses to them, as well as all of the key upcoming economic data in tonight's Evening Wrap.

Also, I have detailed technical analysis on the NASDAQ and the S&P/ASX 200 in today's ChartWatch.

Let's dive in!


Today in Review

Thu 19 Dec 24, 5:04pm (AEDT)

Name Value % Chg
Major Indices
ASX 200 8,168.2 -1.70%
All Ords 8,415.0 -1.68%
Small Ords 3,067.0 -1.61%
All Tech 3,794.3 -2.54%
Emerging Companies 2,228.9 -1.39%
Currency
AUD/USD 0.6219 +0.02%
US Futures
S&P 500 5,876.0 +0.06%
Dow Jones 42,380.0 +0.13%
Nasdaq 21,187.25 -0.15%
Name Value % Chg
Sector
Consumer Staples 11,740.9 -0.66%
Industrials 7,624.2 -0.68%
Utilities 8,748.2 -1.11%
Consumer Discretionary 3,944.9 -1.40%
Communication Services 1,640.3 -1.48%
Health Care 44,743.0 -1.67%
Energy 8,191.3 -1.71%
Real Estate 3,793.6 -1.72%
Financials 8,671.6 -1.89%
Materials 16,190.0 -2.02%
Information Technology 2,708.5 -2.52%

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Markets

XJO Intraday Chart 19 December 2024
ASX 200 Session Chart

The S&P/ASX 200 (XJO) finished 141.2 points lower at 8,168.2, 1.73% from its session high and 0.53% from its low. In the broader-based S&P/ASX 300 (XKO), advancers lagged decliners by a dismal 36 to 230.

You've no doubt read the headlines as to how the market has reacted poorly to the Federal Reserve's FOMC meeting last night, where interest rates were cut by 0.25% (typically something the market cheers).

However, there was plenty of stuff in the revised December Economic Projections which spooked investors – see the highlighted areas in the image below.

December vs September FOMC Economic Projections
December vs September FOMC Economic Projections

In summary:

  • Economic growth ⬆️

  • Unemployment ⬇️

  • Inflation expectations ⬆️

  • Interest rate level forecast ⬆️ (i.e., fewer rate cuts by approximately 0.50% through to the end of 2026)

It's that last point that caused the ruckus. That's it. The level of the Fed's official interest rate is now likely to be 3.9% at the end of 2025 and 3.4% at the end of 2026. Compare this to the corresponding September values of 3.4% and 2.9%.

One line in a table in a document that was 17 pages long. Sure, markets got a 0.25% rate cut, but in reality it was a 0.50% rate hike.

All things considered, markets acted sensibly and accordingly. Really there should be no surprise as to what happened to stock prices over the past 24-hours, only justifiable surprise with respect to the catalyst.

In short: The Fed doesn't think it needs to cut rates as dramatically to support the US economy as it thought a few months ago.

Part of it is for a negative reason – "firmer" inflation expectations as Chairman Powell put it in his post meeting press conference (full details of key takeaways in Economy section below). Part of it is because he thinks the US economy is in "solid" shape. You know that because he used the word "solid" to describe the US economy several times. It stood out like a sore thumb, as did his other comments about his optimism for US economic growth going forward.

This last item, i.e., a stronger US economy, if it turns out to be the case...should be very, very good for stocks. We just need to have some confidence Mr. Powell is correct, but also get out of our systems the initial disappointment over last nights events.

It's like a ripping off a Band-Aid 🩹. It will sting for a bit at first...but the good news is it appears the wound beneath is healed 👍


ChartWatch

NASDAQ Composite Index

NASDAQ Composite Index chart 19 December 2024
The bears were right...Right? 🤔

The last time we covered the Comp was in ChartWatch in the Evening Wrap on 12 December.

In that update, coincidently the exact high point ever for the Comp, I noted: “Don’t fight the trend!

Following the trend on the Comp would have you correct roughly 99 times out of 100. Ok, that's a bit of an exaggeration, but my point is clear: Comp trend followers have done very well.

But alas, no trend follower I know (including myself) can predict the future. Trend followers, by definition, never see it coming.

But they don’t worry about that too much, because the X times out of 100 stat is usually north of X = 50.

If you decide to adopt my trend following approach, get used to getting it wrong. Possibly quite frequently (but I suggest well south of 50 out of 100!).

Hey, don't forget that those who don’t follow the trend get it wrong plenty too! (What’s their X out of 100?)

The trend did bend Wednesday. If you’ve been on social media, you’d think it was all Mr. Powell’s fault.

It wasn’t. He was just doing his job. If there is blame to be apportioned, it's with market participants who’s assumptions were so far out of kilter with the reality of what the Fed intends to do.

Market participants adjusted their collective assumptions yesterday (and on our market today). The balance between demand and supply shifted – and price changed.

That’s all that happened.

Ok, let’s do some technical analysis:

Short term trend = ⬆️ (Yes, still up! The short term trend ribbon is green, it’s still rising, the price has not closed below it, price action isn’t yet falling peaks and falling troughs…)

Long term trend = ⬆️ (No question here, the long term trend ribbon remains a picture of strength!)

Price action = Rising peaks and falling troughs (although the next, lower trough has not yet been set, it will inevitably be lower than the last one…remember: lower troughs = demand removal = consistent with supply-side control)

🕯️’s = Big ⬛ and low session close (a big supply-side signal here that cannot be ignored, it is a major warning signal that something isn’t right with the short term uptrend, that the demand-side did not want to get in the way of the wall of supply yesterday).

Put it all together, and we have a major ⚠️ signal. It is not a panic 😱 signal, however.

Now it’s all about confirmation.

Which comes first? 🤔

1. Confirmation the demand-side is still in control (watch for long white candles and or long downward pointing shadows, rising troughs, the short term trend ribbon acting as dynamic demand)? Or;

2. Confirmation the supply-side is taking even greater control (watch for further black candles and or upward pointing shadows, a confirming lower peak, a close below the short term uptrend ribbon)?

19366 is now the critical point of demand. We’re basically on it – so ideally we get a bounce quickly. Below 19366, 18598 awaits…

20205 is now the critical point of supply. It’s going to take some concerted efforts from the demand-side to rebuild the case to test that level any time soon.

S&P/ASX 200 (XJO)

S&P-ASX 200 (XJO) chart 19 December 2024
Demand zone holds for now 🙌

In many ways it's a bit of a ditto for the XJO.

I note the critical 8063-8149 demand zone appears to be holding for now (modest downward pointing shadow of today's candle)...However, I note it is a far worse short term trend here compared to the Comp – as was carefully noted in the last update from the Evening wrap on 17 December.

In that update, I suggested 8063-8149 was "inevitable" if the 8236 point of demand failed = ✅.

The short term trend is officially down here:

✅ The price is below the short term trend ribbon

✅ The ribbon is falling

✅ There is a peak smack bang at the short term trend ribbon demonstrating it is behaving as dynamic supply

✅ The price action is lower peaks and lower troughs, the candles are predominantly supply-side.

I reiterate, holding 8063-8149 is crucial, as is holding the long term uptrend ribbon which isn't far below.

In summary: Short term trend down, long term trend up = Smacks of neutrality for shorter term traders.

You know the drill here, as in what candles, price action, and trend ribbon activity is required to steady the ship – but also what will sink it. 💥🚢


Economy

Today

  • Federal Reserve FOMC Meeting and December Economic Projections update

    • Key points from Chairman Jerome Powell's post-meeting speech and press conference:

      • Economy continued to expand at a "solid" pace. Consumption is "strong". Housing sector has remained weak. GDP growth to remain "solid". Labour market conditions remain "solid".

      • Conditions in the labour market are "less tight". The labour market is not a major contributor to inflation. The labour market is not cooling in a concerning fashion.

      • Inflation has eased significantly, but remains somewhat elevated. Inflations expectations remain well-anchored.

      • Headline PCE should fall to 2.4% this year and 2.5% next year (Note: was 2.3% and 2.6% in the September update), falling to 2% target thereafter.

      • No preset course, will be data dependent. Summary of economic projections, "dot plot" forecasts the Fed's official rate will be 3.9% at the end of 2025 and 3.4% at the end of 2026. Higher than that predicted in September (3.4% and 2.9% respectively), and due to "firmer" inflation expectations.

      • The Fed lowered its estimate of the unemployment rate to 4.2% from 4.4% in the September update.

      • Over the longer term, the committee sees the “neutral” funds rate at 3%, 0.1 percentage point higher than the September update.

      • We're at a point where it's appropriate to slow our interest rate cuts.

      • There is "significant uncertainty" from expected policy changes (likely referring to Trump policy agenda).

      • "The US economy is just performing very, very well - substantially better than our global peer group. There's no reason to think a downturn is any more likely than it usually is. So the outlook is pretty bright for our economy".

      • "I feel very good about where the economy is. Honestly I'm very optimistic about the economy. We're in a really good place. Our policy is in a very good place, and I look forward to next year."

Later this week

Thursday

  • 17:00 UK Bank of England MPC Official Bank Rate (no change at 4.75% forecast)

Friday

  • 00:30 USA Final GDP September Qtr (+2.8% forecast vs +2.8% June Qtr)

  • 02:00 USA Existing Home Sales November (4.11 million forecast vs 3.96 million in October)

  • 12:15 CHN 1-yr & 5-yr Prime Rate (no change at 3.1% and 3.6% respectively)

Saturday

  • 00:30 Core PCE Price Index November (+0.2% m/m and 2.9% p.a. forecast vs +0.3% m/m and 2.8% p.a. in October)

  • 00:30 Personal Income & Personal Spending November (+0.2% m/m and +0.4% m/m in October & +0.5% m/m and +0.4% m/m in October respectively)


Latest News


Interesting Movers

Trading higher

  • +54.0% Mesoblast (MSB) - N and N, rise is consistent with prevailing short and long term uptrends, has been a recent regular Feature in ChartWatch ASX Scans Uptrends list 🔎📈

  • +7.6% Credit Corp Group (CCP) - No news, but to be fair, there wasn't any news for yesterday's massive plunge…suspect something to do with Fed rates decision

  • +6.6% Peninsula Energy (PEN) - Commencement of Production at Lance Project

  • +4.3% Insignia Financial (IFL) - No news, since yesterday's IFL Rejects Indicative Non-binding Proposal, consistent with recent volatility since speculation of take over, rise is consistent with prevailing short and long term uptrends, has been a recent regular Feature in ChartWatch ASX Scans Uptrends list 🔎📈

  • +4.0% Perenti (PRN) - Becoming a substantial holder, but just great to see the cream rising to the top on a day when the market is down ~2%, rise is consistent with prevailing short and long term uptrends, a regular Feature in ChartWatch ASX Scans Uptrends list 🔎📈

  • +3.0% Adairs (ADH) - No news, rise is consistent with prevailing short and long term uptrends, a regular Feature in ChartWatch ASX Scans Uptrends list 🔎📈

  • +3.0% Aroa Biosurgery (ARX) - No news, rise is consistent with prevailing short and long term uptrends, has been a recent regular Feature in ChartWatch ASX Scans Uptrends list 🔎📈

Trading lower

  • -25.0% 4DS Memory (4DS) - Capital Raising Update (usually management waits until after the price has gone up!)

  • -12.1% Deep Yellow (DYL) - Tumas Project Update - FID Status and Updated Ore Reserve Upgrades Tumas Project, fall is consistent with prevailing short and long term downtrends, has been a recent regular Feature in ChartWatch ASX Scans Downtrends list 🔎📈

  • -10.6% Megaport (MP1) - No news, long term downtrend re-established itself…

  • -9.0% Zip Co. (ZIP) - No news, just one of many casualties on a terrible day on the ASX!

  • -8.3% Westgold Resources (WGX) - Westgold Files Updated Technical Reports, but generally a tough day for ASX gold stocks on sharp drop in gold price last 24-hours

  • -6.5% Latin Resources (LRS) - No news, fall is consistent with prevailing short and long term downtrends, a regular Feature in ChartWatch ASX Scans Downtrends list 🔎📉

  • -5.9% Bannerman Energy (BMN) - No news, fall is consistent with prevailing short and long term downtrends, a regular Feature in ChartWatch ASX Scans Downtrends list 🔎📉

  • -5.8% Vault Minerals (VAU) - Plant upgrade to leverage strategic Leonora position, ditto tough day for ASX gold stocks…

  • -5.8% Vulcan Energy Resources (VUL) - No news, just one of many casualties on a terrible day on the ASX!

  • -5.8% Spartan Resources (SPR) - No news, ditto tough day for ASX gold stocks…

  • -5.6% Block (SQ2) - No news, tracked US listing...just one of many casualties on a terrible day on the ASX!

  • -5.3% Pinnacle Investment Management Group (PNI) - No news, fund manager with plenty of market exposure...just one of many casualties on a terrible day on the ASX!

  • -5.2% Polynovo (PNV) - No news, fall is consistent with prevailing short long term downtrend, long term trend is transitioning from up to down, watch out for it in tomorrow's ChartWatch ASX Scans Downtrends list 🔎📉

  • -5.2% James Hardie Industries (JHX) - No news, plenty of US market exposure...just one of many casualties on a terrible day on the ASX!


Broker Notes

  • Abacus Group (ABG)

    • Retained at buy at Citi; Price Target: $1.35

  • Amcor (AMC)

    • Retained at outperform at Macquarie; Price Target: $18.00 from $18.04

  • Abacus Storage King (ASK)

    • Retained at buy at Citi; Price Target: $1.40

  • Burgundy Diamond Mines (BDM)

    • Retained at buy at Bell Potter; Price Target: $0.18 from $0.22

  • BWP Trust (BWP)

    • Retained at sell at Citi; Price Target: $3.40

  • Codan (CDA)

    • Initiated at buy at Goldman Sachs; Price Target: $18.00

  • Charter Hall Long Wale Reit (CLW)

    • Retained at neutral at Citi; Price Target: $3.70

  • Civmec (CVL)

    • Initiated at buy at Bell Potter; Price Target: $1.75

  • Dexus (DXS)

    • Retained at neutral at Citi; Price Target: $7.30

  • Goodman Group (GMG)

    • Retained at buy at Citi; Price Target: $40.00

  • Growthpoint Properties Australia (GOZ)

    • Retained at buy at Citi; Price Target: $2.60

  • GPT Group (GPT)

    • Retained at buy at Citi; Price Target: $4.90

  • Ingenia Communities Group (INA)

    • Retained at buy at Citi; Price Target: $6.15

  • James Hardie Industries (JHX)

    • Initiated at buy at Bell Potter; Price Target: $64.00

  • Lifestyle Communities (LIC)

    • Retained at neutral at Citi; Price Target: $9.50

  • Lendlease Group (LLC)

    • Retained at buy at Citi; Price Target: $8.00

  • Mirvac Group (MGR)

    • Retained at neutral at Citi; Price Target: $2.20

  • Medibank Private (MPL)

    • Retained at neutral at Macquarie; Price Target: $3.85

  • National Australia Bank (NAB)

    • Retained at sell at UBS; Price Target: $37.50

  • NIB (NHF)

    • Retained at underweight at Macquarie; Price Target: $5.45

  • National Storage Reit (NSR)

    • Retained at buy at Citi; Price Target: $2.70

  • Paladin Energy (PDN)

    • Retained at buy at Canaccord Genuity; Price Target: $15.20

  • Peninsula Energy (PEN)

    • Retained at buy at Canaccord Genuity; Price Target: $3.20

  • Percheron Therapeutics (PER)

    • Downgraded to hold from buy at Bell Potter; Price Target: $0.01 from $0.14

  • Patriot Battery Metals (PMT)

    • Retained at buy at Canaccord Genuity; Price Target: $0.90 from $1.05

    • Retained at buy at Citi; Price Target: $0.50 from $0.70

  • QBE Insurance Group (QBE)

    • Retained at buy at UBS; Price Target: $21.50

  • Qualitas Real Estate Income Fund (QRI)

    • Retained at buy at Citi; Price Target: $1.60

  • Qube (QUB)

    • Retained at accumulate at Ord Minnett; Price Target: $4.09 from $4.11

  • Region Group (RGN)

    • Retained at buy at Citi; Price Target: $2.60

  • Scentre Group (SCG)

    • Retained at neutral at Citi; Price Target: $3.60

  • Stockland (SGP)

    • Retained at buy at Citi; Price Target: $5.80

  • Santana Minerals (SMI)

    • Retained at buy at Canaccord Genuity; Price Target: $1.22

  • SRG Global (SRG)

    • Downgraded to accumulate from buy at Ord Minnett; Price Target: $1.32 from $1.13

  • Syrah Resources (SYR)

    • Retained at outperform at Macquarie; Price Target: $0.26 from $0.32

  • Vicinity Centres (VCX)

    • Retained at neutral at Citi; Price Target: $2.20

  • Westgold Resources (WGX)

    • Retained at buy at Canaccord Genuity; Price Target: $4.75 from $4.50

  • Xero (XRO)

    • Retained at buy at Citi; Price Target: $198.00

    • Retained at hold at Ord Minnett; Price Target: $180.00


Scans

Top Gainers

Code Company Last % Chg
ERG Eneco Refresh Ltd $0.022 +120.00%
MSB Mesoblast Ltd $3.05 +54.04%
MNC Merino & Co. Ltd $0.33 +22.22%
SCP Scalare Partners ... $0.20 +21.21%
BRX Belararox Ltd $0.18 +20.00%
View all top gainers

Top Fallers

Code Company Last % Chg
4DS 4DS Memory Ltd $0.06 -25.00%
NNL Nordic Resources Ltd $0.07 -22.22%
FNR Far Northern Reso... $0.11 -21.43%
PVE Po Valley Energy Ltd $0.03 -21.05%
ALV Alvo Minerals Ltd $0.04 -20.00%
View all top fallers

52 Week Highs

Code Company Last % Chg
ERG Eneco Refresh Ltd $0.022 +120.00%
MSB Mesoblast Ltd $3.05 +54.04%
ROG Red Sky Energy Ltd $0.012 +20.00%
PVL Powerhouse Ventur... $0.092 +15.00%
BTC BTC Health Ltd $0.071 +9.23%
View all 52 week highs

52 Week Lows

Code Company Last % Chg
4DS 4DS Memory Ltd $0.06 -25.00%
ALV Alvo Minerals Ltd $0.04 -20.00%
PVW PVW Resources Ltd $0.013 -18.75%
HWK Hawk Resources Ltd $0.02 -16.67%
PR2 Piche Resources Ltd $0.082 -16.33%
View all 52 week lows

Near Highs

Code Company Last % Chg
GCI Gryphon Capital I... $2.06 +0.49%
VVLU Vanguard Global V... $73.62 -1.55%
AYLD Global X S&P/ASX ... $10.66 -0.93%
BILL Ishares Core Cash... $100.59 +0.01%
GLDN Ishares Physical ... $33.43 +0.18%
View all near highs

Relative Strength Index (RSI) Oversold

Code Company Last % Chg
CUV Clinuvel Pharmace... $11.94 -0.50%
SEK Seek Ltd $23.41 -1.80%
DUG DUG Technology Ltd $1.31 -6.43%
NSC Naos Small Cap Op... $0.385 -2.53%
UTIP Betashares Inflat... $25.29 -0.63%
View all RSI oversold

Written By

Carl Capolingua

Content Editor

Carl has over 30-year's investing experience, helping investors navigate several bull and bear markets over this time. He is a well respected markets commentator who specialises in how the global macro impacts Australian and US equities. Carl has a passion for technical analysis and has taught his unique brand of price-action trend following to thousands of Aussie investors.

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