Evening Wrap: Quiet on surface, but great day for energy, discretionary, lousy for gold, Pilbara Minerals

The S&P/ASX 200 closed 3.7 points higher, up 0.05%.

On the surface, it appeared to be a very quiet day on the ASX to start the week. But scratch the surface, and there was plenty to both cheer and lament. In the cheer column, Energy, Consumer Discretionary and Health were generally very solid. Lamentable included Materials stocks, particularly Gold, but iron ore and lithium weren't far behind. For example, Pilbara Minerals (ASX: PLS) gave back just over 3% of it's recent short covering rally, leaving die hard fans wondering...Is that it? 🤔

Let's dive in.

Markets

ASX 200 Session Chart

Just another manic Monday...

The S&P/ASX200 (XJO) finished points higher at 7,198.6, 0.12% from its session low and 0.39% from its high. In the broader-based S&P/ASX 300 (XKO), advancers lagged decliners by 123 to 147.

The S&P/ASX 200 Energy Sector (XEJ) +1.2% was again the best performing sector today, as the sector bathed in the warm afterglow of the proposed Woodside Energy (ASX: WDS) and Santos (ASX: STO) merger. Today, investors saw particular value in Strike Energy (ASX: STX) +7.8%, with the WA-based junior gas producer topping the sector leaderboard.

Some energy stocks are still showing substantial 1-year declines despite the recent rally

Also doing well today was the S&P/ASX 200 Consumer Discretionary Sector (XDJ) +0.6%. Expectations the RBA is done hiking rates and anticipation of a strong Christmas trading period buoyed retailers like Lovisa Holdings (ASX: LOV) and Nick Scali (ASX: NCK), while positive comments from broker Citi assisted auto stocks like GUD Holdings (ASX: GUD), and Eagers Automotive (ASX: APE).

Retail stocks are hoping for a very merry Christmas

Doing it tough today was the S&P/ASX 200 Materials Sector (XMJ) -0.6% which failed to capitalise on stronger base metals prices on the London Metals Exchange on Friday. Iron ore prices were a touch lower in Singapore today, which probably didn't help, but the blame lay fairly and squarely at the feet of gold stocks as the S&P/ASX All Ordinaries Gold Sub-Index (XGD) dropped -1.9%. Gold prices couldn't shake off that big reversal candle I discussed in Friday's Evening Update, and stocks paid the price today.

Gold stocks showed plenty of promise up until the start of the month, but have since failed to fire

One materials sector chart which caught my eye today was market darling Pilbara Minerals (ASX: PLS) which fell 3.0%. Given Pilbara had rallied over 22% from Wednesday's low to today's high, I'd suggest this is just a necessary pullback.

The reason for Pilbara's rally was a rebound in GFEX lithium carbonate futures over the last three trading sessions - two of which were closed early due to limit up moves. Pilbara's short sell interest, which peaked above 20%, has been well publicised and I'm pretty sure the recent pop is largely to do with shorts scrambling to cover back.

I'll be doing a comprehensive technical review of the ASX lithium sector in ChartWatch tomorrow

The big question for all you Pilbara faithful is this: Sure it's a big positive shorts are covering back, but after they're done, will there be anyone left to buy Pilbara to spur another leg of this rally? FYI, I'll be doing a comprehensive technical review of the ASX lithium sector in ChartWatch tomorrow - so I might just have some answers for you!

Economy

There weren't any major data releases today.

What to watch out for...

RBA Gov Bullock is due to speak at the AusPayNet Summit, in Sydney at 9:20am AEDT tomorrow, then at 10:30am AEDT we'll get the Westpac Consumer Sentiment Survey Index, and at 11:30am AEDT the NAB Business Confidence Index.

Latest News

Interesting Movers

Trading higher

• +7.8% Strike Energy (STX) - Energy sector M&A activity

• +7.4% Smartgroup Corporation (SIQ) - South Australian Government contract win and trading update

• +5.1% Regal Partners (RPL) - Lodgement of Prospectus for Acquisition of PM Capital

• +4.5% Silex Systems (SLX) - Rebound in several uranium stocks on stronger uranium price

• +3.9% Piedmont Lithium Inc (PLL) - Continued rally in several lithium stocks on firmer lithium carbonate price

• +3.9% Credit Corp Group (CCP) - No news

• +3.9% Australian Ethical Investment (AEF) - M&A activity in funds management industry (SOL vs PPT)

• +3.7% Beach Energy (BPT) - Energy sector M&A activity

• +3.6% Ricegrowers (SGLLV) - No news

• +3.4% Garda Property Group (GDG) - No news

• +3.3% Magellan Financial Group (MFG) - M&A activity in funds management industry (SOL vs PPT)

• +3.3% MA Financial Group (MAF) - M&A activity in funds management industry (SOL vs PPT)

Trading lower

• -14.0% Latin Resources (LRS) - Correction in several lithium stocks after sharp rally post recovery in lithium carbonate futures price

• -8.7% The Star Entertainment Group (SGR) - No news, 12-month lows

• -7.7% Bellevue Gold (BGL) - Correction in several gold stocks on weaker gold price

• -5.7% Core Lithium (CXO) - Correction in several lithium stocks after sharp rally post recovery in lithium carbonate futures price

• -5.6% Liberty Financial Group (LFG) - No news

• -5.6% Zip Co. (ZIP) - Likely pullback from strong gains last week

• -5.4% Perenti (PRN) - Update and FY24 Guidance

• -5.4% West African Resources (WAF) - Correction in several gold stocks on weaker gold price

• -5.3% Fineos Corporation Holdings (FCL) - No news

• -5.2% De Grey Mining (DEG) - Correction in several gold stocks on weaker gold price

• -4.7% Chalice Mining (CHN) - Correction in several gold stocks on weaker gold price

• -4.5% Westgold Resources (WGX) - Correction in several gold stocks on weaker gold price

Broker Notes

• AGL Energy (AGL) retained at accumulate at Ord Minnett; Price Target: $12.80

• ANZ Group Holdings (ANZ) retained at neutral Macquarie; Price Target: $24.00

• ARB Corporation (ARB) upgraded to buy from sell at Citi; Price Target: $35.18

• Bapcor (BAP) retained at neutral Citi; Price Target: $6.40

• Beach Energy (BPT) retained at neutral Macquarie; Price Target: $1.50

• City Chic Collective (CCX) retained at buy at Citi; Price target $0.62

• Commonwealth Bank of Australia (CBA) retained at underperforrm Macquarie; Price Target: $87.50

• Chalice Mining (CHN) retained at buy Bell Potter; Price Target: $5.40

• Champion Iron (CIA) retained at outperform at Macquarie; Price target $9.20

• Coronado Global Resources (CRN) retained at outperform at Macquarie; Price target $2.50

• Genesis Minerals (GMD)

  • Downgraded to neutral from outperform at Macquarie; Price target $2 from $1.90

  • Initiated hold at Ord Minnett; Price Target: $1.70

• Genetic Signatures (GSS) retained at buy Bell Potter; Price Target: $0.83

• Golden Road Resources (GOR) downgraded to neutral from outperform at Macquarie; Price target $2

• G.U.D. Holdings (GUD) retained at buy Citi; Price Target: $13.27

• Mount Gibson Iron (MGX) retained at outperform at Macquarie; Price target $0.55 from $0.50

• National Australia Bank (NAB) retained at neutral Macquarie; Price Target: $28.00

• Santos (STO)

  • Retained at buy Citi; Price Target: $8.25

  • Retained at outperform Macquarie; Price Target: $9.60

• The Lottery Corporation (TLC) retained at buy Citi; Price Target: $5.60 from $5.70

• Westpac Banking Corporation (WBC) retained at neutral Macquarie; Price Target: $20.50

• Woodside Energy Group (WDS)

  • Retained at sell Citi; Price Target: $26.50

  • Retained at neutral Macquarie; Price Target: $31.00

Scans