Morning Wrap: Nasdaq pulls ahead while Dow drops, gold rips higher, ASX to fall

The Nasdaq finished in positive territory while the blue-chip Dow declined, Salesforce and Costco post mixed earnings, Eurozone unemployment hits an all-time low, US manufacturing activity falls into contraction for the first time in two-and-a-half years and gold rallies.

Let's dive in.

MARKETS

US markets were choppy after a massive Powell Pivot inspired rally on Thursday. There was a lingering appetite for risk with the Nasdaq finishing in positive territory while the blue-chip Dow declined.  

• Growth-heavy sectors like Communication Services and Technology outperformed

• Defensive and value-oriented sectors like Real Estate, Financials and Staples led to the downside

• Energy slumped as oil prices reversed gains of more than 3%

• Bond yields continued to fall post Powell speech, with the US 2-year Treasury yield falling to a 1-month low of 4.24% from 4.48% just two days ago

• 49% of stocks advanced

• 40% of stocks trade below their 200-day moving average (42% on Thursday, 43% a week ago) 

STOCKS

Costco (-6.7%) posted weaker-than-expected sales figures for November, up 5.7% to US$19.2bn. The growth rate was below what was seen in October and September.

Salesforce (-9.0%) shares tumbled after the unexpected departure of co-CEO Bret Taylor. In parallel, the company posted its third quarter earnings, which beat earnings expectations.

• “You recall that last quarter we noted measured customer buying behaviour really beginning in July. This led to elongated sales cycles, additional deal approval layers, and deal compression, particularly in enterprise.” - CFO Amy Weaver

• “As Q3 progressed, we saw an even more challenging buying environment, driving intense customer scrutiny on every investment dollar to ensure the highest return possible. During Q3, this behaviour was most pronounced in our U.S. and major European markets, while Japan remains more resilient.” - CFO Amy Weaver 

• “From an industry perspective, the most impacted was retail, consumer goods, and communications, and media, while the more resilient for travel and hospitality, manufacturing, automotive, and energy. And from a product perspective, we continue to see customer spending pressure in commerce and marketing.” - CFO Amy Weaver 

ECONOMY

Eurozone unemployment unexpectedly fell to 6.5% in October from 6.6% in September.

• Analysts were expecting unemployment to stay flat month-on-month

• Lowest reading since the series began in 1998

• “From here on, the labour market is set for a slowdown given our expectations of a winter recession … Given labour shortages, however, we don’t expect unemployment to increase much.” ING

US personal spending rose 0.8% month-on-month in October from 0.6% in September. 

• In-line with analyst expectations

• "Looking into the fourth quarter, the US economy is expected to show some resilience – expanding by around 2% – as consumer spending is currently tracking 3%, while business investment is looking to hold up reasonably well.” - TDBank

US manufacturing PMI was 49.0 in November from 5.02 in October.

• Below analyst expectations of a fall to 49.8

• The 50 point level separates contraction from expansion

• This is the first time factory activity has contracted in two-and-a-half years

COMMODITIES

Iron ore futures rose 0.2% to US$102.2 a tonne.

• “New home sales by the 100 biggest producer developers dropped by 26% y/y to CNY559bn in November, according to CRIEC data.” - ANZ senior commodity analyst, Daniel Hynes

Brent crude is currently trading around breakeven, down from session highs of 3.1% or US$89.3 a barrel.

• “Energy traders are eagerly awaiting an OPEC+ decision that could see them keep output steady or deliver a small cut. If China didn’t signal a slight covid easy shift, the probability of a production cut would have been much greater.” - Oanda senior market analyst, Ed Moya

Gold enjoyed another big rally thanks to Wednesday’s Powell speech. The yellow is up 3.5% in the last three sessions, close to a five month high. 

• “Leading labor indicators have been mixed but overall support a weaker pace of hiring. ​ Unless the nonfarm payroll report shows companies are clearly still in hiring mode, gold could remain in rally mode.” - Moya 

QUICK BITES

• A close above the 200: "S&P 500 closed above the 200-day moving average for first time in more than 7 months. Looking at the previous 13 times (since '50) it was beneath this trendline for 6 months or more and closed above showed only once did it move back to new lows. Up an average 18.8% year later and higher 12/13 times." Ryan Detrick, Chief Market Strategist at Carson Investment Group

Source: Carson Investment Group

Major US benchmarks were rather choppy, perhaps seeing the need of a post-Powell pivot breather. The S&P 500 finished slightly lower, above its 200-day moving average and sitting just below the key trendline.

S&P 500 chart (Source: TradingView)

Our Wraps have observed a rather consistent outperformance of the Dow, so it was rather interesting to see the Nasdaq pull ahead. Has the Powell pivot inspired a change of attitude towards richly valued pockets of the market?

SPI futures see the ASX 200 opening -0.2% lower. Does the local sharemarket also join its US peers in an uneventful and choppy session?

XJO chart (Source: TradingView)

Sectors to watch

Gold: Gold has seen a change of character after the softening US inflation print in early November and latest comments from Powell. Gold has had plenty of rallies that fizzled in the past eight months but now its finally had a push above the 200-day, followed by a few days of consolidation and another rally. Higher spot prices overnight could see more positive flow for local gold names, which have been running pretty hard.

Gold spot price (Source: TradingView)

Stocks going ex-dividend over the next week:

• Fri: None

• Mon: Incitec Pivot (IPL) 

• Tue: None 

• Wed: Civmec (CVL) 

• Thu: Hitech Group (HIT), Fisher & Paykel (FPH), Select Harvests (SHV) 

ASX corporate actions occurring today:

• Dividends paid: None

•  Listing: Taiton Resources (T88) 

Other things of interest (AEDT):

• 10:00 am: Korea inflation rate

• 11:30 am: Australian home loans

• 1:00 pm: RBA Lowe speech

• 12:30 am: US unemployment rate