Overnight – Stocks squeeze out record highs ahead of Fed update
Stocks squeezed out a record high overnight, marking a positive start to the holiday-shortened week as investors adopted a “wait-and-see” attitude, ahead of the Federal Reserve’s January meeting minutes and upcoming retail earnings reports.
The Federal Reserve’s stance on interest rates remains a key focus for investors. Several Fed policymakers, including Philadelphia Fed President Patrick Harker and Governors Michelle Bowman and Christopher Waller, have indicated that they believe the current economic strength and elevated inflation warrant holding interest rates steady for now. The upcoming minutes will be closely scrutinized for clues about the central bank’s future policy direction, especially in light of recent data showing price growth gaining momentum and weaker-than-expected retail sales.
Fourth-quarter earnings season is nearing its conclusion, with 74% of the 383 S&P 500 companies that have reported so far posting better-than-expected results. Analysts now project fourth-quarter S&P 500 earnings growth of 15.3% year-on-year, a significant increase from the 9.6% estimate at the beginning of January. In individual stock news, Intel shares jumped about 16% following reports that semiconductor giants Broadcom and Taiwan Semiconductor Manufacturing Co. were exploring potential deals that could split the U.S. chipmaker in two.
Meanwhile, geopolitical developments continue to influence market sentiment. Officials from the U.S. and Russia are holding crucial negotiations in Saudi Arabia on a potential deal to halt the war in Ukraine. These discussions mark a possible thawing in relations between Washington and Moscow, which have been strained since the conflict began in early 2022. However, the absence of Ukraine and its European allies from these talks has raised concerns, with Kyiv stating that no peace deal can be secured on its behalf.
ASX SPI 8439 (-0.01%)
Yesterdays reluctant/hawkish cut from the RBA may weigh on the interest rate sensitive sectors of the market as no further cuts are on the horizon. NAB is set to provide a first-quarter trading update on Wednesday morning, with results pending from, among others, Santos, Goodman Group, James Hardie, Cleanaway, Iluka Resources and Stockland.
It’s meeting day at the Reserve Bank of New Zealand, with policymakers expected to approve a third consecutive 50 basis point rate cut.
Company Specific
- Goodman Group – has announced a $4 billion equity capital raise to accelerate growth in its data centre operations. The company expects to issue 119.4 million new shares at a target price of $33.50 per share. That will include a share purchase plan intended to raise up to $400 million from existing shareholders.
- James Hardie – suffered a drop in profits for the three months through December because of declines in volumes in a tough market. Chief executive Aaron Erter said net profit fell 15 per cent to $US154 million.
- Cleanaway, has increased its interim dividend after generating a 12.2 per cent rise in earnings before interest and tax to $195.2 million for the first half.
- National Australia Bank – said its cash earnings for the first quarter of $1.74 billion was down 2 per cent on the average of its two previous quarters, citing a “small decline in net interest margin” due to higher funding costs and competition in lending and deposits.
- Corporate Travel – first-half profit dropped a third after flagged issues with its European division’s travel booking and accommodation business. Underlying net profit sank by a third to $38.7 million on a 6 per cent decline in revenue to $342.8 million.
