The Match Out: Tech sell-off hits ASX, Coal stocks rally

A choppy and ultimately negative day for the ASX where buying in Energy & Materials was more than offset by a sharp pullback in Tech, although weakness was obvious right across the sectors negatively influenced by higher interest rates.

• The ASX 200 finished down -18pts/ -0.26% at 7099
• The Energy sector was best on ground (+1.33%) while Utilities (+0.93%) & Materials (+0.56%) were also strong.
• IT (-3.83%), Real-Estate (-2.49%) & Consumer Discretionary (-1.39%) the weakest links.
• Coal stocks rallied after a tough period – New Hope (ASX: NHC) +8.6% outperformed Whitehaven (ASX: WHC) +5.54% which was also the theme on the recent pullback.
• Tech shares were hurt today inline with their overseas peers - WiseTech (ASX: WTC) -3.35% , Xero (ASX: XRO) -5.26%, Altium (ASX: ALU) -4.86%
• Seek (ASX: SEK) -4.63% & REA Group (ASX: REA) -3% caught our eye for the wrong reasons – they hadn’t experienced the tech rally but they attracted the same degree of selling – not a good read-through.
• Cathie Wood from Ark Invest spoke at a Morgan Stanley event in Sydney today, and says the Federal Reserve will be forced into a total retreat because she believes inflation is transitory.
• Inflation she said, was a function of supply chain disruptions due to a “pandemic and a war” and would abate.
• “When history is the judge- Inflation [will be seen] as transitory and we’re going to see a much different monetary regime going forward.”
• Goldman’s was active around the retail sector overnight after they updated their Household Final Consumption Expenditure (HFCE) model…in other words, their top-down views changed which flowed through to their assumptions at the stock level, with generally reduced earnings forecasts – we look into this below.
• Premier Investments (ASX: PMV) -3.25% was one of the harder hit names after they downgraded to a sell.
• Metcash (ASX: MTS) +2.58% on the other hand rallied as GS turned ‘less bearish’, upgrading to a neutral.
• AGL Energy (ASX: AGL) hit a 2-year high today and traded above $10. While the stock is overbought in the short term, this is a very under-owned stock whose earnings are materially re-rating. It’s not too often that a large cap utility style stock rallies ~40% in 3 months, however, we intend to keep holding for now in the Market Matters Income Portfolio.
• Boral (ASX: BLD) -5.74% had the opposite view on inflation to Cathie Wood, saying high inflation is likely to persist for at least a year with more price rises for its cement, gravel and asphalt to come as the company offsets rising transport, wages and energy costs.
• Mark Landau from L1 Capital says QANTAS (ASX: QAN) is their No 1 Aussie Stock pick.
• Iron Ore was ~1.6% higher in Asia today supporting Fortescue (ASX: FMG) +1.69% & RIO +2.12%
• Gold was flat overnight before tracking up -US$5 in Asian trade, settled $US1946 at our close.
• Asian stocks were okay Hong Kong was flat, Japan fell -0.56% while China was up +0.42%
• US Futures are down marginally.

ASX 200 Chart - Intraday

ASX 200 Chart - Daily

Goldman’s tweaks view on retailers

The investment bank tweaked their views on the retail sector today and it had a decent bearing on performance. Their Household Final Consumption Expenditure (HFCE) model which is a macro-driven construct that looks to forecast spending pattens is flagging a softening backdrop. In that environment, they reviewed their outlook for 4 domestic discretionary retailers Premier Investments (ASX: PMV) - SELL, Super Retail (ASX: SUL) - BUY, JB Hi-Fi (ASX: JBH) NEUTRAL and Harvey Norman (ASX: HVN) NEUTRAL.

MM remains cautious on the retailers

GS Changes – Source Goldman Sachs

Broker Moves

• Rio Tinto Raised to Buy at Citi; PT A$123
• Fortescue Raised to Neutral at Citi; PT A$19
• KED AU Rated New Speculative Buy at Canaccord
• Estia Health Raised to Overweight at JPMorgan; PT A$3.20
• Premier Investments Cut to Sell at Goldman; PT A$21
• Harvey Norman Cut to Neutral at Goldman; PT A$3.40
• Estia Health Cut to Sector Perform at RBC; PT A$3.20
• Metcash Raised to Neutral at Goldman; PT A$3.50
• Bega Cheese Cut to Sell at CLSA; PT A$3.25

Major Movers Today

The Market Matters Team

Free Webinar Invitation

In what is set to be a tectonic global shift in behaviours and opportunities — Livewire is delighted to be hosting an exclusive 'Resources vs Tech' webinar with Market Matters’ James Gerrish. As a Livewire reader, you can attend this webinar for free.

Is now the time to load up on Resource stocks following the run in Tech?

• Webinar Date: Thursday 15th June 2023
• Time: 12:00 pm – 12:45 pm AEST

Register here