Global markets were more or less flat overnight (S&P 500 index -0.02%) with energy and industrial sector strength offset by ytilities and technology sector weakness as investors focus on upcoming earnings from market heavy weights.
The market is also waiting for tomorrow's US Federal Reserve meeting outcome – with the central bank not expected to take any action, but economists will be looking for the Fed to defend its policy to let inflation run hot.
There was also some sound economic data released, as US consumer confidence jumped to a 14-month high in April as Americans grew more upbeat about the economy and job market fuelled by increased vaccinations and additional fiscal stimulus which allowed more service businesses to reopen. House prices rose +11.9% year on year in February, its highest gain in 15 years.
Tesla shares were down -5.4% after its quarterly result, despite beating market expectations,. The result left investors uninspired with revenue and earnings boosted more from sales of environmental credits and selling bitcoin, rather than vehicle sales. The quality of the result was questionable as it benefitted from sales of bitcoin and made no new S or X models in the quarter. 3M shares were down -2.6% after the conglomerate said supply chain disruptions and other events rose costs partially offset growing revenue and kept guidance flat. UPS, a benefactor of booming e-commerce sector soared more than 10% after earnings blew past Wall Street estimates, after reporting first-quarter revenue was up +27% from the same corresponding period last year.
So far, four out of five S&P 500 companies that have released results have either met or beaten expectations.
Harvey Norman (HVN:ASX)
Homeware and Electronics retailer Harvey Norman shares have been performing strongly over the last 12 months, to sit at a decade high, as it benefits from boost in retail spending for its goods following lockdowns and international travel restrictions prompting people to spend more on "at home products and services". For the first half of the 2021 financial year (6 months ending 31 December 2020) HVN reported total revenues of $5.2 billion, up +25.8%, net profit before tax more than doubled to $643.9m and Harvey also paid a record interim dividend of 20 cents per share.
While a strong set of numbers, we believe this heightened level of retail spending (particularly on "stay at home" goods) will start to subside as the trans-tasman bubble (and eventual opening up to international travel to "covid safe countries") will shift spending towards travel. For that reason we aren't too bullish on the retail sector especially at current valuations and remain HOLD rated on HVN.
Australia & New Zealand Market Movers
The Australian market was lower again on Tuesday (ASX 200 index -0.2%) as record iron ore prices fuelled amongst miners failed to offset losses for technology, healthcare and industrial sectors.
The technology sector was hardest, down -2.5% as investors took profit, after a one month gain of 6.5%. Buy now pay later companies were providing most of the drag, with Afterpay down -5.5% and Zip slumping -6.3%, while other tech names such as Xero, WiseTech, Computershare, and Next DC were also lower.
Recycling and Waste Management company Bingo Industries was the best performer on the market up +6.3% after it agreed to a $2.3 billion buyout from Macquarie Infrastructure and Real Assets.
The New Zealand market (NZX 50 index -0.2%) slipped yesterday, led by A2 Milk which slumped (-5.6%) to a 4-year low on the back of selling down by a significant shareholders, and concerns around its possible exit out of MSCI Index.
Meridian Energy was also lower (-3.5%), as it continues to struggle to be a meaningful part of the clean energy index. On the flipside, NZ stock market operator NZX was up +2.4% after reporting revenue for the first quarter of 2021 was up +13.4% from the previous year.
3 Things Markets will be Watching this Week
- Investors this week will focus on corporate earnings with tech heavy weights such as Microsoft, Alphabet, Apple and Facebook all set to present updates.
- The US Federal Reserve and the Bank of Japan are releasing monetary policy statements.
- President Biden's unveiling of his US$1.5t American Families Plan, and 1st quarter US GDP data Thursday is expected to show 6.9% annualized growth after a more moderate 4.3% rate in the previous quarter.