Note from MD: Markets continue to trade sideways, despite strong earnings

The XJO has continued to trade in a sideways channel, with a mixture of positive earnings numbers and U.S. banking sector weakness overnight having an impact.

The XJO has continued to trade in a sideways channel, with a mixture of positive earnings numbers and U.S. banking sector weakness overnight having an impact.

However, the XJO’s relatively flat performance masked yesterday’s strong earnings reports, which saw a major rally in the tech sector (+5.2), led by Altrium (+0.26%) and Megaport (+16.9%). 

This morning, the XJO opened essentially flat, hovering around 7128 around 10:30am. In terms of sectors, the index is being propped up by A-REIT (+3.73%) and IT (+2.91%), with 7 out of 11 sectors in the red. While the index has lost around 1% for the past week, it has gained over 1% over the last year to date. 

Despite BHP’s recent drop in profits for FY2023, mining stocks are mostly in the green this morning, including Fortescue Metals Group Ltd (ASX:FMG), Rio Tinto Ltd (ASX:FMG) and Newcrest Mining Ltd (ASX:NCM), all up by around 1%. 

In the U.S. overnight, the major stock market indices all edged slightly lower, with the S&P down 0.3% and Dow Jones Industrial Average losing 0.5%, while the Nasdaq Composite ended marginally higher. 

This slight U.S. decline was largely a result of weakness in banking and retail shares after S&P Global once again cut credit ratings and revised its outlook for multiple U.S. banks on Monday, citing “tough” operating conditions. 

The benchmark 10-year Treasury yield eased slightly Tuesday to 4.33%, hitting its highest level since 2007 this week. 

In local economic news, other than a whole raft of earnings reports coming in, new home sales in Australia fell by 2.4% in July. 

Looking ahead, there is a key speech from Federal Reserve Chairman Jerome Powell at the Kansas City Fed’s annual economic symposium this Friday which could have major implications for interest rates.

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