Tech stocks weigh down ASX despite Wall Street gains

The laggards

Lynas Rare Earths stumbled 4.1 per cent, followed by IGO (down 2.8 per cent) and TechnologyOne (down 2.7 per cent).

Information technology stocks were the worst hit on Friday, trading 1.1 per cent lower. But it still remained this week’s, and this year’s, best performing sector, lifting 2.3 per cent since Monday and 12.6 per cent in the past 12 months – the only sector in the green over the year.

Consumer discretionary and consumer staples were also trading in the red on Friday, both falling 0.8 per cent.

Coles’ share price slipped 1 per cent even after the competition watchdog announced this morning it would not block the supermarket giant’s acquisition of two of Saputo’s milk processing plants over initial competition concerns.

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The S&P 500 rose 0.4 per cent after drifting between small gains and losses. The benchmark index rose 8.9 per cent in November, its biggest monthly gain since July 2022.

The lowdown

Zoran Kresovic, market analyst at EightCap, said energy stocks lifted higher following the OPEC+ decision, and while tech stocks declined, investors were merely “profit taking” given the sector had been outperforming over the past month.

“Overall our market is up for November, approximately 4.5 per cent, but we are still lagging when we look at it in comparison to other sectors and other global equities,” he said. “I would also expect the discretionary sector to pick up into Christmas and the New Year.”

The Dow Jones Industrial Average jumped 1.5 per cent, while the Nasdaq composite slipped 0.2 per cent. Both indexes also posted solid gains for the month, finishing with gains of 8.8 per cent and 10.7 per cent, respectively.

The market marched steadily higher for much of November as investors grew hopeful that the Federal Reserve is finally done raising interest rates, which fight inflation by slowing the economy. Those hopes got more support with a report that the Fed’s preferred measure of inflation cooled last month.

November’s rally was also driven largely by the technology sector, where several companies with high values tend to disproportionately impact the market. Microsoft gained 12.1 per cent for the month, while Nvidia rose 14.7 per cent. Also, Treasury yields have generally been falling and easing pressure on stocks. High yields tend to make expensive stocks look less attractive to investors.

“The rally has been dramatic in its move,” said Quincy Krosby, chief global strategist for LPL Financial.

The momentum has stalled over the last week or so, which is the market’s way of dealing with an overbought scenario, she said, but it hardly suggests a deep sell-off ahead.

“What you want to see is that next leg up as we close the year,” she said. “November is a strong month for the market, but so is December.”

Thursday’s report from the Commerce Department said prices were unchanged from September to October, down from a 0.4 per cent rise the previous month. Compared with a year ago, consumer prices rose 3 per cent in October, below the 3.4 per cent annual rate in September. That was the lowest year-over-year inflation rate in more than 2.5 years.

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The Fed’s aggressive rate hike policy pushed its benchmark interest rate from near zero in 2022 to its highest level in two decades by the middle of 2023. The goal has been to tame inflation back to the Fed’s target rate of 2 per cent.

Wall Street is betting that the central bank will continue to hold rates steady at its December meeting and into early 2024, when it could start considering cutting interest rates. Fed officials have hinted at those possibilities, while also saying any future moves will be based on economic data.

Treasury yields gained ground Thursday. The yield on the 10-year Treasury, which influences mortgage rates, rose to 4.34 per cent from 4.26 per cent late Wednesday.

Traders had their eye on companies reporting quarterly results.

Oil prices have also been falling, as have petrol prices in the US, relieving pressure on consumers. The price of US crude oil fell 2.4 per cent Thursday, despite the latest extension of OPEC’s production cuts.

In Europe, the latest data showed that inflation dropped more than expected to 2.4 per cent in November, the lowest in more than two years. The new figure is close to the European Central Bank’s inflation target of 2 per cent following a rapid series of interest rate hikes dating to summer 2022.

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“We’re expecting the worst quarters to be the December quarter that we’re in now and the March quarter of next year for white-collar jobs,” says Deloitte Access Economics partner David Rumbens. The firm has forecast that new hiring in white-collar jobs is now falling off a cliff with just 21,000 white-collar jobs expected to be added in 2024, which would be the weakest growth since 2017. This compares with the 778,800 workers added in 2021 and 2022.

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