The market is down 20 points. The Dow Jones was down 167 at 16,246 — the market dropped at the open and fell throughout the day. A late rally failed and the market finished on its lows in a 180 point range with higher than average volume. It was a continuation of yesterday’s themes, as investors moved out of sectors which had previously been strong performers. Internet, social media and biotechnology industries were some of the most heavily sold as investors moved from higher beta stocks to those perceived as offering lower risk.
European shares were generally weaker — the German DAX was down 1.91%, the UK FTSE was down 1.09% and the French CAC fell 1.08%, with the technology sector the hardest hit.
The Russian MICEX index fell by around 3%, with reports of violence in Ukraine. Reuters said Russian soldiers had shot dead a Ukrainian naval officer in Crimea. There was also a pro-Russian protest in eastern Ukraine on Sunday, where demonstrators stormed government buildings in several major cities and protesters in Donetsk called on Russian President Vladimir Putin to send in Russian peacekeepers.
The Australian dollar was stronger and is currently trading at US92.69c.
Gold fell US$5.20 or 0.40% to US$1298.00 an ounce.
Oil fell 0.69% to US$100.44 a barrel after Libyan rebels agreed to reopen two of four export terminals currently blockaded. The lifting of the blockade increases supplies on the markets and there are indications further breakthroughs are likely.
Iron Ore was up US$1.50 or 1.3% to $117.20 a tonne.
Base metals were generally stronger — Cooper rose 0.77% but zinc and aluminium were weaker.
US earnings season for first quarter 2014 starts tonight (after the close) — S&P 500 earnings growth is expected to be 1.2% with revenue up 2.7%. Alcoa, JPMorgan Chase, and Wells Fargo are the major names posting results this week. The weather is expected to be a key theme. JP Morgan Funds noted there had been a near-record number of companies issuing negative guidance — some blaming the weather and some blaming the strong dollar.
Fed Speak — Last night St Louis Fed President said the recent jobs numbers were encouraging and he was optimistic about the economy this year, expecting an expansion of 3.0%. Speaking tonight is Minneapolis Narayana Kocherlakota and Philadelphia Charles Plosser.
- Cabcharge (CAB) — Is down on the open after the NSW government’s announcement that they will follow Victoria and legislate a reduction in the maximum card surcharge for taxis from 10% to 5%.
- Agricultural stocks up — AAC +5.26%, FSF +2.11%.
- Tech stocks down – XRO -9.35%, FLN -5.80%, REA -3.38% and SEK -3.35%.
- REA Group (REA 4620c) — Following yesterday’s 5.23% fall on tech sector weakness, CIMB Securities has put out a Reduce recommendation with a target price of 3762c. Despite strong earnings fundamentals they think there is a lack of liquidity and any downturn in performance could result in a share price correction. REA trades on a PE of 39.9x which is at the high end of its PE range, has an ROE of 43.2% and a low yield of 1.8%. EPS is high and increasing. Fundamentally, the company is sound and growing, but it’s up 30% since the start of the year. With REA looking toppy and losing momentum, you can expect some profit taking and potentially some shorting to occur in the short term. For the longer term investor, be prepared for a bit of short term volatility.