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Morning Bell 22 February

Grady Wulff
February 22, 2023

Wall Street retreated in the first trading session of the week in the US as rising interest rates continue pressuring investor sentiment, in addition to investors reacting to the latest batch of retail earnings raising concerns over how the consumer is faring the rising interest rate environment. The Dow Jones ended Tuesday’s session down 2.06%, the S&P500 lost 2% and the tech-heavy Nasdaq closed the day down 2.5%. The benchmark 10-year Treasury yield climbed to 3.9%, while the 2-year rate advanced to 4.7%, building on from last week’s gains as investors grappled with hotter-than-expected inflation data. Leading domestic homewares retail chain Home Depot fell 5.4% to a three-month low on Tuesday after warning of weakening demand and issuing a soft profit forecast for 2023, while Walmart, the world’s largest retailer, fell 0.2% after it forecast full-year earnings below analysts’ expectations and issued a warning of hotter-than-expected food prices squeezing profit margins.

In Europe, markets closed lower as investors weighed corporate earnings results against the potential for the US Fed to remain hawkish which enhances the fear of a recession in the coming months. Germany’s DAX fell 0.52%, the French CAC lost 0.37% and, in the UK, the FTSE100 shed 0.46% despite the UK government posting a surprise budget surplus for January. Credit Suisse shares fell on Tuesday following reports that remarks made by the company’s Chairman, Axel Lehmann regarding outflows from the lender, are being reviewed by the Swiss financial regulator on the grounds of potentially being misleading.

What to watch today:

  • In commodities, it’s a red run across the commodities board this morning with oil down 1.16% at US$76.28/barrel, gold is down 0.28% at US$1836/ounce, but iron ore is up 1.96% to US$130/tonne.
  • Ahead of the local trading session here in Australia, the SPI futures are anticipating the ASX to open 0.62% lower on the global sell-off overnight.
  • Stocks going ex-dividend today include Netwealth Group (ASX:NWL), AGL Energy (ASX:AGL) and Commonwealth Bank (ASX:CBA). If you’ve been thinking about these stocks it might be worth considering buying in today as stocks going ex-dividend generally trade lower on the ex-dividend date.
  • The Aussie dollar is buying US$0.69, 92.51 Japanese Yen, 57.30 British Pence and NZ$1.10.

Trading Ideas:

  • Bell Potter has increased its rating on Costa Group (ASX:CGC) from a Hold to a BUY and maintains a $3/share price target on the company following the release of full year earnings for CY22, where the company outlined non-recurring quality issues in on-year in citrus should support material recovery in CY23 earnings and the company will benefit from a 19% uplift in productive hectares in the international division.
  • Trading Central has identified a bullish signal on AMA Group (ASX:AMA) following the formation of a pattern over a period of 114-days which is roughly the same amount of time the share price may rise from the close of $0.24 to the range of $0.33-$0.35 according to standard principles of technical analysis.

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