Foolish Preview: Strong gains in the US should propel ASX upwards


After a slightly positive close on Tuesday afternoon the US markets have put on two strong sessions, while our market was closed in observance of ANZAC Day.

On Tuesday night, our time, the Dow Jones and S&P 500 indices put on gains of 0.6% and 0.4% respectively, while the Nasdaq fell 0.3%, partly on concerns that Apple (Nasdaq: AAPL) would underwhelm when it released earnings at the end of trade.

As you may have seen, Apple delivered a blowout quarter, with profits increasing 94%. When the biggest company in the market posts blockbuster earnings and its stock jumps 9%, you can just about count on it being a good day. Breaking down the numbers:

  • Gains for the U.S. stock market centred on the Nasdaq which was up more than 2% because of Apple’s huge weighting in the tech-heavy index. The S&P 500 was up almost 1.4%, while the Dow components were the relative laggards, up just 0.7%.
  • In other international trade, stocks were similarly positive, if mixed. London’s FTSE 100 rose just 0.2%, but French and German stocks posted gains of around 2%, while Japan’s Nikkei ended with a 1% gain.
  • After a big drop on the heels of Federal Reserve Chairman Ben Bernanke’s comments about the current state of the economy, gold ended the day roughly flat. Oil prices rose slightly, closing at around $104 per barrel.

The ASX SPI futures are this morning 17 points higher, suggesting gains for the S&P / ASX 200 (Index: ^AXJO) (ASX: XJO) and the All Ordinaries (Index: ^AORD), (ASX: XAO) when trade opens today.

Perhaps the most interesting insight overnight came from the Fed’s projections on interest rates and their implications for longer-term U.S. economic conditions. The bulk of the Fed’s Open Market Committee members believe that rates should stay steady until 2014, but fewer participants expect them to stay low after that. Meanwhile, more hawkish Fed members see rates rising into the 2% to 3% range by the end of 2014, and the consensus has short-term rates eventually rising to 3.5% to 4.5%.

In local news Seven West Media (ASX: SWM) released an earnings downgrade at 5:20pm on the day before the ANZAC Day market closure. A less generous observer might suggest the announcement was released at that time to minimise the negative press and be out of the news cycle when the market next opened 38 hours later. Seven West shares will obviously come under pressure, and the other media companies, including Consolidated Media Holdings (ASX: CMJ), Fairfax Media (ASX: FXJ), Southern Cross Media (ASX: SXL) and Ten Network (ASX: TEN) may feel some fallout from investor concerns about a weaker media market, particularly soft advertising spending.

In other media news, investors also had the chance to see both Rupert and James Murdoch of News Corporation (ASX: NWS) appear in front of the UK’s Leveson inquiry into recent alleged misconduct from the company’s UK newspapers

Meanwhile, current and prospective shareholders continue to mull the future of our major grocers, after Wesfarmers (ASX: WES) released a retail sales update on Tuesday. Wesfarmers’ Coles business continues to outperform Woolworths (ASX: WOW), but growth is slowing and price deflation continues to bite.

Of the major Australian-listed stocks that have US dual-listings, BHP Billiton (ASX: BHP) finished up 1.6% overnight, while Rio Tinto (ASX: RIO) was up 2.8% and Telecom New Zealand (ASX: TEL) closed up 0.75%

Macroeconomic trends may play a key role in pushing the broad market indexes up and down. But as Apple’s overnight show, individual companies can thrive in any market — and similarly, they can suffer even when the overall market is doing well. It’s more important than ever to make sure that the stocks you own have positioned themselves to take advantage of current conditions while doing their best to overcome obstacles in their path. In the long run, that will help them stand out from the crowd and hopefully outperform their less nimble peers.

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Scott Phillips is an investment analyst with The Motley Fool. Scott owns shares in WoolworthsThe Motley Fool‘s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691).

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