Market defies selling pressure, Uniti on the market, Adairs slumps

 A spate of headlines over the week naturally put pressure on the S&P/ASX200 today, with the index falling 1% at the open but finding support throughout the day to finish down just 0.5%.
 
It was quite a negative day, with the technology, utilities and materials sectors taking the biggest hit, in many cases due to company-specific results.
 
The winners were of course the ‘defensive’ consumer staples and real estate sectors with Woolworths (ASX: WOW) and Vicinity (ASX: VCX) up 0.8 and 2.5% respectively.
 
The telecoms sector was powered by a 9.3% jump in broadband rollup Uniti Wireless (ASX: UWL) which announced they had received more than one takeover offer, rumoured to be from pension funds and infrastructure managers.
 
Shares in both Fortescue (ASX: FMG) and BHP (ASX: BHP) were lower with the former falling 2% after announcing a deal to purchase Williams Advanced Engineering.
 
The purchase will come at a cost of $310 million with the Williams business related to the original F1 team and focusing specifically on electric vehicle technology.
 
Twiggy Forrest is continuing his global quest to turn FMG into a net-zero business by 2030.
 
Regis downgrades, South 32 cuts guidance, economic turns weaker
 
One of the less covered announcements today was news that the Australian business sector shrank for the first time in four months, with the Composite PMI index tanking from 54.9 points in December to 45.3 in January.
 
The Services PMI also dropped from 55.1 to just 45 points, which suggests falling confidence and falling a shrinking economy hit by the masses of people in isolation.
 
Popular 2020 stock Adairs (ASX: ADH) had a terrible day, falling 21.5% after reporting sales were flat on the same period in 2020 at $242 million.
 
Same-store sales grew at just 2.7% and earnings will halve on 2020 levels.
 
Management warned of higher costs of doing business as rent returned to normal, along with higher staff costs due to labour and product shortages.
 
The big question is how the company manages their way from here, with supply chains all pointing to China, placing continuing pressure.
 
Shares in gold miner Regis (ASX: RRL) fell by another 1% after cutting their production guidance by more than 15%.
 
Global markets defy sentiment, staging intra-day rally, Fed decision, earnings ahead
 
All three indices fell into a correction during the session, with some down as much as 5% before rallying to finish the day.
 
The end result was broad-based gains for every US benchmark, as the negative sentiment turned positive, with markets clearly preferring to wait for the Fed’s decision rather than acting in advance.
 
The Nasdaq outperformed, gaining 0.6%, with both the Dow Jones and S&P500 0.3% higher.
 
The weakness remains primarily focused on the Federal Reserve’s impending rates decision, due on Thursday Australian time, with trades predicting more bad news on rates.
 
As was the case in 2020, volatility and algorithmic trading are amplifying volatility, with many strategies forced to sell automatically when volatility increases, seeing the market swing more than usual.
 
Investors are also dealing with the threat of a Russian incursion in Ukraine and potential action from US allies.
 
The department store retailers had the strongest day, with Kohl’s (NYSE: KSS) gaining more than 30% after an activist investor offered more than US$9 billion to buy the struggling chain.
 
Shares in Macy’s (NYSE: M) and Nordstrom (NYSE: JWN) also gained on the news.
 
Interestingly, despite the perceived threat of rate hikes the US 10-year bond yield has fallen from 1.9 to 1.75% in just a few days.

Drew Meredith

Drew is publisher of the Inside Network's mastheads and a principal adviser at Wattle Partners.