The Overnight Report: Tech Wreck

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The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

Sell Now, Cry Later

The shock news yesterday morning ahead of the bell locally was a -20% crash in Meta (Facebook) shares after posting earnings in the Wall Street aftermarket. It was clear Wall Street, and the Nasdaq in particular, would be in for a rough night.

And so it was our tech sector fell -5.9% yesterday. Next worst was healthcare (-1.5%), but that is currently under the influence of activity in CSL ((CSL)) as the trading period to set the volume-weighted average price (VWAP) for the retail part of the big capital raising enters its final days.

On the flipside, materials rose 1.5% and utilities 1.6% and other sector moves were unsubstantial, netting out to a modest fall for the ASX200.

The big fall in tech was not about Facebook. Australia has no Facebook. It’s just that Facebook stole the limelight from PayPal, which fell -23% overnight on its earnings result. PayPal is a longstanding payment platform but more recently, big in BNPL. Hence yesterday Block ((SQ2)) fell -9.7%, Zip Co ((Z1P)) fell -9.6%, Sezzle ((SZL)) fell -8.5% and you can keep on going into the smaller names.

There was nevertheless blind contagion apparent in the general tech sector, with the likes of WiseTech Global ((WTC)) down -8.0% and Xero ((XRO)) down -5.0%.

There was actually one local Facebook victim. Magellan Financial ((MFG)) is a big holder. It fell -7.5%.

Ever get the feeling you’re having a bad year?

Strength in materials came from the iron ore miners, with the iron ore price jumping a surprise 3% with China absent, but also from Nufarm ((NUF)). It posted an earnings update worth 20%.

The question now is what happens today. Wall Street has indeed been clobbered overnight, led down by all things tech, and the sentiment has flowed through to the Dow, which has only two Big Tech names in it (Apple, Microsoft), arguably along with Salesforce. Our futures are down -78 points this morning, with minimal tech weighting.

But just to cloud…ahem…the issue, Amazon has reported this morning and as I write its shares are up 17%, having been down -7% in the day-session in line with everyone else.

With apologies to Kogan ((KGN)), we don’t have an Amazon here either, but then sentiment-wise that doesn’t seem to matter.

Nevertheless, Block fell another -11% last night.

About Face

It should be noted that the Bank of England raised its cash rate for the second time post-pandemic last night, to 0.5%. The last time the BoE hiked at consecutive meetings was in 2004. The result was a shift in global bond yields, with the US ten-year up 6 basis points to 1.83%.

The Nasdaq doesn’t like higher bond yields, but then it’s no fan of -26% stock plunges for its largest companies either, which is where Meta ended up. The result was put down to weak advertising revenue in the core Facebook business as the company fannied about in the metaverse, eyes off the ball. Even Zuckerberg admitted TikTok was winning the video war.

The impact of Meta’s fate was felt across all things tech, and Wall Street in general. Snap fell -23%, Pinterest fell -10% and Twitter fell -5.5%.

But hold the presses. Snap has just reported in the aftermarket and is up 57%! As has Pinterest, and it’s up 27%. Twitter is up 10%.

Google fell -2% last night in sympathy but was up 7% the night before on its result.

Looks like Meta is the pariah.

To be fair, a weak result from Honeywell saw it down -7.6%, which weighed on the Dow, while Apple fell -1.7%, Microsoft -3.9% and Salesforce -5.4%.

On the back of Amazon, Snap and Pinterest, will it all be different tonight?

Note that our futures closed at 8am, ahead of these aftermarket earnings reports.

Commodities

OPEC-Plus decided not to change course at its meeting last night, sticking to a 400,000 barrel per day production increase beginning in March. As this is deemed insufficient by the market to meet global demand, oil prices rose last night.

The only other standout is that iron ore price jump, which is very rare in Chinese New Year.

The Aussie is off -0.2% at US$0.7137.

Today

The SPI Overnight closed down -78 points or -1.1%.

The RBA will release a Statement on Monetary Policy today.

US jobs tonight.

New Corp ((NWS)) and REA Group ((REA)) have reported earnings overnight.

The Australian share market over the past thirty days…

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