The share market plumbed fresh four-month lows before staging a partial recovery as US futures rebounded after Wall Street entered a technical correction overnight.
The ASX 200 slumped 104 points at the open before trimming its loss to 72 points or 1.2% at 5819 following the Dow's second largest points drop on record. US blue chips tumbled 1,033 points or 4.15% last night, the third time the Dow has lost more than 500 points in five sessions.The broader S&P 500 lost 3.75% as traders fretted about rising bond yields, inflationary pressures and the outlook for interest rates. S&P 500 futures bounced 5.5 points this morning or 0.21%.
"This whole correction is really about rates. It's really about inflation creeping up. It's really about people thinking the Fed is either behind the curve or actually has to be more aggressive," Stephanie Link, global asset management managing director at TIAA in the US, told CNBC. "That fear, that unknown is really what's driving a lot of the anxiety."
Gold stocks provided the only haven on the ASX, rising 2.2%. Energy stocks dropped 2.1%, utilities 2.1%, telecoms 1.8%, consumer discretionary 1.8% and financials 0.9%.
Asian markets fell in lockstep. China's Shanghai Composite gave up 2.69%, Hong Kong's Hang Seng 2.63% and Japan's Nikkei 2.68%.
Crude oil futures eased 53 cents or 0.87% this morning to US$60.62 a barrel. Gold futures improved $2.80 or 0.21% to US$1,321.90 an ounce. The dollar was buying 77.84 US cents.
As I suggested earlier in the week, market corrections are rarely over in a couple of sessions. I say 'correction', because there's no reason yet to think this is more than that - conditions are very different now to 2008 or 2000 or 1987. However, Wall Street prices were overinflated and could move a lot lower without becoming bargains. The market is rattled and needs to spend some time building a new base at a lower level. I've seen nothing in the price action yet to suggest Wall Street has found that level. Volatility remains elevated. The S&P 500 delivered a big fat red candle overnight and finished near the low, which suggests further weakness tonight. That said, the ASX has a different feel today to Monday and Tuesday. I don't know if it's seller fatigue, but there has been minimal movement since the first half hour and little evidence of panic selling. The semi-recovery in the XJO suggests institutional buyers are starting to dip their toes. It will be interesting to see if the recovery holds through to the close.
It might not feel like it yet but this is a great learning opportunity. You're not really a trader until you've survived a correction. You survive by managing your capital. Eventually you learn that you're never "stuck" in a trade, you're just hoping it will somehow come good, despite all evidence to the contrary. I learned the hard way by riding a couple to zero. Expensive lesson, but I learned.
Trading: slim pickings in the end. I set a dozen buy orders pre-market, but was too bearish and only got one fill: SYA from the open for a wage.
