Profit-Taking Pause as US Rates Stay High

Stocks closed mixed on cautious trade Tuesday, as the profit-taking consolidation due to overbought momentum from recent gains persisted. The FBM KLCI was up 1.64 points to end at 1,512.98, after moving within early low of 1,508.99 and high of 1,513.98, as gainers edged losers 514 to 452 on slower turnover of 3.08bn shares worth RM2.17bn.

Supports at 1,490/1,480; Resistance at 1,520/1,550

The profit-taking consolidation should prevail as investors remain cautious over recent cues that US interest rates may stay high-for-longer given the strong US economy. Key index supports cushioning downside will be at 1,490, 1,480 and 1,465, the respective rising 30-day, 50-day and 100-day moving averages, while immediate overhead resistance remains at 1,520, with stronger upside hurdles at 1,550 and 1,580.

Bargain MRCB & UEM Sunrise

MRCB will be attractive to bargain on weakness for rebound upside towards the 161.8%FP (65sen), with next hurdles seen at 70sen and 200%FP (74sen), while the mid Bollinger band (55sen) and 30-day ma (52sen) cushion downside. UEM Sunrise should also attract buyers on dips, with key chart supports at the 30-day ma (96sen) and 100-day ma (84sen) capping downside risk, while a breakout above the 123.6%FP (RM1.11) should aim for the 138.2%FP (RM1.21) and 150%FP (RM1.30) ahead.

Asian Markets Mixed on Rate Woes

Asian markets ended mostly mixed Tuesday after Fed Chair Jerome Powell squashed hopes of a Fed rate cut in March. Fed Chair Jerome Powell reiterated the central bank is unlikely to cut interest rates next month during an interview with "60 Minutes" on Sunday. Powell suggested the strength of the U.S. economy even amidst elevated rates will allow the Fed to proceed carefully. However, Chinese shares bucked the trend after authorities intensified rescue efforts. The latest gains in Chinese shares came after Beijing rolled out more measures to stem a stock rout, such as tightening trading restrictions on domestic institutional investors as well as some offshore units.

On economic front, the Reserve Bank of Australia held interest rates steady on Tuesday but cautioned that a further increase could not be ruled out given inflation was still too high. In Australia, the S&P/ASX 200 extended losses from Monday, closing 0.60% lower at 7,581.60, and the Nikkei 225 fell 0.53% to 36,160.66. South Korea’s Kospi also fell 0.58% to 2,576.20, while the Kosdaq lost 0.12% to 807.03. Meanwhile, the Shanghai composite index bucked the regional trend by gaining 3.23% to 2,789.49 and Hang Seng index jumped 4% to 16,136.87.

Wall Street Drift Higher as Traders Digest Fed Comments

Wall Street’s major indexes closed slightly higher in choppy trading overnight as traders continued to debate the possibility of interest rate cuts and concentrate on a fresh batch of earnings. The Dow Jones Industrial Average rose 0.37% to 38,521.36. The S&P gained 0.23% to 4,954.23, while the Nasdaq Composite inched up 0.07% to 15,609.00. The choppy trading on Wall Street comes as some traders may be reluctant to make significant moves amid uncertainty about the near-term outlook for the markets following recent volatility. Meanwhile, traders are also digesting comments from a handful of Fed officials. Cleveland Fed president Loretta Mester said in a speech that "it would be a mistake to move rates down too soon or too quickly without sufficient evidence that inflation was on a sustainable and timely path back to 2%."

Separately, Minneapolis Fed President Neel Kashkari said recent inflation data has been surprisingly positive but that the Federal Reserve is "not all the way there yet" when it comes to tackling higher prices. On earnings front, Palantir Technologies surged 19% after the company posted a revenue beat in the fourth quarter, while Spotify Technology popped more than 6% after topping expectations and posting an increase in Premium subscribers. On the other hand, shares of Rambus have tumbled by 19.8% after the chipmaker reported a yearover-year decline in fourth quarter revenue.

Source: TA Research - 7 Feb 2024