Profit-Taking Correction on Weak US 1Q GDP

Stocks fell for profit-taking consolidation on Thursday, due to overbought momentum after rising for six straight trading days and caution ahead of closely watched 1Q GDP data for the US. The FBM KLCI slid 2.23 points to settle at 1,569.25, off an early high of 1,574.45 and low of 1,569.03, as losers beat gainers 581 to 443 on slower turnover of 3.96bn shares worth RM2.83bn.

Resistance at 1,580/1,600; Supports at 1,547/1,539

The local market should fall for profit-taking correction ahead of the weekend, given the still overbought technical momentum and overnight fall on Wall Street following the sharply weaker 1Q GDP reading. Immediate resistance for the index remains at 1,580, with stronger upside hurdles seen at 1,600 and then 1,620. Key supports will be at 1,547, 1,539 and 1,517, the respective rising 30-day, 50-day and 100-day moving averages.

Bargain Public Bank & Sime Darby

Positive technical momentum on Public Bank support further upside bias towards the 76.4%FR (RM4.34), with tougher upside hurdles seen at the Feb high (RM4.52) and 123.6%FP (RM4.69), and key retracement support from the 38.2%FR (RM4.06). Sime Darby will need confirmed breakout above the 123.6%FP (RM2.89) to extend uptrend towards the 138.2%FP (RM3.00) and 150%FP (RM3.09) ahead, with uptrend supports from the rising 50-day ma (RM2.66) and 100-day ma (RM2.54) cushioning downside.

Asian Markets Fall Ahead of U.S. Inflation Data

Most Asian markets fell on Thursday, as traders remain cautious ahead of the report on first quarter U.S. GDP data that could have an impact on the outlook for interest rates. The Fed is widely expected to leave interest rates unchanged at next week's US Fed monetary policy meeting, but traders focus will be on the first quarter U.S. gross domestic product data on late Thursday and personal consumption expenditures, the Fed's preferred inflation gauge, for March on Friday. A hotter-than-expected consumer price inflation report for March had pushed back expectations of when the Fed will begin cutting interest rates.

Economists surveyed by Bloomberg predict gross domestic product likely cooled to around 2.5% in the first quarter, with the figures still potentially suggesting persistent inflationary pressures. The Japanese benchmark dropped 2.16% to 38,628.48, while the broad based Topix fell 1.74% to 2,663.53. South Korea’s Kospi also slipped 1.76% and ended at 2,628.62, while the small cap Kosdaq fell 1.04% to 853.26. However, the Shanghai composite rose 0.27% to 3,052.90, while markets in Australia and New Zealand are closed for a public holiday.

Wall Street Tumble on Weak GDP Data

Wall Street’s main indexes tumbled overnight after a sharply lower-than-expected reading on US GDP for the first quarter ratcheted up questions about the health of the US economy in the face of persistently high interest rates. The Dow Jones Industrial Average slid 0.98% to close at 38,085.80. The S&P 500 dropped 0.46% to finish the session at 5,048.42, and the Nasdaq Composite lost 0.64% to 15,611.76. The sell-off on Wall Street came after U.S. GDP growth came in at a 1.6% annualized pace in the first quarter, falling well short of expectations of 2.5%. Meanwhile, an underlying measure of inflation grew by 3.7% in the first quarter, above estimates and significantly higher than a 2% gain in the prior quarter. The lackluster GDP added further pressure to an already-tense market contending with concerns over a pullback in growth among technology earnings.

Traders moved down expectations for an easing of Federal Reserve monetary policy. Fed funds futures trading data suggests there will be just one interest rate cut this year, according to the CME Fed Watch Tool. Separately, Meta also offered an unwelcome reminder that keeping up in the artificial-intelligence race doesn't come cheap. Meta plunged 10.5% after the social media giant issued light revenue guidance for the second quarter. International Business Machines also fell 8.3% after missing consensus estimates for first-quarter revenue. Caterpillar, often considered a bellwether for the economy, dropped around 7%.

Source: TA Research - 26 Apr 2024