Extend Correction on Overnight Wall Street Drop

Profit-taking interest returned to drag stocks lower on Wednesday, matching regional falls on weaker economic data and as selling pressured stocks down from three-year highs. The FBM KLCI fell 8.54 points to settle at 1,621.14, off an opening high of 1,631.31 and low of 1,619.71, as losers beat gainers 773 to 341 on slower trade totaling 4.39bn shares worth RM2.8bn.

Resistance at 1,638/1,640; Supports at 1,614/1,606

The local market should extend profit-taking correction following the sharp overnight Wall Street drop, pending more significant domestic leads to lift stocks from the recent consolidation. Immediate index resistance remains at the recent high of 1,638, with 1,640 and 1,660 as tougher upside hurdles, while immediate supports are at 1,614, 1,606 and 1,581, the respectively rising 30-day, 50-day and 100-day moving average levels.

Bargain Hibiscus & Velesto

Further weakness on Hibiscus should attract buyers looking for rebound upside, with a breakout above the 50-day ma (RM2.43) to aim for the 61.8%FR (RM2.50) and 76.4%FR (RM2.65) ahead, while key retracement supports at the 38.2%FR (RM2.25) and 23.6%FR (RM2.09) cushion downside. Velesto will be attractive to bargain on any dips towards key chart supports at the 61.8%FR (22sen) and 50%FR (19sen), while oversold rebound should be capped by the 200-day ma (26sen) and 29sen.

Asian Markets Range Bound as Traders Digest Data, Tech Earnings

Asian markets traded in narrow ranges on Wednesday, as markets assessed economic data from the region and a plethora of earnings reports from major technology behemoths from the U.S. Japan's factory activity contracted slightly in July as output and new orders fell and firms remained under pressure from higher prices, a business survey showed on Wednesday. Meanwhile, Australia saw its private sector activity expand at a slower pace in July, with the composite purchasing managers index at 50.2 compared to 50.7 in June, according to Juno Bank. The region will also look for any spillover effect on tech and EV stocks after U.S. tech giants Alphabet and Tesla reported their second-quarter earnings, with Tesla falling short of estimates.

On the macro side, traders await the U.S. GDP data on Thursday and PCE data on Friday to gauge the expectations of interest rate cuts this year. A growing majority of economists in a Reuters poll said the Fed will likely cut rates just twice this year, in September and December, as resilient U.S. consumer demand warrants a cautious approach despite easing inflation. Hong Kong’s Hang Seng index fell 0.9% at its close, reversing earlier gains, while mainland China’s CSI 300 slipped 0.63% to a two-week low of 3,418.16. Japan’s Nikkei 225 dropped 1.11% to close at 39,154.85, marking a one-month low. South Korea’s Kospi was 0.56% lower at 2,758.71, while Australia’s S&P/ASX 200 was little changed at 7,963.7.

Wall Street Fall Amid Tech Sell-Off

Wall Street's main indexes finished sharply lower overnight after disappointing earnings from mega-cap technology companies fueled concern the artificial-intelligence frenzy that has powered the bull market might be overblown. The Dow Jones Industrial Average fell 1.25% to end at 39,853.87. The S&P 500 lost 2.31% to close at 5,427.13, while the tech-heavy Nasdaq dropped 3.64% to finish at 17,342.41. The sell-off on Wall Street came amid a negative reaction to corporate earnings news from Tesla and Alphabet. Shares of Tesla plummeted by 12.3% after the electric vehicle maker reported weaker than expected second quarter

earnings. Google parent Alphabet also plunged 5% after reporting second quarter earnings that beat analyst estimates but missing expectations for YouTube advertising revenue.

Other major tech stocks also fell in sympathy with Alphabet and Tesla. Nvidia and Meta Platforms respectively lost 6.8% and 5.6%, while Microsoft slid 3.6%. On economics news, the U.S. PMI flash manufacturing output index fell to 49.5 in July, unexpectedly slipping into contraction territory as new orders, production and inventories declined. Sales of new U.S. single-family homes fell to a seven-month low in June as higher mortgage rates and prices weighed on demand, further evidence that the housing market recovery faltered in the second quarter.

Source: TA Research - 25 Jul 2024