The laggards

Loading

Healthcare stocks (down 1.5 per cent) were among the weakest companies in the benchmark index, with hearing implants maker Cochlear sliding 3.9 per cent, Sonic Healthcare losing 2.4 per cent and Ramsay declining 0.8 per cent. Ampol (down 5.1 per cent) was the biggest large-cap decliner as it went ex-dividend on Friday.

The lowdown

Friday marked the third time this year the local bourse hit a record high, following record closes on January 31 and February 2. Before that, the last recorded high was on August 13, 2021.

AMP chief economist Shane Oliver noted that with the December half-year earnings reporting season now over, the number of companies beating expectations (46 per cent) clearly exceeded those that missed (36 per cent) – higher than the long-term average of 41 per cent.

Loading

“That said, consensus expectations remain for a 5.5 per cent or so fall in profits this financial year [down from 4.9 per cent a month ago], with a big fall in energy sector profits on the back of lower prices and a small fall in bank profits, but most other sectors seeing flat to up profits,” Oliver wrote in a research note.

“The bad news has been that revenue growth has slowed and high interest expenses are a problem, but the good news has been that the peak in cost growth may be near, labour market pressure appears to be starting to normalise, cost control remains strong and guidance has been stable. So, the bottom line has been that results have been better than feared, but profits are still likely to be down this financial year.

Turning to the economy, Oliver said it was too early to tell if the Reserve Bank had gone too far in its interest rate increases, but he believes November’s hike might have been “a bit of an overreaction”.

“Of course, it may become more of an issue in the week ahead as December quarter GDP growth looks like being weak at 0.1 per cent quarter-on-quarter, with an ongoing per capita recession and a high risk of a contraction in GDP.”

Elsewhere, US stocks climbed to record highs.

Loading

The S&P 500 rose 0.5 per cent to top its peak set last week. The Nasdaq composite led the market with a gain of 0.9 per cent, which surpassed its high set in 2021. The Dow Jones finished just below its record set last week after rising 0.1 per cent.

In the bond market, yields eased after a closely followed inflation report showed prices across the US rose as expected last month. That calmed worries that had built on Wall Street that the inflation data could show a discomforting re-acceleration. Earlier reports had shown prices rose more than expected in January at both the consumer and wholesale levels.

“While inflation was hotter than it’s been in a while, it may be more of a flash-in-the-pan than the start of something worse,” said Brian Jacobsen, chief economist at Annex Wealth Management.

Thursday’s report kept intact hopes that the Federal Reserve may begin cutting interest rates in June. Such a move would relax the pressure on the economy and boost investment prices, and the Fed has indicated several cuts may be coming this year.

The Fed’s main interest rate is sitting at its highest level since 2001 in hopes of grinding down inflation by dragging on the economy through more expensive mortgage and credit-card payments. Hopes for coming cuts to rates helped launch the US stock market’s big rally in late October, and the S&P 500 just closed its fourth straight winning month.

Relief on rates, though, would come only if the Fed sees additional convincing data that inflation is sustainably heading down towards its target of 2 per cent.

Tweet of the day

Quote of the day

‘Alan will be back soon. Thank you!’

That’s the admin team of streaming news channel ADH TV, who are insisting that embattled media figure Alan Jones, who is in London, will return to air soon, despite having no immediate plans to return to Australia, as reported by this masthead.

You may have missed

No-one was preaching the “greed is good” mantra when Australia’s publicly listed companies reported their financial results for the December half-year.

Australia’s corporate titans are used to weathering a brutal level of scrutiny during reporting season. But they are also used to receiving the typical payoff: the kudos of delivering a bumper profit for investors. Not this year.

A volatile cocktail of political and public fury over alleged price gouging by the likes of Qantas, Coles and Woolworths forced Australia’s largest consumer-facing businesses to be sensitive when it came to reporting just how much money they were making – and how they did it.

If the recent example of Qantas boss Alan Joyce and his chairman Richard Goyder were not enough, Woolworths boss Brad Banducci would have rattled a few corporate cages with his surprise retirement last week, as the grocery giant announced its December half-year results.

Read more on why Australian companies don’t want to make too much money here.