Evening Wrap: ASX 200 slips on falling silver, lithium and uranium prices, defence stocks tumble: DRO -8.3% and ELS -17%
The S&P/ASX 200 closed 38.6 points lower, down -0.43%.
The ASX 200 retreated after two days of gains as fresh volatility in precious metals, lithium, and uranium prices sparked renewed selling pressure across the Resources sector.
To put this into perspective, silver is currently trading down 7% to US$78/oz, gold is 0.3% lower at US$4,930/oz, the benchmark lithium futures contract is trading limit down 11% in China, and uranium fell 5% to US$87.50/lb on COMEX overnight.
Financials (XFJ) (+0.8%) was the standout for resilience, pushing back to its highest level since November as Commonwealth Bank of Australia (CBA) (+1.4%) and ANZ Group (ANZ) (+1.4%) led the way.
On the other hand, Resources (XJR) (-3.3%) led the decliners, falling commodity prices showing up in Alcoa Corporation (AAI) (-6.1%), Capstone Copper Corp (CSC) (-7.1%) and Sandfire Resources (SFR) (-5.8%).
In company news, MAAS Group (MGH) slid 26.6% after announcement of the sale of its construction materials division to Heidelberg Materials Australia, while Lynas Rare Earths (LYC) (-7.9%) dived on concerns that new US government policy may cap the upside of certain critical minerals prices. Amcor (AMC) (+6.6%) was among the better large cap performers as it benefited from positive response to its quarterly results.
Be sure to click/scroll through for the usual reporting of the major sector and stock-specific moves, the broker responses to them, as well as all the key economic data in tonight's Evening Wrap.
Also, I have detailed technical analysis on the Nasdaq Composite and the S&P/ASX 200 in today's ChartWatch.
Let's dive in!
Today in Review
Thu 05 Feb 26, 4:26pm (AEST)
Name
Value
% Chg
Major Indices
ASX 200 8,889.2
-0.43%
All Ords 9,154.9
-0.54%
Small Ords 3,716.1
-1.96%
All Tech 2,916.6
+0.08%
Emerging Companies 3,116.7
-4.00%
Currency
AUD/USD 0.697
-0.41%
US Futures
S&P 500 6,904.0
-0.03%
Dow Jones 49,527.0
-0.13%
Nasdaq 25,009.5
+0.04%
Name
Value
% Chg
Sector
Consumer Discretionary 4,000.1
+1.36%
Consumer Staples 11,956.3
+0.96%
Financials 9,421.7
+0.80%
Communication Services 1,690.6
+0.34%
Industrials 8,351.7
+0.22%
Real Estate 3,832.6
+0.22%
Health Care 34,033.5
+0.21%
Utilities 9,434.0
+0.21%
Information Technology 1,786.9
-0.13%
Energy 9,353.5
-1.25%
Materials 22,897.2
-3.31%
Markets
ASX 200 Session Chart
The S&P/ASX 200 (XJO) finished 38.6 points lower at 8,889.2, 0.19% from its session low and 0.43% from its session high. In the broader-based S&P/ASX 300 (XKO), decliners beat advancers by 148 to 126.
Fund flows: Eventually, they'll find an explanation for what's already in the charts! 📈
Hey, have you noticed just how many headlines there are banging around right now about the plunge in the tech sector… some of them even refer to a “great rotation” out of tech and into other, more mundane sectors. Who would have thunk it!? 🤷
One of the narratives I’ve heard expressed more commonly in the last 24-hours, is that many tech stocks are falling due to fears that AI will undermine their business models, particularly those with software as a service “SaaS” offerings. There was a time when SaaS was all the rage… think Xero (XRO), think Wisetech Global (WTC), think Pro Medicus (PME)…
But also think Adobe (NYSE: ADBE), and Salesforce (NYSE: CRM) — charts below.
Adobe (NASDAQ: ADBE) chart (TOP);
Salesforce (NYSE: CRM) chart (bottom).
What do you notice about ADBE’s and CRM’s charts? Do they look familiar? 🤔
They look the same as you know who! If anything, the local tech names look worse — probably because local risk-free rates have moved substantially higher compared to US risk-free rates (= great impact on analysts' discount rates vs ASX tech).
You know that I couldn’t care less about why this is happening — simply that it is happening. More specifically, I only care that the state of the market for tech shares resembles S > D = P ⬇️. ChartWatch has been all over it — many months before the headlines caught up this week.
But I know there are a few of you out there who are clinging to the nostalgic notion that “it’s good to know what’s happening in the fundamentals” — bless your little hearts!
For all of you, the gist of it goes like this:
1.
It’s never been easier to develop new software using AI. I’ve seen what the Market Index/Livewire team is up to, and it is completely revolutionising their workflow (stuff that took days and weeks is down to hours — as in we can’t write development tickets fast enough!).
2.
Back to SaaS — once the posterchild for “everything you want in a tech business”: Subscription revenue is no longer “bond-like.” Software companies have long been prized by credit investors for predictable, recurring cash flows. AI is threatening that stability by enabling cheaper competitors, pressuring pricing — which raises churn risk and makes forward revenue less certain.
3.
That directly weakens debt metrics. Less reliable cash flow means lower interest-coverage ratios, weaker free-cash-flow generation, and higher leverage on a forward basis. For lenders, that increases the probability of covenant breaches, rating downgrades, or refinancing stress. For stock analysts — they’re going to ratchet up the interest rate they use to punitively discount risky future cash flows. It means that investors will likely prefer to pay much less per share for an affected tech business.
4.
Private credit is exposed. Many private credit funds have lent heavily to mid-market software firms at floating rates, assuming stable renewals. This is the key factor that’s sparked the sharp falls in US tech stocks over the last 48-hours — and its one to watch as markets absolutely hate credit concerns! As equity prices fall and growth assumptions reset, loans to once-unicorn-tech-hopefuls begin to look riskier — prompting mark-downs, tighter lending conditions, and broader risk-aversion.
The points above are part of a “narrative” = words put together in the right order constituting a plausible reason for investing in a certain way.
You know how much I hate investing on narratives! They’re just words. And as plausible as they might be — they can become defunct faster than you can scroll down your favourite social media platform!
Price on the other hand, is irrefutable. More specifically, D vs S = P. This is not a narrative, this is the most basic tenet of economics. It was when they built the pyramids, it is now, and it will be until AI finally enslaves the human race! 🤖
Hey, until that last bit… I’ll keep watching my charts! 😉
Microsoft (NYSE: MSFT) chart
Today's best blue chip gainers
Company
Last Price
Change $
Change %
1mo %
1yr %
Treasury Wine Estates (TWE)
$5.52
+$0.36
+7.0%
+6.8%
-48.7%
Amcor PLC (AMC)
$69.65
+$4.34
+6.6%
+11.6%
-11.0%
Netwealth Group (NWL)
$24.00
+$1.35
+6.0%
-4.6%
-21.8%
Resmed Inc (RMD)
$37.46
+$1.75
+4.9%
+3.8%
-3.8%
Pinnacle Investment (PNI)
$18.31
+$0.56
+3.2%
+6.9%
-26.8%
Nextdc (NXT)
$13.22
+$0.37
+2.9%
+5.4%
-9.1%
REA Group (REA)
$182.39
+$4.64
+2.6%
+1.1%
-25.4%
James Hardie Industries (JHX)
$33.81
+$0.79
+2.4%
+7.8%
-34.9%
Insurance Australia (IAG)
$7.85
+$0.18
+2.3%
-0.1%
-12.2%
SGH (SGH)
$47.37
+$1.08
+2.3%
-2.5%
-1.2%
Block (XYZ)
$81.50
+$1.73
+2.2%
-19.8%
-43.3%
The Lottery Corp. (TLC)
$5.29
+$0.11
+2.1%
+5.6%
+6.7%
Wesfarmers (WES)
$86.19
+$1.78
+2.1%
+8.0%
+16.7%
QBE Insurance Group (QBE)
$20.16
+$0.41
+2.1%
+1.4%
-1.4%
Cleanaway Waste (CWY)
$2.46
+$0.05
+2.1%
-3.9%
-9.9%
Seek (SEK)
$19.63
+$0.37
+1.9%
-14.1%
-14.9%
Brambles (BXB)
$22.72
+$0.39
+1.7%
+1.8%
+16.1%
Suncorp Group (SUN)
$16.98
+$0.28
+1.7%
-1.9%
-14.4%
Endeavour Group (EDV)
$3.72
+$0.06
+1.6%
+2.2%
-9.9%
Technology One (TNE)
$23.02
+$0.37
+1.6%
-15.2%
-24.7%
Today's worst blue chip losers
Company
Last Price
Change $
Change %
1mo %
1yr %
Lynas Rare Earths (LYC)
$14.74
-$1.27
-7.9%
+12.1%
+132.9%
Genesis Minerals (GMD)
$6.87
-$0.44
-6.0%
-8.2%
+117.4%
Sandfire Resources (SFR)
$18.91
-$1.17
-5.8%
-0.4%
+94.1%
Capricorn Metals (CMM)
$13.37
-$0.79
-5.6%
-8.2%
+69.9%
Ramelius Resources (RMS)
$4.44
-$0.25
-5.3%
+3.3%
+76.2%
Newmont Corp. (NEM)
$162.83
-$9.05
-5.3%
+5.6%
+137.5%
Northern Star Resources (NST)
$27.24
-$1.31
-4.6%
+8.3%
+58.1%
Life360 (360)
$25.87
-$1.07
-4.0%
-16.5%
+7.8%
South32 (S32)
$4.60
-$0.19
-4.0%
+21.7%
+39.0%
BHP Group (BHP)
$50.36
-$2.04
-3.9%
+6.7%
+28.3%
PLS Group (PLS)
$4.17
-$0.16
-3.7%
-13.8%
+87.0%
Whitehaven Coal (WHC)
$9.25
-$0.31
-3.2%
+18.3%
+52.6%
IGO (IGO)
$8.48
-$0.28
-3.2%
-2.9%
+77.4%
Evolution Mining (EVN)
$14.54
-$0.48
-3.2%
+13.4%
+156.4%
Perseus Mining (PRU)
$5.51
-$0.18
-3.2%
-3.5%
+92.0%
Wisetech Global (WTC)
$49.92
-$1.33
-2.6%
-23.8%
-59.7%
ALS (ALQ)
$23.88
-$0.63
-2.6%
+7.8%
+45.3%
Mineral Resources (MIN)
$54.34
-$1.31
-2.4%
-5.9%
+64.3%
Light & Wonder (LNW)
$168.49
-$2.83
-1.7%
+8.4%
+20.4%
Rio Tinto (RIO)
$157.13
-$2.3
-1.4%
+3.2%
+36.7%
ChartWatch
Nasdaq Composite Index
Analysis
Rest assured, ChartWatch is a 🚫 NARRATIVE FREE ZONE 🚫
Let’s start with Wednesday’s candle: S > D = P⬇️
However, the modest downward pointing shadow suggests (like it has been the case all week) there remains some credible buy the dip activity around. Credible, commendable really… but ultimately, still losing the battle.
In the short term at least: there exists excess supply for Comp stocks.
The 22692 point of demand held — just — but it certainly got tickled (Wednesday’s low = 22684).
*
Short term trend = ↔️, short term trend ribbon is amber, price is below ribbon. ⚠️
*
Long term trend = ⬆️ ✅
*
Price action = 📉 = falling peaks/troughs = supply reinforcement and demand removal = sell the rally + fail to buy the dip ⚠️
*
Candles: Since the 28-Jan minor peak of 23989, predominantly supply-side in nature = pervasive sell orders ⚠️
*
Volatility = elevated (+ supply-side price action = strong supply-side motivation) = ⚠️
*
Volume = elevated (+ supply-side price action = supply-side operating with size) = ⚠️
Using a weight of evidence approach, what
