Good morning and welcome to the ABC’s finance blog! I’ll be your guide for the next few hours.
The Australian share market is expected to start its day slightly higher (with ASX futures pointing to a 0.3% gain).
It comes after a mostly positive day on Wall Street as investors looked forward to the record US government shutdown ending after 41 days.
A deal to end the shutdown and restore federal funding has passed the US Senate and will next be considered by the House of Representatives.
The shutdown has disrupted food benefits for millions, left hundreds of thousands of federal workers unpaid, led to flight cancellations at US airports and delayed the release of government economic data.
‘Sector rotation’ out of tech
The Dow Jones Industrial Average, which comprises 30 of America’s largest companies, jumped 1.1% in the final hour of trade.
The broader S&P 500, however, rose 0.2%, while the tech-focused Nasdaq Composite slipped by 0.2%.
Some of the companies that saw the biggest falls to their share price were Nvidia (-2.5%), Tesla (-1.7%), Oracle (-2.5%).
What appears to be happening is “sector rotation”. That’s when investors sell their more “expensive” shares and buy more shares of companies that trade at lower valuations.
Essentially, investors sold out of technology companies closely associated with the “artificial intelligence (AI) trade” on concerns they’re becoming overvalued.
Instead, they piled into companies on the Dow index, including Merck (+4.4%), Nike (+3.9%), McDonald’s (+2.6%), Johnson & Johnson (+2.5%), which are considered better value on a price-to-earnings basis.
Anyway, feel free to grab a tea or coffee (or whatever you drink) and I’ll be back with more finance news shortly!