Follow the leader, consumer businesses send ASX lower, travel is back

The local market couldn’t overcome growing concerns about stagflation, an instance when the economy slows as inflation increases, with the S&P/ASX200 falling 1.7 per cent on Thursday.

The losses were broad-based, with every sector but healthcare falling, led by the consumer sectors.

Healthcare gained 0.1 per cent with the discretionary and staples companies down 3.1 and 3.7 per cent after Target USA delivered an underwhelming quarterly update.

Energy and materials also fell more than 1 per cent with less than 10 per cent of the market finishing higher.

Wesfarmers (ASX: WES), Woolworths (ASX: WOW) and JB HiFi (ASX: JBH) fell by 7.8, 5.6 and 6.6 per cent, however, such broad-based losses likely ignore the very unique conditions in different parts of the world.

Economic news remained strong with a 40-year record low in unemployment of 3.9 per cent despite only 4,000 more jobs being created in April.

On the positive side, the long-awaited $60 billion merger of BHP’s oil business with Woodside Petroleum (ASX: WPL) received 97 per cent of votes in favour and is set to proceed in becoming a top 10 global oil producer.
 
KKR confirms Ramsay bid, healthcare shines, Aristocrat delivers record profit, WebJet returns to profit
 
Healthcare companies attracted the majority of capital flows, with both CSL (ASX: CSL) and Ramsay (ASX: RHC) finishing higher on a rough day for global sharemarkets.

Ramsay was buoyed by confirmation that private equity giant KKR would be proceeding with their $88 per share, $20 billion bid for the company. It still trades at a 10 per cent discount on the price.

Gaming machine designer and distributor Aristocrat (ASX: ALL) gained 6.7 per cent after reporting a 46 per cent jump in profit, reaching a record of $530 million as gamblers flocked online amid the pandemic.

Revenue was 23 per cent higher with the group clearly not suffering from the supply chain or labour issues. The result was a $500 million on-market buyback.

“Travel is back, baby” said the CEO of WebJet (ASX: WEB) after the company reported a return to profit in the second half of FY22.

Costs are falling and revenue is returning amid surging travel and airfare prices.

Revenue more than tripled in the 12 month period whilst the loss narrowed from $100 to just $15 million.
 
Strong start but fears linger, S&P500 nears 20 per cent fall, retailers recover
 
All three US benchmarks looked to be turning the corner on Thursday, trading in positive territory but ultimately reversing gains with the Dow Jones finishing 0.8 per cent lower.

The S&P500 and Nasdaq both fell, down 0.6 and 0.3 per cent as a wall of worry sends markets nearly 20 per cent off in 2022.

Retailer Kohl’s (NYSE: KSS) reversed recent losses, gaining 4.4 per cent, despite missing sales and profit expectations significantly, showing signs the selloff may be coming to an end.

Retail sales in the US showed a 20 per cent jump in services spending, which could help the ballooning inflation rate that is predominantly focused on goods.

Unemployment benefits increased whilst the manufacturing index dropped heavily as sentiment continues to weaken.

Shares of Harley Davidson (NYSE: HOG) fell 9 per cent after announcing it would suspend all assembly and shipments for two weeks due to supply chain issues, while Cisco (NYSE: CSCO) fell another 13 per cent after reporting flat revenue and guiding for weaker growth for the networking equipment giant.

Drew Meredith

Drew is publisher of the Inside Network's mastheads and a principal adviser at Wattle Partners.