The local market looks to be facing another tough start as investors become a lot more cautious about buying the pullback.

US stocks are once again modestly lower this morning following a night of mixed earnings reports and unsurprising rhetoric from the Federal Reserve Board indicating interest rates will likely remain at exceptionally low levels through at least mid-2015. They added that the central bank will continue to purchase Mortgage Backed Securities at a pace of $US40 billion per month.

With 20 minutes of trading left, the broad-based S&P 500 is down 0.3 per cent while the NASDAQ and Dow Jones Industrial Averages are down 0.2 per cent respectively.

So, it looks like its going to be another tough start for the local market, with SPI futures indicating an open around the 4490 level, some 15 points weaker than yesterday’s close and below the psychologically important 4500 level. It’s likely to be the cyclical sectors that feel the pressure once again this morning with energy names the worst performers in US trade.

It’s interesting how quickly the tone of markets can change. It was only a few days ago that any dip, no matter what the size, was bought locally as participants just wanted to get cash into the market. Fast forward a few sessions and this has changed, with people now a lot more cautious about buying the pullback.

The reaction to yesterday’s Chinese data was interesting as well. If this had been last week, the local market would have rallied strongly, yet yesterday, the market plodded sideways instead choosing to focus its attention on the negative developments offshore and the higher than expected inflation report, which casts a little more doubt on a Melbourne Cup day rate cut.

Nonetheless, we’re unlikely to see this trading correction last too long as ‘the glass half empty view’ turns to ‘half full’ once again; in fact, corrections in uptrend’s are completely healthy as it keeps sentiment in check and allows new participants to get into the market.

With nothing in the way of economic releases due out today, traders are going to be focusing on regional trade and more corporate releases. ANZ are due to report full year results this morning, probably at 8am while later in the session we expect to hear from Wesfarmers and Mirvac regarding Q1 performance. Echo Entertainment, Suncorp and Newcrest are due to hold their AGM’s today so there will probably be news from them too in some way or form.

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