Weaker miners bring rally to an end

THE sharemarket closed weaker as declines among the major miners dragged the broader market lower and snapped a two-day rally.

By InvestSMART · 5 Jan 2013

By InvestSMART ·
5 Jan 2013

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THE sharemarket closed weaker as declines among the major miners dragged the broader market lower and snapped a two-day rally.

The benchmark S&P/ASX200 index was down 16.9 points, or 0.36 per cent, at 4723.8, while the broader All Ordinaries fell 18.5 points, or 0.39 per cent, to 4742.9.

The market opened down about 0.3 per cent, following a disappointing night on Wall Street as investors reacted negatively to news the US central bank may consider ending its quantitative easing program earlier than expected.

Stocks remained stuck in red figures but held their ground to trade in a tight range throughout Friday's session, ending a two-day rally.

CMC Markets chief strategist Michael McCarthy said the declines were a healthy sign. "We've had such strong runs in both the US market and the local market," he said. "We need a bit of a flush, a bit of a correction or at least a pause to consolidate to bring new buyers into the market.

"A concern from an investor's point of view is when a market runs and runs in one direction because inevitably that then leads to a very significant correction."

Gold was the worst-performing sector, falling 3.48 per cent. Metals and minerals stocks (down 1.34 per cent) and materials (down 1.17 per cent) were also in negative territory.

BHP Billiton fell 24 cents to $37.91, while Rio Tinto was off 70 cents at $68.55.

One bright spot was financial stocks, with the big four banks all posting gains. ANZ climbed 8 cents cents to $25.26, CBA 1 cent to $63.25, NAB 6 cents to $25.31 and Westpac was 6 cents firmer at $26.25.

Making news, Atlas Iron said it was on track to produce up to 7.7 million tonnes of iron ore in the 2013 financial year after bringing its third Pilbara iron ore mine into production. Atlas fell 6 cents to $1.81.

Macmahon Holdings said an agreement to sell its construction operations to Leighton meant it was unable to let an Indian-based bidder that emerged on Thursday conduct due diligence on the assets. Macmahon was up 0.5 cent at 29 cents, while Leighton was 35 cents higher at $19.

The spot price of gold in Sydney was $US1649.90 per fine ounce, down $US36.53.

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Frequently Asked Questions about this Article…

Why did the S&P/ASX 200 close weaker today?

The S&P/ASX 200 slipped as declines among the major miners dragged the broader market lower and ended a two-day rally. The benchmark fell 16.9 points (0.36%) to 4,723.8, while the All Ordinaries dropped 18.5 points (0.39%) to 4,742.9. The market also opened down about 0.3% after a disappointing session on Wall Street tied to reports the US central bank may consider ending quantitative easing earlier than expected.

Which sectors led the losses on the ASX today?

Gold was the worst-performing sector, falling 3.48%. Metals and minerals shares were down 1.34% and the broader materials sector fell 1.17%, with these resource-led falls being the main drag on the market.

How did major miners like BHP Billiton and Rio Tinto perform?

Major miners underperformed: BHP Billiton fell 24 cents to $37.91 and Rio Tinto was off 70 cents at $68.55. Those declines among big miners helped pull the market lower.

Did the big four banks rise despite the weaker market?

Yes — the big four financial stocks were a bright spot. ANZ rose 8 cents to $25.26, Commonwealth Bank (CBA) added 1 cent to $63.25, NAB gained 6 cents to $25.31, and Westpac was 6 cents firmer at $26.25.

What did market strategists say about the pullback?

CMC Markets chief strategist Michael McCarthy described the decline as healthy. He said after strong runs in both US and local markets, a flush, correction or pause is useful to consolidate and help bring new buyers into the market, and to reduce the risk of a large correction later.

What company-specific news moved stocks today (Atlas Iron, Macmahon, Leighton)?

Atlas Iron said it is on track to produce up to 7.7 million tonnes of iron ore in the 2013 financial year after bringing a third Pilbara mine into production; Atlas fell 6 cents to $1.81. Macmahon Holdings said its agreement to sell construction operations to Leighton prevented an Indian-based bidder from conducting due diligence; Macmahon was up 0.5 cent at 29 cents and Leighton rose 35 cents to $19.

What happened to the gold price and how did that affect gold stocks?

The spot price of gold in Sydney was US$1,649.90 per fine ounce, down US$36.53, and the gold sector posted the day's biggest fall, dropping 3.48%—making gold the weakest-performing sector on the market.

What does trading in a 'tight range' and the end of a two-day rally mean for everyday investors?

According to the article, stocks traded in a tight range and ended a two-day rally, which reflects limited price movement after recent gains. Strategists quoted said a pause or modest correction can be healthy — it can consolidate recent gains, potentially attract new buyers and reduce the chance of a sharper correction later.