ASX 200 afternoon report: 27th of February 2023

The ASX 200 trades 90 points lower (-1.24%) at 7216 at 2.30 pm.

With one full trading session left in February, the ASX 200 is in danger of ending the month near where it was trading in Mid-January after plunging by 1.6% this morning to a six-week low of 7193.4.

The catalyst for the ASX 200's sell-off, heavy falls on Wall Street after the Feds preferred measure of inflation, Core PCE stunned to the upside (4.7% vs 4.3% expected) on Friday evening.

The latest round of hotter-than-expected US economic data has added to concerns that the US economy is not slowing enough to allow the Fed to end its rate-hiking cycle. A similar story is also playing out in Australia as hotter-than-expected inflation data push the RBA towards extending its own tightening cycle.

The ASX 200 disappointing performance in February, compounded by an earnings season skewed towards earnings misses rather than beats and forward guidance, particularly from consumer-facing companies that suggest more challenging times lay ahead.

This puts the spotlight on tomorrow's release of Australian Retail Sales for January. Following a surprise -3.9% fall in December, which appeared to be related to Black Friday/Cyber Monday sales, the market is looking for a rebound in retail sales tomorrow by 1.5%.

As always, there is a wide range of expectations from +5% to -1%. However, given retail sales are more likely to be slowing due to the RBA's interest rate tightening cycle and cost of living pressures, we see the risks as being to the downside.

Returning to today's action. Last week's worst-performing sector, the Materials Sector, has fallen a further 2.83% today, following a crackdown on pollution in China that has weighed on iron ore prices. Mineral Resources fell 5.91% to $79.89, Fortescue Metals fell 5.84% to $21.13, Rio Tinto fell 2.53%, and BHP fell 2.43% to $44.83.

The share price of Domino's pizza fell another 5.44% to $50.30 and is back trading at its pre-covid levels after hitting a Covid high of $167.15! Super Retail Group fell 2.07% to $13.25, Aristocrat fell 2% to $36.13, and Nick Scali fell 1.92% to $9.71.

The big four banks have gained, led by NAB, which added 0.4% to $29.97, Westpac added 0.35% to $22.75, CBA added 0.22% to $101.41 while ANZ added 0.08% to $24.81. Macquarie lost 0.95% to $187.12.

A sea of red in the Lithium space led by Pilbara Minerals, which fell 5.41% to $4.29 back to where it was trading last week prior to its announcement it would pay its first-ever dividend. Galan Lithium fell 5.22% to $1.09, Liontown Resources fell 4.95% to $1.30, and Alkem fell 4.92% to $11.29.

The pullback in the ASX 200 from the February 6th 7567 high has today reached the upper echelon of the 7200/7000 support band we have been targeting since late January. Providing this support level holds, we expect to see a recovery towards the 7400/7600 resistance area.

ASX 200 daily chart