investors continue to sell into strength on the asx 1447672015

A broad-based decline embraced all sectors save healthcare on the ASX on Tuesday, which closed in the red for the second consecutive session.

In highly volatile trading, stocks represented by the S&P/ASX 200 fell sharply in the opening hour of trade to a low of 5,611.20, but rebounded in the very next hour to the day’s high of 5,673.30 on release of the RBA’s minutes. Unfortunately, those levels could not be maintained, and steady selling through the rest of the session dragged the S&P/ASX 200 back near the lows of the day.

Indices and sectors

The benchmark S&P/ASX 200 on Monday fell 43.7 points, or 0.8 per cent, and closed at 5,615.5, while the broader All Ordinaries index was down 40.6 points, or 0.7 per cent, at 5,619.4.

Healthcare (+0.34 per cent) was the sole gaining sector. The biggest losing sectors were consumer staples (-1.93 per cent), energy (-1.04 per cent), real estate investment trusts (-1.02 per cent) and consumer discretionary (-0.82 per cent).

Stocks

Miners were pressured by the market sell-off as well as declines in the iron ore price. BHP Billiton Limited (ASX:BHP) fell 1.66 per cent to AU$29.63, Rio Tinto Limited (ASX:RIO) was unchanged at AU$57.45 and Fortescue Metals Group Limited (ASX:FMG) fell over 3 per cent to AU$2.22. BC Iron Limited (ASX:BCI) fell 1.09 per cent to AU$0.455. According to The Australian this morning, iron ore prices slipped for the sixth consecutive session to a new two-week low of US$58.40 per tonne. The newly listed, BHP spun off entity, South32 Ltd (ASX:S32), rebounded from the previous session’s subdued opening and rose 13.66 per cent to AU$2.33. It was the top gainer on the S&P/ASX 200 and was bid up by investors following positive analyst recommendations and gains in London.

In energy, Woodside Petroleum Limited (ASX:WPL) fell 0.67 per cent to AU$34.35, Origin Energy Ltd (ASX:ORG) slumped 2.32 per cent to AU$12.61, Oil Search Limited (ASX:OSH) was down 0.55 per cent to AU$7.29 and Santos Ltd (ASX:STO) declined 1.34 per cent to AU$8.09.

Among the major banks only Westpac Banking Corp (ASX:WBC) ended higher by 0.19 per cent to AU$32.28, with the other three closing in the red. Commonwealth Bank of Australia (ASX:CBA) was down 0.18 per cent to AU$82.85, National Australia Bank Ltd. (ASX:NAB) was down 0.97 per cent to AU$33.67, and Australia and New Zealand Banking Group (ASX:ANZ) fell 0.87 per cent to AU$32.00.

Retailers were also sold off by investors yesterday. Wesfarmers Ltd (ASX:WES), the owner of supermarket chain Coles, was down 1.78 per cent to AU$43.71, Woolworths Limited (ASX:WOW) fell 2.60 per cent to AU$28.10, and Myer Holdings Ltd (ASX:MYR) shed 3.62 per cent to AU$1.47. Caltex Australia Limited (ASX:CTX) bucked the trend and rose 0.61 per cent to AU$33.16.

Telstra Corporation Ltd (ASX:TLS) dipped 0.81 per cent to AU$6.13, TPG Telecom Ltd (ASX:TPM) fell 0.11 per cent to AU$8.80, M2 Group Ltd (ASX:MTU) was down 1.36 per cent to AU$10.90 and iiNet Limited (ASX:IIN) was unchanged at AU$9.72.

Qantas Airways Limited (ASX:QAN) fell 0.84 per cent to AU$3.53, while Virgin Australia Holdings Ltd (ASX:VAH) was down 1.02 per cent to AU$0.485.

Economic news, currency and insight

The minutes of the Reserve Bank of Australia’s meeting earlier this month, at which it cut the official interest rate to a record low of 2 per cent, showed that the central bank was worried about rising property prices, but ultimately ruled in favour of a cut to boost economic activity.

“Members also discussed the potential risk that low levels of interest rates could foster imbalances in the housing market. While concerned about the very strong pace of growth of housing prices in Sydney, and observing that conditions in Melbourne were strong, members saw much more muted trends in other capital cities,” the minutes said on housing. “On the data available for this meeting, however, it did not appear that the growth of housing credit, either for investment or owner-occupancy purposes, had been increasing over recent months. The Bank would continue to work with other regulators to assess and contain the risks arising from the housing market.”

On interest rates the bank said that a “further reduction in the cash rate would provide some additional support to economic activity by reinforcing recent encouraging trends in household demand. In turn, this would support non-mining business investment insofar as demand conditions were the main factor constraining these decisions.”

The ANZ/Roy Morgan's consumer confidence index showed that consumer confidence rose last week due to a favourable response to the federal budget, with the index rising 3.6 per cent to the highest level its November. "The initial positive reaction of Australians to last week's budget is great news for the economic outlook," ANZ chief economist Warren Hogan said, as quoted by news.com. "This suggests to us that Australians believe the government has got the mix of medium-term fiscal consolidation and short-term support for the economy about right."

On Wall Street, the Dow Jones Industrial Average closed at an all-time record high for the second consecutive session, unmoved by a less than impressive Walmart earnings report and a decline in energy stocks. At the end of a volatile trading session, the Dow Jones Industrial Average stood at 18,312.93, up 14.05 points (0.08 per cent), the broad-based SP 500 fell 1.31 (0.06 per cent) to 2,127.89, ending a three-day streak of new record peaks, while the tech-heavy Nasdaq Composite Index dropped 9.23 (0.20 per cent) to 4,503.72.

The Australian dollar was on the defensive as bullish housing data out of the US pushed up the greenback, according to Business Spectator. At 07:00 this morning (AEST), the Aussie was trading at 79.15 US cents, down from 79.97 US cents on Tuesday.

The Australian stock market is likely to open flat today given that at 06:55 this morning (AEST) the June ASX SPI200 Index (AP) Futures was up by 3 points at 5,623.