Market Highlights: Powell calms markets, and more Big Tech stocks start to pay dividends

ASX to open flat after the US Fed held rates
Jerome Powell eased market tensions after saying another rate hike is “unlikely”
More and more tech stocks are paying divvies, and that’s good news

Aussie shares are poised to open flat on Thursday after the US Fed expectedly left its interest rates unchanged.

Overnight, Wall Street was a mixed bag following the Fed’s decision. The S&P 500 fell by -0.34%, the blue chips Dow Jones index was up by +0.23%, and the tech-heavy Nasdaq tumbled by -0.70%.

The Fed kept the Fed Funds rate at the range of 5.25% – 5.5% as per market expectations, with chairman Jerome Powell saying that another rate increase is unlikely.

“I think it’s unlikely that the next policy rate move will be a hike. I’d say it’s unlikely,” Powell said.

“I think we’d need to see persuasive evidence that our policy stance is not sufficiently restrictive to bring inflation sustainably down to 2% over time. That’s not what we think we’re seeing.”

However, he warned about sticky price pressures in the US economy.

“Inflation is still too high. Further progress in bringing it down is not assured and the path forward is uncertain,” Powell said.

US treasuries rallied (bond yields fell) across the curve on the back of Powell’s comments, sending the US dollar to tumble against major currencies. The Aussie dollar gained 0.8% to trade at US65.32c.

To stocks, healthcare giant CVS plunged -17% after cutting its 2024 profit forecast.

Amazon rose +2% after profit more than tripled in Q1, topping analysts’ expectations.

Microchip maker AMD fell -9% after its forecast of AI chip sales for 2024 fell far short.

Fellow chips stock Super Micro also fell -14% after Q3 revenue missed estimates. Both of these stocks led a selloff in other chip stocks.

Binance founder Changpeng Zhao or CZ – the 38th richest person in the world – was sentenced to four months in jail after pleading guilty to failing to install money laundering safeguards at Binance.

More Big Techs are starting to pay dividends

Meta, Salesforce and Alphabet have just announced dividends for the first time in 2024.

What does this mean for income investors?

“This news obviously garnered a lot of attention. However, the reality is that it marks the development of a trend we have been watching for a long time,” said Richard Saldanha, senior portfolio manager at Aviva Investors.

Saldanha said the perception of dividend-paying companies is that they usually belong to mature industries with fewer growth prospects, such as telecoms or utilities.

Meanwhile, high-growth tech companies have long had a reputation for focusing on other means of capital allocation, such as buybacks or mergers and acquisitions.

“But the reality is the likes of Microsoft and Apple have been paying dividends for years,” said Saldanha.

“And while this is not an entirely new trend, the fact more tech companies are now entering the ranks of dividend payers is positive.”

Saldanha adds that companies that announce dividends are making a firm commitment to shareholders that they are going to consistently deliver and grow their cashflows so they can support a dividend over time.

“And the presence of strong companies like Meta and Salesforce in the dividend-paying universe further broadens the opportunity set for equity investors with an income focus.”

In other markets …

Gold price rose by +1.3% to US$2,321.40 an ounce.

Oil prices also fell around -3%, with Brent crude now trading at US$83.565 a barrel.

The benchmark 10-year US Treasury yield was down 4 basis points (bond prices higher) to 4.64%.

The Aussie dollar surged by +0.8% to US65.32 cents on the back of Powell’s comments.

Bitcoin meanwhile was down almost -4% in the last 24 hours to US$57,863, taking its losses in the last seven days to around -10%.

5 ASX small caps to watch today

Meteoric Resources (ASX:MEI)
MEI says it has entered into a non-binding MoU with Neo Performance Materials (TSX:NEO) for an offtake of 3,000 metric tonnes total rare earth oxide (TREO) per year from its Caldeira Project in Minas Gerais, Brazil, to supply Neo’s magnet manufacturing plant. The deal allows a right of first refusal for Neo to purchase additional MREC (mixed rare earth carbonate) that Meteoric produces from the Caldeira Project in excess of 6,000 MT TREO per year, on similar terms.

Augustus Minerals (ASX:AUG)
Augustus has been granted a co-funded drilling grant of up to $110,000 for 2 x 700m deep diamond drill holes under the WA Government’s Exploration Incentive Scheme (EIS) for the Minnie Springs prospect. The deeper diamond drill program is designed to test and to provide a 550m deep, 1km wide geological/geochemical/structural cross-section through the large 3km long by 1km wide copper moly porphyry system, linking the Mo mineralised leucogranite to the extensive Cu in soil anomaly to the northeast.

Adavale Resources (ASX:ADD)
Adavale reported the successful completion of the maiden exploration program on EL6821 and EL6957, Mundowdna and Mundowdna South, within the company’s expanding uranium portfolio in South Australia. The program was completed ahead of schedule and under budget, with all of the key objectives completed. Assays results are expected early June.

Macmahon Holdings (ASX:MAH)
Macmahon announced that it has been granted a three-year extension of its alliance style, mining services contract with AngloGold Ashanti Australia at the Boston Shaker underground mine. The Boston Shaker mine is part of the Tropicana gold operation in WA. The three-year contract is worth $352m.

Insignia Financial (ASX:IFL)
Funds Under Management and Administration (FUMA) increased by $11.7 billion (+3.9%) to $312.3 billion as at 31 March. Total net outflows for the quarter were $1.7 billion, largely reflecting the transitory impact of execution of wrap platform consolidation.