Month: May 2022

The market may be a sea of red but that hasn’t stopped the Arafura Resources Limited (ASX: ARU) share price from surging higher.

In morning trade, the rare earth developer’s shares are up 18% to 41.5 cents.

Why is the Arafura share price surging higher?

Investors have been bidding the Arafura share price higher today following the release of a major announcement.

According to the release, the company has signed a non-binding memorandum of understanding (MoU) with one of the world’s largest automotive groups, South-Korean based Hyundai Motor Company.

The release advises that the MoU provides a framework for the parties to negotiate a binding offtake agreement for the supply of up to approximately 1,000 to 1,500 tonnes per annum (tpa) of NdPr Oxide from the Nolans Project.

If all goes to plan, this will commence in 2025 for a seven-year term and represents just over one third of the estimated average annual production capacity of 4,440 tonnes from Nolans following an expected ramp-up.

Pricing will be determined quarterly using a formula-based mechanism referencing the NdPr oxide Ex Works China price per tonne. In addition, an industry recognised customary discount in recognition of the long-term offtake agreement would also be applied.

A ‘fantastic outcome’

Arafura’s Managing Director, Gavin Lockyer, was very pleased with the news and appears optimistic that this won’t be the only automotive group that the company signs an offtake agreement with. He said:

The signing of the MoU represents a fantastic outcome and validates the Tier-1 credentials of the Nolans Project as one of the world’s premier next generation NdPr ore to oxide projects.

The Nolans Project is strategically significant for Tier-one customers as it offers scale and supply chain diversification and security that will underpin their EV technologies.

The post Arafura share price surges 18% on Hyundai deal appeared first on The Motley Fool Australia.

More reading

• Battery-powered! 3 ASX mining shares up more than 50% in 2022
• Arafura Resources share price extends gains on Friday, up 100% since March

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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S&P/ASX 200 Index (ASX: XJO) tech share WiseTech Global Ltd (ASX: WTC) has been savaged this year. But there could be much brighter days ahead for the logistics software provider.

At the time of writing, the WiseTech share price is $40.70. That’s 32% lower than it was at the start of 2022.

For context, the ASX 200 has slumped 7% in that time. Meanwhile, the S&P/ASX 200 Information Technology Index (ASX: XIJ) has plunged 33%.

As of the end of the last half, the tech stock had $380 million in cash and no debt. On top of that, experts are tipping it as a “genuine growth company”. Is the stock one to look at in 2022?

Experts weigh in on the WiseTech share price

WiseTech could be one of its sector’s hidden gems, according to brokers and fund managers.

Marcus Today portfolio manager Ben O’Leary told The Motley Fool Australia’s Tony Yoo earlier this year the company is one to look out for.

“They are a genuine growth company with wins that are about benefiting from the longer-term structural changes in the shipping industry,” O’Leary said.

The fundie also likes WiseTech’s revenue stream and its low level of customer churn. Around 90% of the company’s revenue is recurring while its customer loss has been below 1% for more than nine years.

“We know customers are a really important thing in the long-term success of any business,” O’Leary continued. “[WiseTech] really do get people on board and keep them on board.”

Meanwhile, Macquarie brokers think the company could be hunting for new acquisitions, reports the Australian Financial Review (AFR).

Long-term investors will remember the company’s previous years as an ASX 200 acquisition machine.

The broker reportedly estimated the company’s cash balance could grow to $772 million by financial year 2024. That could see it looking for enterprises to buy.

Is WiseTech an ASX 200 bargain?

While it all sounds very rosy, the experts warned investors to be wary of tech stocks in 2022.

“[T]hey are a high-growth tech company, so they are going to be pushed on the valuation grounds when the market gets worried about that, which they have recently,” O’Leary told Yoo.  

“It’s a little bit at the whims of what the central banks decide to do, but … from our perspective, it’s mostly priced in and the tailwinds behind it will hopefully outweigh that.”

Macquarie has been quoted by the AFR as saying:

WiseTech is still looking expensive on an enterprise value-to-sales multiple versus its own history, the company is now trading in-line with its historical one-year forward enterprise value-to-earnings before interest, tax, depreciation, and amortisation (EBITDA) multiple and is thus looking fairly valued.

Macquarie reportedly has a $45 price target and a ‘neutral’ rating on WiseTech shares.

The post This ASX 200 tech share has $380 million in cash and no debt but has fallen 32% this year. Is it a bargain? appeared first on The Motley Fool Australia.

More reading

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• Why are ASX 200 tech shares having such a stellar start to the week?
• Tech turnaround: ASX 200 tech shares surge higher on Friday
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• Why is the WiseTech share price slipping 5% lower today?

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended WiseTech Global. The Motley Fool Australia has positions in and has recommended WiseTech Global. The Motley Fool Australia has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Treasury Wine Estates Ltd (ASX: TWE) share price could not escape the market sell-off even as it executes on a plan to by-pass punishing Chinese tariffs.

Shares in the winemaker fell 0.9% to $11.10 in morning trade, although shareholders can consider that a win.

Treasury Wine share price looking fortified

The weakness isn’t as bad as the 1.9% plunge by the S&P/ASX 200 Index (ASX: XJO). That’s caused by a meltdown on Wall Street overnight, which suffered its worst one-day fall in nearly two years.

The Treasury Wine share price is even holding on better than other ASX staple shares. The Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW) share prices have fallen between 2% and 4% each.

Penfolds getting revived in China

The optimism towards Treasury Wine comes on news that it is launching a wine made in China aimed at the 52 million regular wine drinkers in the country, reported The Australian.

The wine, which will be sold under the Penfolds name and marketed as an entry-level luxury product, will not be subject to Chinese tariffs. The Company is pricing the new offering at between $30 and $50 a bottle and will be released later this year.

But Aussies are unlikely to be given a taste as Penfolds China is only meant for that market – at least for now.

Treasury Wine share price boosted by renewed revenue stream

The excitement towards Treasury Wine’s share price is understandable. The Asian giant’s punitive tax on Australian wine had effectively brought many local vineyards to their knees.

Treasury Wine took a big earnings hit from the trade war. It came at a time when its Australian Penfolds product was gaining popularity among Chinese drinkers.

The company doesn’t believe that its brand has been damaged in the eyes of Chinese consumers by the trade friction.

The chief executive of Treasury Wines, Tim Ford, said:

As a leading global wine producer, we have a responsibility to help build the wine category and industry in our different markets. The Penfolds brand continues to be strong among consumers in China, and sharing our global expertise is part of our ongoing investment in our local team, our brands, customers, consumers, partners and the broader industry: that’s what long-term commitment to a market really means.

Where grapes are being sourced

While sourcing grapes from other countries is nothing new for Treasury Wines, using Chinese grapes could surprise some. China may have a long history of making alcohol that dates back to 2,600BC, but the country isn’t known to be a wine growing region.

The first batch of Penfold China wine will come from grapes grown in the Ningxia region in the North. Treasury Wines is working with other Chinese vineyards to expand production.

The Treasury Wine share price has traded 1.5% higher over the past 12 months, which is in line with the ASX 200.

The post Treasury Wine share price beating the sell-off amid ‘made in China’ push appeared first on The Motley Fool Australia.

More reading

• Can a new $165m ‘state-of-the-art facility’ help restore the Treasury Wine share price?
• Broker tips the Treasury Wine share price to pop 23% higher
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• Broker names the best ASX shares to buy right now
• The Treasury Wine share price has tumbled 9% in 2022, so is the dividend yield worth its weight?

Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended COLESGROUP DEF SET. The Motley Fool Australia has recommended Treasury Wine Estates Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Reckon Limited (ASX: RKN) share price is rocketing higher in early trade.

Reckon shares are defying the broader sell-off, currently up 49.71% to $1.31.

Here’s what’s driving investor interest in the ASX software solutions provider today.

What did Reckon announce?

The Reckon share price is off to the races after the company reported it has entered into a sales agreement with international consortium Access Group.

Subject to Australian regulatory approvals, Access will buy Reckon’s Accountants Practice Management Group for $100 million cash.

That price equates to 4.6 times the 2021 financial year revenue for the Accountants Practice Management Group and 8.4 times its earnings before interest, taxes, depreciation, and amortisation (EBITDA).

Investors may also be bidding up the Reckon share price after the company reported it intends to return the majority of the sales proceeds to shareholders via a partially franked special dividend.

Reckon also plans to strengthen its balance sheet by repaying some of its outstanding debt.

Commenting on the sale, Reckon CEO Sam Allert said:

The sale agreement with Access Group represents a compelling offer, which we believe is in the best interests of our shareholders. The transaction unlocks significant value for shareholders.

Reckon will be in a stronger position to focus on and invest in the growth and development of the Business and Legal Groups, should the transaction complete. These divisions represented approximately 70% of the company’s revenue and 60% of the company’s EBITDA prior to this transaction and we believe have significant upside.

This transaction would allow us to focus on our remaining business divisions.

Reckon expects the transaction to be completed within the next three months.

Reckon share price snapshot

Today’s big surge has lifted the Reckon share price well into the green for 2022, up around 40%. That compares quite favourably to the 8.2% year-to-date loss posted by the All Ordinaries Index (ASX: XAO).

The post Here’s why the Reckon share price is booming 50% on Thursday appeared first on The Motley Fool Australia.

More reading

• Treasury Wine share price beating the sell-off amid ‘made in China’ push
• These ASX 200 companies just lost market share to a small-cap rival
• Why is the Westpac share price sliding lower today?
• 2 reasons Amazon stock is slumping today
• Nufarm share price tumbles despite huge first-half profit growth

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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It’s been a tough year for S&P/ASX 200 Index (ASX: XJO) companies, but it just became that much worse for a couple of giant telcos.

The Australian Competition and Consumer Commission today released the latest NBN wholesale market figures, and it’s bad news for Telstra Corporation Ltd (ASX: TLS) and TPG Telecom Ltd (ASX: TPG).

In the quarter ending 31 March, the report showed the two largest players, Telstra and TPG Telecom (which owns the Vodaphone brand), each lost 0.3 percentage points of the NBN market.

The third-largest NBN retailer, Optus, also lost 0.3 percentage points of market share.

So who’s winning then?

It seems Australians are drifting away from the big ASX 200 telcos to sign up with smaller players offering better deals.

In fact, the market share of all the small providers outside the top four increased by one full percentage point.

The charge was led by Aussie Broadband Ltd (ASX: ABB), which boosted its share by a massive 0.5 percentage points. It now has 6.1% of the NBN market.

“The smaller internet providers are growing, and in doing so they are increasing competition in the residential broadband market,” said ACCC commissioner Anna Brakey.

“The presence of smaller players with competitive offers is keeping the larger providers on their toes.”

Despite its share of the pie shrinking, Telstra is still dominant, holding 43.7% of the market. TPG retains 23.3%, while Optus is down to 13.9%.

How are ASX telco shares doing this year?

Aussie Broadband shares have fared better than many other growing technology stocks, falling 15.8% for the year so far.

The stock price was actually up 17.3% year-to-date before a disappointing performance update sent it plummeting at the start of this month.

According to CMC Markets, three out of five analysts still rate it as a strong buy.

TPG shares have done well this year, actually gaining 2.7% since the first trading day of the year. This compares very favourably to the general ASX 200 index, which has plunged 7.1%. The telco has also given out a 2.8% dividend yield to add to the capital growth.

The Telstra share price has largely followed the fortunes of the ASX 200, dropping 5.92% for the year so far. Telstra shareholders enjoy a 2.77% dividend yield.

The post These ASX 200 companies just lost market share to a small-cap rival appeared first on The Motley Fool Australia.

More reading

• ASX 200 shares tumble following worst day on Wall Street in 2 years
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• ASX 200 midday update: BlueScope and Fortescue rise, Boral tumbles

Motley Fool contributor Tony Yoo has positions in Aussie Broadband Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Aussie Broadband Limited. The Motley Fool Australia has positions in and has recommended Telstra Corporation Limited. The Motley Fool Australia has recommended Aussie Broadband Limited and TPG Telecom Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Aussie share market is heading south today following Wall Street’s biggest loss overnight since October 2020, and the Westpac Banking Corp (ASX: WBC) share price is following suit.

Markets returned to heavy selling after major retailers, Target and Walmart, released their disappointing quarterly reports.

In early morning trade, the S&P/ASX 200 Index (ASX: XJO) is sinking by 1.8% to 7,053 points.

But the Westpac share price is faring considerably worse. At the time of writing, the company’s shares are down 3.85% to $23.50.

So what’s going on with the big four bank today?

Shareholders set eyes on the Westpac interim dividend

With the earning season wrapped up for a majority of the major banks, the Westpac share price is trading ex-dividend today.

This comes after the bank delivered its half-year results on 9 May, reporting a reduction across key financial metrics.

Nonetheless, the board opted to increase its upcoming interim dividend by 5.2% over the prior corresponding period.

Typically, one business day before the record date, the ex-dividend date, is when investors must have purchased shares. If the investor does not buy Westpac shares before this date, the dividend will go to the seller.

When can shareholders expect to be paid?

For those eligible for Westpac’s interim dividend, shareholders will receive a payment of 61 cents per share on 24 June. The dividend is fully franked at a corporate tax rate of 30%, which means investors will receive tax credits.

In addition, investors can elect for the dividend reinvestment plan (DRP) which will add a portion of shares to their portfolio instead. This will be based on a 10-day volume-weighted average price from 25 May to 7 June.

There is no DRP discount rate and the last election date for shareholders to opt-in is 23 May.

Under the company’s capital management framework, there is typically a 60% to 75% targeted dividend payout ratio.

The latest dividend represents a dividend payout ratio of 69% for the first half.

Westpac share price snapshot

Over the past year, Westpac shares have lost around 7%. The ASX 200 index is up almost 2% over the same timeframe.

However, the Westpac share price is up around 8% this year to date. It reached a 52-week low of $20.00 in late January, before sharply rebounding in the following weeks.

Based on today’s price, Westpac commands a market capitalisation of roughly $86.57 billion and has a trailing dividend yield of 4.8%.

The post Why is the Westpac share price sliding lower today? appeared first on The Motley Fool Australia.

More reading

• 3 cheap ASX shares set to boom with higher interest rates: Wilsons
• 5 things to watch on the ASX 200 on Thursday
• Can ASX 200 banks really see a 15% profit jump if the cash rate hits 1%?
• Latest Westpac review notes progress but flags ‘bank’s difficulty in staying the course’
• Brokers name 2 ASX 200 blue chip shares to buy

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Westpac Banking Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened 

Shares of the e-commerce juggernaut Amazon (NASDAQ: AMZN) were falling today as investors processed the disappointing quarterly financial results recently reported from two of Amazon’s peers. 

Additionally, Amazon’s stock was tumbling today as investors continued to worry about rising inflation and how the Federal Reserve’s action in response to it could slow down the economy. Those fears sent the tech-heavy Nasdaq Composite down 2.7% this morning. 

As of 11:39 a.m. ET, Amazon’s stock had fallen 5.4%. 

So what

Earlier this week, Walmart (NYSE: WMT) missed analysts’ earnings expectation for its first quarter, which has sent its share price falling over the past few days. Then yesterday, Target (NYSE: TGT) reported adjusted earnings of $2.19, which was far below Wall Street’s average estimate of $3.07 for the quarter. That sent Target’s stock into a free-fall this morning, plunging 24%. 

The worse-than-expected performance by two of Amazon’s retail rivals is weighing down Amazon’s stock today as investors worry that the same supply chain constraints and effects from rising inflation will hurt the online retailer as well. 

This leads us to the next reason why Amazon’s stock is stumbling today: Investors are getting increasingly anxious about the economy. 

Inflation is still at a nearly 40-year high, and the Federal Reserve has committed itself to raising the federal funds rate to get it back down. That’s going to take some time and will likely result in some aggressive rate hikes in the coming months. 

Even with those moves, Fed Chairman Jerome Powell said recently that he couldn’t guarantee a so-called soft landing for the economy.  

That’s stoked fears among some investors that the Fed’s moves could result in a recession, and it’s causing some investors to sell their stocks, leading to a broader market drop.

Now what 

It’s not surprising that Amazon investors were nervous this morning. Two big U.S. retailers are experiencing the effects of inflation, long-standing supply chain problems, and rising fuel costs, which are all taking a bite out of profits. 

And with the Fed taking big steps to tamp down inflation, some investors are exiting their stock positions and looking for safer places to put their money. 

But as difficult as this time is, investors should remember to keep playing the long game, particularly with companies like Amazon, which have significant competitive advantages and are in a strong financial position to weather any potential economic storm. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post 2 reasons Amazon stock is slumping today appeared first on The Motley Fool Australia.

More reading

• Why Meta Platforms stock just rose while Amazon sank
• The single greatest investing lesson I ever learned
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• Why Amazon shares are tumbling today
• Is global e-commerce really at risk?

Chris Neiger has no position in any of the stocks mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon. The Motley Fool Australia has recommended Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The Nufarm Ltd (ASX: NUF) share price is under pressure on Thursday morning after a market selloff offset the release of a strong half-year result.

At the time of writing, the agricultural chemicals company’s shares are down 3% to $6.43.

Nufarm share price down following half-year update

• Revenue up 31% to $2,165.5 million
• Underlying EBITDA up 41% to $330 million
• Net profit after tax up 61% to $98.7 million
• Interim fully franked dividend of 4 cents per share

What happened during the half?

For the six months ended 31 March, Nufarm delivered a 31% increase in revenue to $2,165.5 million and a 41% lift in underlying EBITDA to $330 million. The latter was in the middle of its guidance range of $320 million to $340 million.

Management advised that this strong result reflects healthy seasonal demand for its crop protection and seed products, higher grain prices, and the success of its transformation program.

Nufarm’s Managing Director and CEO, Greg Hunt, commented:

This is a very strong result for Nufarm, validating our strategy and reflecting good management through volatile global conditions. While we have benefited from healthy seasonal demand in our markets and higher grain prices, we are also reaping the outcomes of the hard work undertaken in recent years to transform the company.

Our focus on core crops and key geographies is delivering strong results. Our seed technologies platforms continue to hit strategic milestones and provide significant growth opportunities for the company.

How does it compare to expectations?

Despite what the Nufarm share price performance might indicate, analysts at Goldman Sachs were blown away by the result.

They commented: “NUF reported 1H results significantly above expectations (EBITDA +46% above GSe), with strong underlying conditions amplified by demand pull-forward across the Australia and European segments.”

However, due to the broker’s belief that this has been driven largely by demand pull-forward, it has only made a modest revision to its full-year estimates.

The broker said: “These benefits should drive a larger than normal 1H EBITDA skew (we model 62%/38% 1H/2H), leading to a more modest +5% revision to our full-year EBITDA forecasts vs the large 1H beat.”

Goldman currently has a buy rating and $6.00 price target on Nufarm’s shares.

Outlook

Management has spoken positively about the second half. Mr Hunt commented:

The outlook for the full year remains positive. Current industry conditions are highly favourable with grain prices likely to remain elevated driving increased planting and demand for crop protection products. Full year results are anticipated to be proportionately more weighted to the first half compared to FY21, given the elevated forward sales due to global uncertainty and volatility in relation to active ingredient pricing, global supply chain and logistics challenges.

Looking further ahead, the CEO sees a path to annual revenues of $4 billion by 2026. He explained:

Our five-year growth aspirations remain unchanged as per the detailed strategy presentation in February. We see a credible path to over $4 billion revenue by 2026, with our seed technologies business aspiring to revenues of between $600-$700 million in 2026.

The post Nufarm share price tumbles despite huge first-half profit growth appeared first on The Motley Fool Australia.

More reading

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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APA Group (ASX: APA) looks like a good ASX dividend share in my opinion.

The gas and electricity infrastructure business has seen a solid performance over the last 12 months. In the past year, the APA share price has gone up by almost 25%. That compares to the S&P/ASX 200 Index (ASX: XJO) which has only risen by 1.6% over the past year.

Here are the reasons why I think APA can be an effective ASX dividend share:

Dividend yield and growth

APA has been growing its distribution to shareholders for many years in a row. It has one of the longest consecutive growth streaks on the ASX. It’s getting closer to 20 straight years of increases. I think this sort of growth history is an attractive factor about the business.

It’s expecting another annual increase in FY22. The annual distribution for the current financial year is expected to be 53 cents per security, which would translate into growth of 3.9% for the year.

At the current APA share price, it has an FY22 distribution yield of 4.6%. I think that’s a solid starting place for the business.

APA notes that its recent distribution growth reflects strong cash conversion and benefits from the March 2021 debt refinancing activities and a positive outlook.

Growing cash flow

APA funds its distribution to investors from its cash flow, which continues to increase. In the FY22 half-year result, free cash flow went up by 22.6% to $515.1 million.

The business is benefiting from the rise in its revenue as well as the conveyor belt of projects that are being completed.

APA says it’s favourably exposed to rising inflation, with almost 100% of its contracted revenue linked to inflation indices. That might explain some of the recent strength of the APA share price.

The ASX dividend share notes that its organic growth pipeline now exceeds $1.4 billion in value. Organic growth opportunities are being sourced from across all of APA’s strategic focus areas. New projects are underway across both gas pipelines and renewable energy.

It’s also executing its strategy to grow its electricity footprint with a strategic investment in the senior secured debt of Basslink. It’s going to work with Hydro Tasmania, the State of Tasmania, the Australian energy regulator, and other key stakeholders to convert Basslink to a regulated asset.

Future-focused

A lot of APA’s value is focused on pipelines which transport around half of Australia’s natural gas usage.

In the future, hydrogen could play an important role for the business. That’s why it is partnering to assess green hydrogen opportunities through the Central Queensland Hydrogen Consortium. In addition to local supply, there is an ambition to export supply to Japan’s industrial market.

If APA can convert its pipelines to transport hydrogen, then it can future-proof the business.

The post I like APA as an ASX dividend share idea. Here’s why appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended APA Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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S&P/ASX 200 Index (ASX: XJO) shares are off to a rocky start today.

After closing up a welcome 1% yesterday, the benchmark index is down 1.8% in the early minutes of trade today.

And the tech sector is faring worse than the broader basket of ASX 200 shares.

The S&P/ASX All Technology Index (ASX: XTX) is down 3.3%. That’s after gaining 2.2% in yesterday’s trade.

Why are ASX 200 shares selling off?

Investors down under are selling more than they’re buying today following sharp falls in US markets yesterday (overnight Aussie time).

The losses in US stocks, the biggest single day fall in almost two years, saw the S&P 500 close down 4% while the tech-heavy Nasdaq shed 4.7%.

With Aussie markets tending to take their lead from US markets, you can see why ASX 200 shares are coming under renewed pressure.

So, why did US markets just suffer their worst day in 24 months?

Why the US market rout?

A number of now familiar bugbears came together to shake investor confidence yesterday.

Chief among those, investors are concerned that the US Federal Reserve and other major central banks, including the RBA, will need to raise interest rates faster and sharper than previously expected to bring fast-rising inflation figures back into their target ranges.

With the Russian war in Ukraine and China’s economy crippling COVID-zero battle simmering in the background, investors are now also eyeing the possibility that the US – the world’s biggest economy – could be heading for a recession. A shrinking US economy will throw up additional headwinds for US markets, and for ASX 200 shares.

Recession fears were spurred following a reduced profit forecast from US retail giant Target Corporation (NYSE: TGT), indicating higher prices may be hitting consumers where it hurts. Shares of Target crashed 24.9%, the worst day of trading for the company since 1987.

What the pros are saying

Commenting on the sharp selloff, Ryan Detrick, chief market strategist at LPL Financial said (quoted by Bloomberg):

Worries over inflation and a hawkish Fed are nothing new, but now add in worries over profit margins and the impact of inflation on the consumer and you have the recipe for a big down day.

Lori Calvasina, head of US equity strategy at RBC Capital Markets added:

We are pricing in a growth scare. The market is trying to find a bottom here. There is a lot of uncertainty in this market right now about whether or not that recession is going to come through or if it’s going to be another near-death experience.

Calvasina may have hit the nail on the head there. If there’s one thing markets dislike, it’s uncertainty as witnessed by the selloff in ASX 200 shares today.

The post ASX 200 shares tumble following worst day on Wall Street in 2 years appeared first on The Motley Fool Australia.

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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