The big end of the Dow leads falls on Friday, Star Wars on track to boost Disney earnings, ASX futures down 40 points

It wasn't the high valuations of the NASDAQ or Russell 2000 names that were hardest-hit on Friday night, rather it was the big end of the Dow Jones Industrial Average. Goldman Sachs (GS) fell 3.9%, Visa fell 3.01% and JP Morgan fell 2.84% as the sugar-hit of certainty from last week's expected rate hike faded. Interestingly, Microsoft fell 2.82% despite Goldman upgrading its price target on the stock and Walt Disney Company (DIS) fell 3.83% after its division Lucasfilm succeeded in taking out the highest-ever box office takings for an opening weekend in the US/Canada. So if any of you were kicking yourselves for not buying DIS before Star Wars: The Force Awakens started looking like such a hit, don't. As you can see from today's second chart, you can buy DIS at two-month lows at US$107.72, well off its 12-month high of US$122.08. The potential for this film to gross upwards of US$3 billion before merchandise etc. has the ability to have a significant impact on DIS's earnings, which sees quarterly revenues of around US$13 billion. However, these have been partly factored in from earlier this year when analysts started to pre-empt the success of the release.

As a side note, I wore out my Star Wars trilogy VHS box set when I was younger; and over the weekend--after my own personal disappointment at George Lucas's last three attempts to recreate the magic--I was delighted by The Force Awakens. I won't talk it up too much, but fans of 70s/80s era Star Wars should go and see it - and get yourself to a loud cinema, they've reproduced the chilling roar of the TIE Fighters beautifully.

Today's first chart shows the disparity between US S&P 500 futures and ASX 200 futures from 4pm Friday, with the S&P 500 falling 2.5 times as hard since that point. As such, despite the sense of carnage associated with a 367-point fall on the Dow, ASX futures are pointing to a modest 40 point fall on the open. Volumes on US markets were huge on Friday night, and while I don't think anyone is doing a good job of picking the direction of major markets at present, the one consensus view that I agree with is that we'll continue to see high levels of volatility throughout 2016 and this is illustrated by today's last chart, where VIX has ticked back up to 20 after getting some relief immediately after the Fed decision.
  


Source: Rivkin, Saxo Bank

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This article was written by Scott Schuberg, CEO of Rivkin Securities Pty Ltd. Enquiries can be made via info@rivkin.com.au or by phoning +612 8302 3600.

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