Stocks on the rocks: Why the ASX 200 is backtracking from record highs today

After clocking new record highs last week, why are ASX 200 investors abandoning ship today?

| More on:
A woman looks quizzical as she looks at a graph of the share market.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Last week was a pretty special week for the history of the S&P/ASX 200 Index (ASX: XJO). Over the week just gone, investors watched with delight as the ASX 200 hit a series of fresh new all-time highs. It was the first time that the ASX 200 had clocked a new high watermark since August 2021.

Friday's trading saw the ASX 200 close at 7,699.4 points – its highest-ever close. That was after the index hit its most recent all-time high of 7,703.6 points during intra-day trading.

Yet today, we're seeing investors lose that optimism that resulted in those new highs for ASX shares. At the time of writing, the ASX 200 has dropped dramatically. It's currently down a hefty 1.36% and back to 7,594.8 points.

So why have investors so decisively reversed the gains that we saw only a few days ago this Monday? Is it just a case of a market consolidation, or is there something else going on?

Why are ASX 200 shares pulling back from record highs today?

Well, it's hard to know exactly why the market is doing something on any given day. However, we can speculate.

It's very possible that, after an extraordinary runup last week, investors are just taking a breather, and perhaps some profits, today. It's worth keeping in mind that last week alone saw the ASX 200 climb by almost 2%.

That's an extraordinary gain for the index over just five trading days. Gains of this enthusiasm are often followed by periods of consolidation. That could well be what is going on this Monday.

However, we can't rule out other factors.

Over the weekend, the world wasn't exactly greeted with good news when it came to the global geopolitical scene. The United States, assisted by allies, spent the weekend ramping up retaliatory actions in the Middle East as a result of the attack in Jordan which killed three of its soldiers last week.

According to CNN, US National Security Adviser Jake Sullivan said that the American strikes in Iraq, Syria and Yemen were "the beginning of our response" and promised that "there will be further action".

Iran-backed Houthi groups in Yemen have already disrupted global trade in the Red Sea with a series of attacks on shipping vessels. If this conflict widens and the Red Sea continues to be a 'no-go zone' for international shipping, it could lead to global economic damage.

We've already seen global oil prices tick upwards as well as what's going in in the Middle East. According to Bloomberg, Brent crude oil futures are up 0.53% today to just under US$80 a barrel. WTI crude futures have also risen around 0.46% to US$72.60 a barrel.

So it's possible that the developments over the weekend, as well as potentially higher oil prices, are also weighing on investors' optimism on the ASX 200 today.

Whatever the cause for today's pessimism, it's certainly a jolt back to reality for ASX 200 investors this Monday. Let's see how the rest of the week plays out.

Motley Fool contributor Sebastian Bowen 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.

More on Share Market News

Broker written in white with a man drawing a yellow underline.
Broker Notes

Brokers name 3 ASX shares to buy today

Here's why brokers are feeling bullish about these three shares this week.

Read more »

Woman with a scared look has hands on her face.
Broker Notes

Bapcor shares fell more than 30% yesterday. Should investors buy in the dip?

Is this a value opportunity?

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Broker Notes

Broker raises price targets on 2 ASX 200 shares to buy

Ord Minnett has just upped its 12-month share price targets on 2 buy-rated ASX 200 stocks.

Read more »

Man with rocket wings which have flames coming out of them.
Share Gainers

Guess which ASX All Ords stock just rocketed 34% on strong earnings growth

Investors just sent this ASX All Ords stock surging 34%. Here’s what’s happening.

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why DroneShield, Gentrack, Metals X, and Northern Star shares are tumbling today

These shares are ending the week in the red. But why?

Read more »

A businessman looking at his digital tablet or strategy planning in hotel conference lobby. He is happy at achieving financial goals.
Share Gainers

Why Dimerix, Newmont, Regal Partners, and Titomic shares are storming higher

These shares are having a good finish to the week. Let's see why.

Read more »

Man drawing an upward line on a bar graph symbolising a rising share price.
Broker Notes

Morgans says these ASX can rise 30% to 50%

The broker has good things to say about these shares.

Read more »

Two businessmen look out at the city from the top of a tall building.
Broker Notes

2 ASX REITs to buy in July: expert

Is it time to consider ASX REITs?

Read more »