Local shares reversed an intraday rise yesterday as caution about upcoming corporate earnings eclipsed data indicating continued improvement in Australia's two biggest trading partners.
The benchmark S&P/ASX 200 index closed down 0.3 per cent at the intraday low of 4907.5 after hitting a 21-month high of 4951.3, near significant technical resistance levels around 5000.
Some recently strong stocks saw relatively sharp declines -- Commonwealth Bank, Westpac, Macquarie, CSL, Ramsay Health Care and Crown suffered declines ranging from 0.4 per cent to 1.4 per cent.
"In light of the strong gains we've just had, it's not that surprising to see a little bit of consolidation," an institutional trader at a major brokerage said.
January's 4.9 per cent gain in the benchmark index was the strongest start to a year since 1994.
Rio Tinto rose 1.2 per cent after spot iron ore gained 0.5 per cent and London Metals Exchange copper increased 1.5 per cent following upward revisions to US employment data for November and December, strong US manufacturing and consumer confidence data for January, and a rise in China's purchasing managers' index for the services sector, also for January.
Rio Tinto was also favoured after receiving the backing of the West Australian government to expand iron ore operations in the Pilbara region, involving a near-tripling of production at the Nammuldi mine and construction of a new power plant.
Among other stocks that bucked yesterday's sell-off, Telstra rose 0.2 per cent and QBE gained 1.3 per cent.
CMC Markets' chief market analyst Ric Spooner said investors had recently been moving money from cash and bonds to equities in search of higher yields.
"In that environment, the market may be in a relatively forgiving frame of mind this earnings season," Mr Spooner said.
"Disappointing results may not be punished to the same extent they were in recent years, while positive outlook comments from good quality, high-yielding stocks may attract more buying, pushing (price-to-earnings) values higher.
"Even so, the looming resistance levels and consistency of the recent rally create an element of short-term risk for the market."
Cochlear, Navitas, Reckon and Transurban are among companies due to report earnings today.
Major companies including Primary Health Care, Tabcorp, Telstra and Newcrest are due to report later this week.
The Reserve Bank also meets today and is widely expected to leave its policy interest rate unchanged.
The Australian dollar, meanwhile, was higher in Asia yesterday after overcoming early weakness on news of poorer-than-expected building approvals in December.
Selling after the data was short-lived because traders were not prepared to take on fresh risk before the RBA meeting.
In late afternoon trading, the Australian dollar was trading at $US1.0422c -- up from $US1.0391 late on Friday. It traded as low as $US1.0398 just after the building-approvals data.
The number of home-building permits fell in December, the Australian Bureau of Statistics said yesterday. Building approvals rose 9.3 per cent in December from a year earlier, the ABS said.
Earlier yesterday data showed total residential property listings around the country fell 1.9 per cent in January from December.
