ASX 200 to rise, AI optimism lifts S&P 500 + Charts of the Week

ASX 200 futures are trading 66 points higher, up 0.90% as of 8:30 am AEDT.

S&P 500 SESSION CHART

S&P 500 higher, closed near best levels (Source: TradingView)

MARKETS

Note: Overnight tables are experiencing some issues. They will be back on Monday.

• S&P 500 higher, finished near best levels and within 1% of all-time highs

• Apple provided a substantial kick to major benchmarks, up 3.3% after a Bank of America upgrade

• Markets pare rate cut bets after central bankers push back against aggressive easing expectations (Bloomberg)

• March rate cut expectations ease to 59% from 70% a week ago

• S&P 500 VIX highest since November amid Fed rate path uncertainty, geopolitical tensions and mixed start to US earnings season (Bloomberg)

• Passive investment funds surpass active in total assets at end of 2023 (CNBC)

STOCKS

• Apple shares soar on Bank of America upgrade (CNBC)

• Google employees told to expect more job cuts this year (The Verge)

• Tesla cuts price of Model Y cars in Europe (Reuters)

• Reddit reportedly seeking to launch official IPO in March of this year (CNBC)

• Morgan Stanley CEO says he is "super bullish" on meeting financial targets (CNBC)

• Amazon announces more layoffs, this time in the Buy with Prime segment (CNBC)

EARNINGS

Wells Fargo says that 58% of Q4 earnings reporters to date have seen negative immediate stock reactions despite 92% beating consensus expectations. 

Taiwan Semiconductor (9.8%) – Q4 net profit down 19% but ahead of market expectations, guided to 1Q24 revenue between US$18-18.8bn (down 6.2% at the midpoint).

• Chip bottom: “Our business has bottomed out on a year-over-year basis, and we expect 2024 to be a healthy growth year for TSMC, supported by continued strong ramp of our industry-leading 3nm technologies, strong demand for the 5nm technologies, and robust AI-related demand.”

• AI demand: “The surge in AI-related demand in 2023 supports our already strong conviction that the structural demand for energy-efficient computing will accelerate in an intelligent and connected world. TSMC is a key enabler of AI applications.”

CENTRAL BANKS

• Fed Bostic expects rate cuts to happen in Q3 this year (Atlanta Fed)

• ECB officials converge around June to start cutting rates (Bloomberg)

• BOJ's Ueda's recent remarks douse chances of January policy change (Reuters)

• IMF official warns central banks against fueling market hopes for rapid rate cuts (FT)

GEOPOLITICS

• US launches another round of strikes against 14 Houthi targets in Yemen (Bloomberg)

• Pakistan carries out strikes against terrorist hideouts in Iran (Bloomberg)

• Iran strikes in Iraq, Pakistan and Syria a signal that Tehran will not be passive in current conflict (Bloomberg)

• Working group of US Treasury and Chinese officials to meet this week in Beijing, in latest sign of closer economic engagement (FT)

• NATO to conduct biggest war drills since Cold War with 90,000 troops (Reuters)

CHINA

• China signals no big stimulus in 2024, testing investor patience (Bloomberg)

• Patchy economic growth and lack of strong stimulus keep global investors away from China (Reuters)

ECONOMY

• Global corporate defaults surged in December, taking 12-month trailing default rate to highest since year to May-2021 (FT)

• Japan machinery orders shrink as manufacturers pulled orders amid challenging economic backdrop (Reuters)

• Australian unemployment rises, reinforces RBA rate outlook (Bloomberg)

• OPEC forecasts global oil demand will continue to increase strongly in 2025 (Bloomberg)

Charts of the Week

Charts of the Week are back – Except you're stuck with me. As always, they're for illustrative and educational purposes. Always do your own research.

Setting setting the scene: I'd like to acknowledge is the state of the broader market before we dive in to some charts. Most stocks have run up pretty hard since November and in the midst of a pullback/consolidation, particularly sectors such as banks, iron ore and uranium. The broader market is on the backfoot over concerns about rate cut expectations, China weakness, geopolitical risks and a potential inflation shock from Red Sea disruptions. This is also causing bond yields and the US dollar to bounce – Which is typically a headwind for stocks and commodities. You can see this dynamic take place in the Russell ETF vs. US Dollar Index chart below.

Russell 2000 ETF (top) vs. US Dollar Index (bottom) Source: TradingView

Stanmore (ASX: SMR) setting up after a ~3 month consolidation.

Stanmore daily chart (Source: TradingView)

Suncorp (ASX: SUN) is a massive sideways grinder (as you'd expect with a large cap insurer) but consolidating on the weekly.

Suncorp weekly chart (Source: TradingView)

Gentrack (ASX: GTK) experienced a ~15% breakout last October after trading sideways between May and September. It then reported earnings in November and rallied another ~30%. Its currently consolidating near four year highs.

Gentrack daily chart (Source: TradingView)

Southern Cross Electrical (ASX: SXE) is another name that's trying to set up for a breakout. It's rather illiquid and thinly traded.

Southern Cross Electrical daily chart (Source: TradingView)

Key Events

ASX corporate actions occurring today:

• Trading ex-div: Kelly Partners (KPG) – $0.004

• Dividends paid: Charter Hall Social Infrastructure REIT (CQE) – $0.04 

• Listing: None 

Economic calendar (AEDT):

• 10:30 am: Japan Inflation (Dec)

• 6:00 pm: UK Retail Sales (Dec) 

• 2:00 am: US Consumer Sentiment (Jan)