Market Wrap

Morning wrap: Amazon pushes US stocks higher, ASX set to fall

Mon 07 Feb 22, 8:14am (AEST)

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ASX Futures (SPI 200) imply the ASX will open 41 points lower, down -0.6%.

US stocks closed mostly higher last Friday, buoyed by Amazon earnings and a stronger-than-expected jobs report.

Overnight summary

Sun 06 Feb 22, 9:14pm (AEST)

Name Value Chg %
US Indices
S&P 500 4,501 +0.52%
Dow Jones 35,090 -0.06%
NASDAQ 14,098 +1.58%
Russell 2000 2,002 +0.57%
Country Indices
Canada 21,272 +0.84%
China 3,361 -0.97%
Germany 15,100 -1.75%
Hong Kong 24,573 +3.24%
India 58,645 -0.24%
Japan 27,440 +0.73%
United Kingdom 7,516 -0.17%
Name Value Chg %
Commodities (USD)
Gold 1,808.80 +0.26%
Iron Ore 145.45 -
Copper 4.506 +0.78%
WTI Oil 91.92 +1.83%
Currency
AUD/USD 0.7074 +0.24%
Cryptocurrency
Bitcoin (AUD) 58,792 -0.83%
Ethereum (AUD) 4,224 -1.70%
Miscellaneous
U.S. 10 Year Treasury 1.93 +5.64%
VIX 23 -4.64%

Key points

  • US earnings season continues to whipsaw the market between “it's the end of the world” and “it's going to be ok” 

  • Amazon led gains for the S&P 500 (large cap) and Nasdaq (tech), rallying 13.5% on strong quarterly earnings, cloud revenue growth and a fast growing advertising business 

  • Amazon will be hiking the price of its Prime membership for the first time in four years. Annual prime fees will increase from US$119 to US$139, with changes coming into effect in mid-February 

  • On the economic front, the US added 467,000 jobs in January. Economists surveyed by The Wall Street Journal were expecting a reading closer to 150,000 

  • The unemployment rate ticked slightly higher from 3.9% to 4.0%. However, the labor force participation rate hit a pandemic high of 62.2% 

  • The strong reading reinforce the Fed’s view that the economy is ready for higher interest rates and less monetary stimulus 

  • US 1, 2, 3, 5 and 10 year Treasury yields ended the week at their highest levels since the beginning of the pandemic

  • Most notably, the US 2-year treasury yield - used to reflect short-term interest rate expectations - hit 1.31%.

  • This means the Fed is well ‘behind the curve’. Rate hikes are coming

US 2-year yield vs. US cash rate

US Interest rates vs. 2-year Treasury yield, TradingView


US Sectors

Sun 06 Feb 22, 9:14pm (AEST)

Sector Chg %
Communication Services +0.14%
Consumer Discretionary +3.74%
Consumer Staples -1.20%
Energy +1.58%
Financials +1.66%
Health Care -0.41%
Sector Chg %
Industrials -1.07%
Information Technology +0.47%
Materials -1.72%
Real Estate -1.26%
Utilities -0.80%

Local bank and energy stocks could benefit from the same catalysts that drove their US counterparts higher last Friday.

That said, ASX futures is currently pointing towards a -0.6% fall at open. Investors should brace for yet another volatile session as markets attempt to price-in looming interest rate hikes.

▲ Consumer discretionary

Amazon’s 13.5% gain drove an outsized gain for the sector

Other eCommerce related stocks relished Amazon's positive result, with Etsy and eBay rallying 5.3% and 3.7% respectively.

▲ Financials 

US banks including Citi, JPMorgan and Wells Fargo rallied between 1.3% and 2.6%.

A higher interest rate environment can boost all-important net interest margins for banks, which have been contracting for the past decade.  

▲ Energy 

Crude oil prices closed at a fresh 7-year high of US$91.95.

“Crude prices seem to have a one-way ticket to US$100 oil,” said Oanda senior market analyst, Ed Moya. 

“This week’s rally in crude was supported by the OPEC+ decision to stick to their gradual increase strategy and as US production fell again.  An artic blast is also disrupting some production in Texas and that is driving this latest price surge.” 

“Everything seems to be turning very bullish for WTI crude and the bullish momentum might not see much resistance until the US$95 level,” Moya added. 


Industry ETFs

Sun 06 Feb 22, 9:14pm (AEST)

Description Last Chg %
Commodities
Aluminum 63.6602 +0.22%
Copper Miners 38.02 +0.66%
Gold 168.6 +0.15%
Lithium & Battery Tech 77.29 +1.44%
Nickel 30.2291 +0.93%
Strategic Metals 99.02 +2.42%
Steel 54.89 +0.67%
Silver 20.71 +0.39%
Uranium 19.92 +2.96%
Industrials
Aerospace & Defense 102.3 +0.11%
Global Jets 21.11 -0.47%
Healthcare
Biotechnology 130.21 +0.32%
Cannabis 4.98 +3.61%
Description Last Chg %
Cryptocurrency
Bitcoin 22.84 +11.91%
Renewables
CleanTech 14.15 +1.98%
Hydrogen 15.39 +0.65%
Solar 61.44 +3.21%
Technology
Cloud Computing 21.99 +3.18%
Cybersecurity 27.99 +2.57%
E-commerce 23.82 +2.94%
Electric Vehicles 27.74 +0.94%
FinTech 31.68 +3.88%
Robotics & AI 28.97 +0.66%
Semiconductor 474.1 +0.57%
Sports Betting/Gaming 21.28 +1.79%
Video Games/eSports 61.39 +2.96%

ASX Sectors to watch

#1 Tech

Local tech stocks could be in for a positive session after the FinTech, Cloud and eCommerce ETFs all closed at least 2.6% higher last Friday. 

More specifically, US-BNPL rivals Affirm and Block both rallied 9.2% and 7.3% respectively. 

This will lead to a positive open for Block CDIs (ASX: SQ2) and local BNPL names including: 

However, if not for Amazon, US tech stocks would have likely faced pressure from the jump in bond yields. With the ASX set to fall this morning, the tech and BNPL gains could very well be short-lived.

#2 Cryptocurrency 

Bitcoin rallied through US$40,000 with ease amid the renewed attitude towards risky assets. Bitcoin and cryptocurrencies pared gains last week that stemmed from Amazon’s upbeat earnings. 

This could position beaten up ASX names for a bounce, including: 


Today's events

ASX corporate actions occurring today:

  • Ex-dividend: AMH, CIA

  • Dividends paid: PCI, TCF

  • Issued shares: 360, AII, AMC, ANN, AO1, AVH, BEX, BRK, CDM, CIA, CPV, EAI, ELT, EMT, ENX, GBZ, GDA, GWR, HT8, IDT, INL, JAT, KP2, LIT, LTR, MGF, MGT, MTR, NAB, NGE, NWS, ORA, PIC, PUA, QVE, RAB, RDT, RMI

Other things of interest 

  • China services PMI for January will be released at 12:45 pm AEDT

    • Economists forecast a reading of 51 vs. the 53.1 reported in December. Any figure below 50 represents a contraction 

  • US balance of trade for December will be released at 12:30 am AEDT

 

Written By

Kerry Sun

Finance Writer & Social Media

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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