Market Wraps

Morning Wrap: ASX 200 futures flat, S&P 500 ends 9-week win streak + 3 signs of market exhaustion

Mon 08 Jan 24, 8:32am (AEDT)

ASX 200 futures are trading 3 points lower, down 0.04% as of 8:20 am AEDT.

The S&P 500 and Nasdaq snapped a nine-week winning streak as markets pull back from overbought conditions, short-sellers cop almost US$200 billion in paper losses in 2023, Mark Zuckerberg has sold almost half a billion in Meta stock over the past two months, stronger-than-expected US jobs data puts March fed pivot in doubt and a recap of recent market indicators.

Let's dive in.

Overnight Summary

Mon 08 Jan 24, 8:21am (AEDT)

Name Value % Chg
Major Indices
S&P 500 4,697 +0.18%
Dow Jones 37,466 +0.07%
NASDAQ Comp 14,524 +0.09%
Russell 2000 1,951 -0.34%
Country Indices
Canada 20,938 +0.32%
China 2,929 -0.85%
Germany 16,594 -0.14%
Hong Kong 16,535 -0.66%
India 72,026 +0.25%
Japan 33,377 +0.27%
United Kingdom 7,690 -0.43%
Name Value % Chg
Commodities (USD)
Gold 2,049.8 -0.06%
Iron Ore 141.45 -1.88%
Copper 3.806 -1.08%
WTI Oil 73.81 +1.95%
Currency
AUD/USD 0.6697 -0.09%
Cryptocurrency
Bitcoin (AUD) 65,672 +0.81%
Ethereum (AUD) 3,333 +0.03%
Miscellaneous
US 10 Yr T-bond 4.042 +1.28%
VIX 13.35 -5.52%

US Sectors

Mon 08 Jan 24, 8:22am (AEDT)

SECTOR % CHG
Financials +0.53%
Utilities +0.39%
Communication Services +0.34%
Consumer Discretionary +0.29%
Materials +0.21%
Industrials +0.21%
SECTOR % CHG
Information Technology +0.15%
Energy +0.06%
Health Care -0.02%
Real Estate -0.19%
Consumer Staples -0.24%

S&P 500 SESSION CHART

SPX intraday
S&P 500 marginally higher amid choppy conditions (Source: TradingView)

MARKETS

  • S&P 500 higher but off session highs of 0.72%

  • S&P 500 and Nasdaq both snapped nine-week winning streaks

  • US 10-year yield up six in the last seven sessions, reclaiming the 4.0% level

  • Path of least resistance has been a lower start to 2024 amid overbought conditions and stretched positioning

  • Consensus currently expects ~12% S&P 500 earnings growth in 2024 

  • Latest flow data shows investors poured US$123bn into money markets (Bloomberg)

  • Traders make aggressive options bet on spike in Treasury yields (Bloomberg)

  • End of QT could offer tailwind to bond markets (Reuters)

  • Strategists expect Treasury rally to resume after current rest (Bloomberg)

  • Goldman strategists say US corporate earnings may exceed forecasts (Bloomberg)

  • Yen slump to deepen as markets adjust US and Japan rate expectations (Bloomberg)

  • Short-sellers accumulated almost US$195bn in paper losses last year, erasing some two-thirds of US$300bn made during 2022 market selloff (Bloomberg)

  • Latest EIA stockpile data show fuel stocks building substantially (Reuters)

  • Bitcoin remains volatile as investors wait for ETF approval (CNBC)

STOCKS

  • OpenAI in talks with publishers about deals to license their content (Bloomberg)

  • McDonald's CEO says Middle East tensions will leave a meaningful impact (Reuters)

  • Mark Zuckerberg sold ~US$500m in Meta stock over past 2 months (Bloomberg)

  • Amazon captured ~30% of all online orders in final days of holiday shopping (Bloomberg)

CENTRAL BANKS

  • Markets see BoJ moving more cautiously following this week's earthquake (Nikkei)

  • Markets see growing bets on further PBOC easing in 2024 (Bloomberg)

  • Investors pull back rate cut forecast after this week's jobs data (FT)

  • Dallas Fed's Logan says Fed can't take further hikes off the table given easing financial conditions (Reuters)

GEOPOLITICS

  • Biden administration to keep many of Trump's China tariffs, still considering lowering duties on some consumer goods (Axios)

  • Blinken heads to Middle East amid Red Sea crisis and attack on Iran (Bloomberg)

  • Islamic State claims responsibility for deadly explosions in Iran (Reuters)

  • Israel's defence minister says no plans for Israeli civilian control of Gaza (FT)

  • Washington says North Korea provided Russia with ballistic missiles and launchers for war in Ukraine (Reuters)

  • US officials concerned Israel may soon launch major military operation in Lebanon (Washington Post)

ECONOMY

  • Healthy US December payrolls puts March Fed pivot in doubt (Reuters)

  • US economy cranks out 216,000 jobs vs. 173,000 expected (Reuters)

  • US services sector slows in December (Reuters)

  • Canada's job growth stalls in December as wages accelerate (Reuters)

  • Eurozone inflation accelerated in December for first time in six months (FT)

  • US 30Y mortgage rates ticks up slightly, first rise in 10 weeks (Bloomberg)

Industry ETFs

Mon 08 Jan 24, 8:22am (AEDT)

Name Value % Chg
Commodities
Silver 21.21 +0.62%
Copper Miners 36.88 -
Gold Miners 29.77 -
Lithium & Battery Tech 48.42 -0.12%
Steel 71.8662 -0.16%
Strategic Metals 58.07 -0.67%
Uranium 26.96 -0.88%
Industrials
Global Jets 18.77 +2.12%
Construction 60.8926 +0.19%
Aerospace & Defense 123.84 +0.10%
Agriculture 20.58 -0.68%
Healthcare
Cannabis 5.79 +0.35%
Biotechnology 136.12 -0.29%
Name Value % Chg
Cryptocurrency
Bitcoin 21.41 -0.51%
Renewables
Solar 48.29 -0.98%
CleanTech 10.07 -1.37%
Hydrogen 6.48 -1.97%
Technology
Semiconductor 541.84 +0.55%
Electric Vehicles 23.6 +0.30%
Cloud Computing 21.32 +0.05%
FinTech 24.2 -0.04%
Robotics & AI 26.84 -0.11%
Sports Betting/Gaming 16.58 -0.18%
Cybersecurity 27.71 -0.57%
Video Games/eSports 54.7601 -0.58%
E-commerce 20.3 -0.59%

Does January Matter?

January is a reasonable good predictor of the year based on S&P 500 data going back to 1928, according to Bank of America.

  • When January is up, the year is up 80% of the time with an average return of 13.2%

  • The rest of the year (February to December) is up 78% of the time with an average return of 8.7%

  • When January is down, the S&P 500 tends to finish up only 46% of the time with an average return of -0.7%

  • For the rest of the year, it is up 60% of the time with an average return of 3.0%

That said – the January barometer has not been as accurate in recent years.

  • The S&P 500 finished lower in January nine times between 2003 and 2021, down an average -3.7%

  • The market finished the rest of the year higher in eight of the nine occurrences, up an average 11.5%


Where Are We Now

Markets are in the midst of a pullback after a powerful run up between November and December. The pullback will offer valuable feedback as to whether or not the rally has more legs to run. Will we get a calm 3-5% pullback where the selling stabilises and stocks start to consolidate? Or will things unravel and we experience the all-too-familiar tumble?

Some of the recent sentiment and positioning data may suggest that the recent strength was worth selling into. These include:

  • CNN's Fear & Greed Index briefly hit 'Extreme Greed' levels between December 15-26. It has since pulled back slightly to 'Greed'

  • Bank of America's Bull & Bear Indicator is up to 5.3 last week, up from 5.0. This marks the highest reading since November 2021

    • The indicator ranges from 0 to 10 where below 2 is considered extreme bearish and a buy signal

  • NAAIM Exposure Index hit 102.7 on the last trading day of 2023. This marks the highest level since November 2021

    • The National Association of Active Investment Managers represents average exposure to US equity markets reported by its members

Interest rate futures are also beginning to ease.

  • The likelihood of a rate cut in January has more than halved to just 6.7% from 20.7%

  • The base case still shows 6 rate cuts for a total of 150 bps in 2024

  • The base case is more than double the 3 rate cuts forecasted at the Fed's latest meeting

So where to from here? Here are a few upcoming data points to pay attention to:

  • Australia's monthly inflation data on Wednesday is expected to print 4.4%, down from 4.9% in October

  • US inflation data on Friday morning is expected to print 3.8%, down from 4.0% in November

  • US Q4 earnings season will kick off on Friday, led by their major banks. This will provide an important read through amid consensus expectations that S&P 500 earnings will grow 12% in 2024

  • ASX reporting season kicks off in February and Citi analysts expect earnings for the market to fall 2.1% in FY24. The decline will be led by a 9.2% drop in earnings from the resources sector as well as a 3.2% drop in bank earnings. The rest of the market is expected to remain robust, with 6.6% growth for FY24e

Key Events

ASX corporate actions occurring today:

  • Trading ex-div: Turners Automotive (TRA) – $0.05 

  • Dividends paid: Danakali (DNK) – $0.27

  • Listing: Kali Metals (KM1) at 12:00 pm

Economic calendar (AEDT):

  • 6:00 pm: Germany Balance of Trade

Written By

Kerry Sun

Content Strategist

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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