Morning Wrap: ASX 200 futures flat, S&P 500 hits another record, Dow crosses 38,000 for first time

The S&P 500 rose to another record high as tech stocks added to recent gains, key market sentiment indicators such as the AAII Bull-Bear Survey and NAAIM Exposure Index ease from extreme levels, homebuilder stocks rally to a fresh all-time high overnight as battery metal sectors continue to tank plus BHP's Xplor Program (and two ASX-listed companies that made the cut).

Let's dive in.

S&P 500 SESSION CHART

S&P 500 higher amid choppy trade (Source: TradingView)

MARKETS

• S&P 500 closed at another all-time high but off best levels of 0.59%

• Dow closed above 38,000 for the first time in history

• Relatively quiet session where the market continues to digest a number of moving pieces including repricing of aggressive Fed rate cut expectations, Fed pushback against pivot, easing of positioning and sentiment indicators, retail FOMO, lackluster Q4 earnings and elevated geopolitical tensions

• Market sentiment data have shown some signs of easing – AAII bull-bear spread down 10.8 pp to ~14% vs. ~32% late last year and NAAIM Exposure Index down to 53.5 from 80.2 a week ago and ~103 at the end of 2023 

• January set to break record as busiest month for new US corporate bond sales (Reuters)

• Survey shows most foolish 2024 trades include early fed cuts, shorting USD, and oil rebound (Bloomberg)

STOCKS

• Apple analyst says initial strong demand for Vision Pro could taper off (CNBC)

• ExxonMobil files lawsuit to stop vote on shareholder climate resolution (FT)

• Nvidia CEO made trip to China in effort to navigate chip controls (Fortune)

• Microsoft says email accounts hacked by a Russian-backed group (ABC News)

• Bank performance has been weak amid uncertainties about rates (Bloomberg)

• Macy's rejects a US$5.8bn take private offer from Arkhouse Management (Axios)

EARNINGS

• Netflix is the first major tech name before our market opens on Tuesday

• Tesla results due tomorrow after the close

CENTRAL BANKS

• Fed officials giving no sign Jan meeting will set up a March rate cut (Bloomberg)

• Fed enters a quiet period ahead of January 30-31 FOMC meeting

GEOPOLITICS

• Trump holds double-digit lead in New Hampshire ahead of primary (CNN)

• Biden continues to pursue a Mideast "grand bargain" involving a Palestinian state despite Israel's reticence (Axios)

• Meetings between US Treasury and Chinese financial officials in Beijing concluded with commitment to continue more regular talks (Reuters)

• Israeli PM Netanyahu rejects Hamas terms for hostage release (Bloomberg)

• US, Egypt and Qatar working on end of war plan (Times of Israel)

• Tanker shipping costs now three-times what they were prior to Red Sea attacks (Bloomberg)

CHINA

• China data over steel and GDP add doubts about official measures of activity (FT)

• Bearish sentiment over China assets spreading beyond stocks (Bloomberg)

• China orders indebted local governments to halt some infrastructure projects (Reuters)

ECONOMY

• US Q4 GDP expected to show slowing growth, waning inflation (Bloomberg)

• Companies' reluctance to roll back price hikes poses US inflation risk, keeping retail goods unaffordable (FT)

• European companies face chaotic period after Red Sea attacks (FT)

• Germany's chemicals sector starting to feel the pinch from delayed shipments via the Red Sea (Reuters)

Sectors to Watch

Recap of yesterday's sectors to watch: We called out tech due to Nasdaq strength and local names opened higher but faded intraday (e.g. Xero opened 1.8% higher, hit a session high of 3.6% but closed just 0.55% higher). Financials continued to push higher, with Commonwealth Bank up 1.3% to another fresh all-time high. Uranium and battery metals were among the worst performing ETFs in our above watchlist. Most key names finished lower including Paladin Energy (-2.4%) and Pilbara Minerals (-4.0%).

Homebuilders: SPDR Homebuilders ETF hit a new all-time high overnight. Local names like James Hardie and CSR have also rallied pretty hard in recent days. Let's see if they can have another strong session.

Uranium and lithium: These were again the worst performing ETFs in the above table.

• Global X Uranium ETF is now down 6.3% in the last five sessions and working its way through a rather volatile pullback

• VanEck Rare Earths/Strategic Metals ETF finished 1.6% lower, up from session lows of -4.6%. The reversal sounds encouraging but there isn't a positive catalyst in sight for these battery metal names. Especially after Liontown's review/funding update announcement on Monday

BHP's Xplor Program

BHP (ASX: BHP) has selected its second cohort of companies to join its Xplor accelerator program, designed to support early-stage exploration companies in finding the critical resources needed to support the energy transition.

Six companies made the cut (from a pool of over 500 applicants) but only two are ASX-listed.

• Hamelin Gold (ASX: HMG) – Seeks to execute a modern exploration program at its 100% owned West Tanami Gold Project in WA. The region is prospective for large scale gold deposits and nickel-copper-PGE mineralised intrusions. The stock is down 46% in the past twelve months.

• Cobre (ASX: CBE) – Focused on copper and base metals exploration in Botswana. The stock is down 74% in the past twelve months

Homework for today: Seven companies were selected to join last year's Xplor program, four of which were ASX-listed. I will put together some data about how much cash they received as well as share price performance

Rate Cut Expectations

March Fed rate cut expectations have eased substantially, down to 40.5% from 75.6% a month ago.

This makes sense as housing and stock prices continue to rise, labour conditions remain sound and financial conditions have already experienced substantial easing in recent months. The recent economic headlines have also been supportive of a soft landing.

• Reuters – US consumer sentiment races to two-and-a-half year high

• Bloomberg – US retail sales rise at strongest pace in three months

Source: CME Group

ASX corporate actions occurring today:

• Trading ex-div: None 

• Dividends paid: None

• Listing: None

Economic calendar (AEDT):

• 11:30 am: Australia Business Confidence

• 2:00 pm: Bank of Japan Interest Decision