Market Wraps

Morning Wrap: ASX 200 set to rise + Are stocks expensive right now?

Wed 28 Jun 23, 8:32am (AEST)

ASX 200 futures are trading 26 points higher, up 0.36% as of 8:20 am AEST.

Major US benchmarks finished higher following a strong batch of economic data, US consumer confidence jumps to a 17-month high while new home sales accelerate to the fastest pace since February 2022, Goldman Sachs is set to lay off 125 Managing Directors globally, China's Premier Li says the economy will grow faster in the second quarter and why the S&P 500's expensive price tag is justified (somewhat).

Let's dive in.

Overnight Summary

Wed 28 Jun 23, 8:32am (AEST)

Name Value Chg %
Major Indices
S&P 500 4,378 +1.15%
Dow Jones 33,927 +0.63%
NASDAQ Comp 13,556 +1.65%
Russell 2000 1,850 +1.46%
Country Indices
Canada 19,733 +0.74%
China 3,189 +1.23%
Germany 15,847 +0.21%
Hong Kong 19,148 +1.88%
India 63,416 +0.71%
Japan 32,538 -0.49%
United Kingdom 7,461 +0.11%
Name Value Chg %
Commodities (USD)
Gold 1,923.90 +0.01%
Iron Ore 112.60 -
Copper 3.772 +0.03%
WTI Oil 68.01 +0.46%
Currency
AUD/USD 0.6687 +0.02%
Cryptocurrency
Bitcoin (AUD) 45,945 +1.96%
Ethereum (AUD) 2,833 +2.35%
Miscellaneous
US 10 Yr T-bond 3.768 +1.32%
VIX 14 -3.58%

US Sectors

Wed 28 Jun 23, 8:32am (AEST)

Sector Chg %
Consumer Discretionary +2.06%
Information Technology +2.04%
Materials +1.40%
Industrials +1.26%
Communication Services +1.12%
Real Estate +1.11%
Financials +0.71%
Consumer Staples +0.34%
Energy +0.23%
Utilities +0.04%
Health Care -0.20%

S&P 500 SESSION CHART

S&P 500 intraday
S&P 500 higher and closed towards session highs (Source: TradingView)

MARKETS

  • S&P 500 higher, finished near best levels after softness on Tuesday

  • Strong set of economic data bolstered soft landing expectations, including better-than-expected US durable goods, consumer confidence and home sales data

  • Big tech downgrades continue to pick up (Yahoo)

  • Quarter-end rebalancing could drive outsized equity selling (Reuters)

  • JPMorgan says potential quarter-end selling could see US$50bn for sale in US equities, Goldman Sachs estimates US$27bn of stocks to sell for the month

  • Morgan Stanley warns the first negative payrolls data could come in August or September, while JPMorgan says this could result in an early end to the Fed’s tightening cycle

STOCKS

  • Delta Airlines shares rally after guiding to the top end of its full-year guidance (CNBC)

  • Insurance firm American Equity Investment Life rallies on rumours that Brookfield was close to making a deal to buy the company for approximately US$4.3bn (CNBC)

  • Coinbase shares surge as Fidelity set to submit an application for a spot Bitcoin ETF

  • Microsoft CEO Nadella said last year goal is to reach $500bn in revenue by 2030 (CNBC)

  • Baidu says its ChatGPT-style service outperforms OpenAI on key measures (Bloomberg)

  • Robinhood to lay off 7% of workforce amid decline in trading activity

  • Goldman Sachs to layoff 125 Managing Directors globally (Times)

  • EV maker Lordstown Motors files for bankruptcy (CNBC)

ECONOMY

  • US durable goods orders top expectations, increase for a second month (Bloomberg)

  • US consumer confidence jumps to a 17-month high (Reuters)

  • US new home sales surge to fastest pace since Feb 22, up 12% MoM (Bloomberg)

  • China Premier Li says economy on track to hit growth target (Bloomberg)

  • ECB's Lagarde says rate hike pauses possible in coming months (Bloomberg)

  • BoE expected to hike two more times, will tip UK into recession (Bloomberg)

Industry ETFs

Wed 28 Jun 23, 8:32am (AEST)

Description Last Chg %
Commodities
Lithium & Battery Tech 63.72 +1.63%
Steel 63.46 +1.49%
Strategic Metals 82.61 +0.89%
Silver 20.98 +0.38%
Copper Miners 38.09 +0.26%
Gold 177.69 -0.46%
Uranium 21.21 -0.56%
Industrials
Global Jets 21.07 +4.41%
Aerospace & Defense 114.88 +1.24%
Healthcare
Cannabis 6.71 -0.15%
Biotechnology 125.53 -1.21%
Description Last Chg %
Cryptocurrency
Bitcoin 17.21 +1.41%
Renewables
Solar 69.2 +1.15%
CleanTech 14.22 +0.85%
Hydrogen 8.89 +0.57%
Technology
Semiconductor 503.28 +3.49%
FinTech 21.72 +2.84%
Video Games/eSports 55.63 +2.60%
E-commerce 18.25 +2.59%
Electric Vehicles 25.43 +2.13%
Cybersecurity 23.88 +1.92%
Robotics & AI 28.18 +1.51%
Cloud Computing 19.42 +1.46%
Sports Betting/Gaming 17.1147 +1.10%

The Nickel and Aluminium ETFs have been removed and will be replaced by Invesco Agriculture ETF (DBA) and Invesco Construction ETF (PKB). Changes coming soon. A new education piece is out about the above ETF list. If you want to learn more about why this list can be helpful (or you just want to suss what the tickers are) read here.

Deeper Dive

S&P 500: Where are we now

From a technical perspective, the S&P 500 is rather bullish. It bounced from the 20-day moving average overnight, up 1.15% after a shallow 2.7% pullback from recent highs.

But from a valuation perspective, boy is it expensive. Just about every valuation metric for US stocks is in the 90th percentile.

FzjWB-7WcAIZpph
Source: Goldman Sachs

At the same time, we know that markets have a tendency to lead the economy by 2-3 quarters. The second quarter of 2023 is expected to mark the trough for S&P 500 earnings, followed by a rebound from the third quarter onwards. By the fourth quarter of 2023, analysts expect earnings to be in record territory.

If the Fed is truly done with its hiking cycle and earnings are bottoming, then valuations might not be that expensive after all.

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Source: Factset

Key Events

ASX corporate actions occurring today:

  • Trading ex-div: None

  • Dividends paid: GQG Partners (GQG) – $0.02

  • Listing: None

Economic calendar (AEST):

  • 11:30 am: Australia Monthly CPI Indicator

  • 11:30 am: Fed Chair Powell Speech

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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