Market Wraps

Morning Wrap: ASX 200 to bounce, Energy and Materials to lead gains + US earnings in focus

Mon 10 Jul 23, 8:34am (AEST)

ASX 200 futures are trading 25 points higher, up 0.35% as of 8:20 am AEST.

The S&P 500 aggressively sold off in the last two hours of trade, the US unemployment rate ticks lower to 3.6% but the jobs market is beginning to show some cracks, S&P 500 earnings season kicks off this week and analysts expect earnings to fall 7.2% year-on-year and the ASX 200 futures point towards a bounce, led by Energy and Materials.

Let's dive in.

Overnight Summary

Mon 10 Jul 23, 8:34am (AEDT)

Name Value Chg %
Major Indices
S&P 500 4,399 -0.29%
Dow Jones 33,735 -0.55%
NASDAQ Comp 13,661 -0.13%
Russell 2000 1,865 +1.22%
Country Indices
Canada 19,831 +0.10%
China 3,197 -0.28%
Germany 15,603 +0.48%
Hong Kong 18,366 -0.90%
India 65,280 -0.77%
Japan 32,388 -1.17%
United Kingdom 7,257 -0.32%
Name Value Chg %
Commodities (USD)
Gold 1,930.90 -0.08%
Iron Ore 110.54 -
Copper 3.778 -0.11%
WTI Oil 73.53 -0.45%
Currency
AUD/USD 0.6691 -0.01%
Cryptocurrency
Bitcoin (AUD) 44,964 -0.33%
Ethereum (AUD) 2,777 +0.05%
Miscellaneous
US 10 Yr T-bond 4.05 +0.22%
VIX 15 -3.95%

US Sectors

Mon 10 Jul 23, 8:34am (AEDT)

Sector Chg %
Energy +2.06%
Materials +0.88%
Industrials +0.23%
Consumer Discretionary +0.18%
Financials +0.16%
Information Technology -0.44%
Real Estate -0.50%
Communication Services -0.58%
Utilities -0.74%
Health Care -1.16%
Consumer Staples -1.34%

S&P 500 SESSION CHART

S&P 500 intraday
S&P 500 fades from session highs to finish at worst levels (Source: TradingView)

MARKETS

  • S&P 500 lower, faded from sessions of 0.65% and finished at worst levels

  • S&P 500 and Nasdaq finish the week down 1.16% and 0.95% respectively 

  • US 2-Year Treasury yield briefly trades above 5.0% again, marking the highest level since 2007 after solid jobs data 

  • Market and treasury selloff reflect expectations that the Fed will hold rates higher for longer following the latest batch of strong economic data

  • JPMorgan says investors were most bullish on Treasuries since 2010

  • Bullish focus points for the week: Rising soft landing expectations, prices paid component falling in both ISM manufacturing and service PMIs, cracks in the hot labor market narrative, optimism around Q2 earnings and retail investor momentum 

  • Bearish focus points for the week: Risks of higher-for-longer Fed, median terminal rate now around 5.4% – the highest since March, market positioning and overbought conditions, rising geopolitical tensions and resumption of US student loan repayments 

  • Strong US jobs data tempers recession fears, raises prospects of hikes (Bloomberg)

  • Narrow, tech-focused market leadership not necessarily a bad thing (Bloomberg)

  • Wall St analysts divided about prospects for the remainder of 2023 (Bloomberg)

  • Treasury volatility likely to remain until Fed's rate path becomes clearer (Bloomberg)

STOCKS

  • Twitter threatens trade secrets lawsuit over Meta's Threads app (FT)

  • Renault Chairman Senard warns of a coming storm of Chinese EV imports (Reuters)

  • Alibaba shares surge on reports that it would pay a US$984 million fine to Chinese regulators, which would end several years of dispute (Reuters)

  • Jeans maker Levi Strauss shares tumble after cutting its full-year guidance (CNBC)

GEOPOLITICS

  • EU is pushing China to narrow the scope of metal export controls (Bloomberg)

  • Biden weighs controversial decision to send cluster bombs to Ukraine (NY Times)

ECONOMY

  • US job gains smallest in two-and-a-half years (Reuters)

  • US jobs growth cools but labor market still tight, wages won’t comfort Fed (Reuters)

  • Treasury Secretary Yellen says a recession is "not completely off the table" (CBS)

  • Chinese authorities under pressure to deliver on economic stimulus (Bloomberg)

  • China Premier Li pledges speedy policy support measures (Bloomberg)

  • German industrial output declined in May, factory weakness weighs (Bloomberg)

  • ECB Lagarde says inflation may remain above target in 2024-25 (Bloomberg)

Industry ETFs

Mon 10 Jul 23, 8:34am (AEDT)

Description Last Chg %
Commodities
Uranium 20.86 +2.31%
Copper Miners 37.3 +2.28%
Steel 63.8021 +2.10%
Strategic Metals 84.51 +2.04%
Lithium & Battery Tech 66.73 +1.85%
Silver 21.18 +1.68%
Gold 178.64 +0.75%
Industrials
Global Jets 21.68 +2.02%
Aerospace & Defense 116.04 -0.04%
Healthcare
Cannabis 6.6 +3.29%
Biotechnology 124.38 -0.85%
Description Last Chg %
Cryptocurrency
Bitcoin 16.19 -0.31%
Renewables
Hydrogen 9.08 +3.53%
CleanTech 14.32 +1.78%
Solar 68.05 +1.02%
Technology
Sports Betting/Gaming 17.411 +2.42%
E-commerce 18.31 +1.84%
Electric Vehicles 26.1 +1.52%
Robotics & AI 28.21 +0.93%
FinTech 22.06 +0.87%
Cloud Computing 19.56 +0.72%
Video Games/eSports 54.48 +0.59%
Cybersecurity 23.52 +0.26%
Semiconductor 494.36 +0.04%

Deeper Dive

US earnings season

Second quarter earnings season kicks off this week. It's a bit of a slow start and most of the more interesting names that report will be skewed towards the end of the week.

  • Thu: Pepsi, Delta Airlines

  • Fri: JPMorgan, Citi, Wells Fargo, State Street, United Healthcare

The S&P 500 is expected to report a year-on-year decline of 7.2% for Q2 2023. This would mark the largest decline since Q2 2020 (where earnings fell 31.6%).

S&P 500 second-half expectations

Wall Street analysts are incredibly bearish on the second half and S&P 500 target points are at the most bearish levels on record, according to Bloomberg.

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Source: Bloomberg

But every single time analysts were net negative on the S&P 500 in the second half, the market delivered positive returns:

  • 1999: 7.0%

  • 2019: 9.8%

  • 2020: 21.0%

  • 2021: 10.9%

Sectors to Watch

The overnight session was a little two-faced. The Index was rather bearish, with the S&P 500 fading a 0.65% gain to finish lower. But most of the ETFs above were positive and up around 1-2%, especially those in the Materials and Energy space. BHP (ASX: BHP) ADRs reversed a 0.76% decline to finish the session 0.4% higher.

  • Uranium: The Global X Uranium ETF bounced 2.3% overnight after falling around 6.0% in the previous three sessions. This weakness has dragged a strong trending name like Boss Energy (ASX: BOE) to a 1-month low. Is it time to bounce?

  • Energy: WTI crude rallied 2.5% overnight to a 1-month high of US$73.5 a barrel. Energy was also the best performing S&P 500 sector overnight, up 2.06%.

  • Lithium: Lithium-related ETFs like the VanEck Rare Earths/Strategic Metals and Global X Lithium & Battery Tech rose 2.04% and 1.85% overnight. Last Friday was a pretty heavy session for local names, with bellwether names like Pilbara Minerals (ASX: PLS) and Allkem (ASX: AKE) down 3.75% and 1.35% respectively. Patriot Battery Metals (ASX: PMT) also tumbled 7.4% following the release of a short report by Night Market Research. Is a bounce in play after a strong showing from overnight peers?

  • Defensives: Defensive sectors like Staples, Healthcare, Utilities and Communication Services led to the downside on Wall Street. Do we see a similar theme take place on Monday?

Key Events

ASX corporate actions occurring today:

  • Trading ex-div: Turners Automotive (TRA) – $0.066, Collins Foods (CKF) – $0.15, Red Hill Minerals (RHI) – $0.10 

  • Dividends paid: None

  • Listing: None

Economic calendar (AEST):

  • 11:30 am: China Inflation Rate

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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