Market Wraps

Morning Wrap: ASX 200 to fall, S&P 500 ticks higher despite Nvidia weakness + Lithium prices dip

Thu 23 Nov 23, 8:37am (AEDT)

ASX 200 futures are trading 12 points lower, down 0.17% as of 8:20 am AEST.

Major US benchmarks ticked higher overnight as bond yields fell to their lowest levels in two months, oil prices briefly tumble 5% as markets reprice for a recent string of events, Nvidia's latest earnings topped analyst expectations but received a muted reaction, OpenAI has reached a mutual agreement for Sam Altman to return as CEO and lithium futures took a sharp tumble on Wednesday.

Let's dive in.

Overnight Summary

Thu 23 Nov 23, 8:22am (AEDT)

Name Value % Chg
Major Indices
S&P 500 4,557 +0.41%
Dow Jones 35,273 +0.53%
NASDAQ Comp 14,266 +0.46%
Russell 2000 1,796 +0.69%
Country Indices
Canada 20,114 +0.02%
China 3,044 -0.79%
Germany 15,958 +0.36%
Hong Kong 17,735 +0.00%
India 66,023 +0.14%
Japan 33,452 +0.29%
United Kingdom 7,470 -0.17%
Name Value % Chg
Commodities (USD)
Gold 1,991.8 -0.44%
Iron Ore 129.55 +0.19%
Copper 3.7675 -1.04%
WTI Oil 76.78 -1.37%
Currency
AUD/USD 0.6541 -0.23%
Cryptocurrency
Bitcoin (AUD) 57,420 +1.73%
Ethereum (AUD) 3,171 +4.14%
Miscellaneous
US 10 Yr T-bond 4.416 -0.05%
VIX 12.91 -3.30%

US Sectors

Thu 23 Nov 23, 8:22am (AEDT)

SECTOR % CHG
Communication Services +0.88%
Consumer Staples +0.71%
Health Care +0.54%
Consumer Discretionary +0.50%
Financials +0.39%
Real Estate +0.37%
SECTOR % CHG
Utilities +0.34%
Information Technology +0.28%
Industrials +0.19%
Materials +0.12%
Energy -0.11%

S&P 500 SESSION CHART

S&P 500 intraday
S&P 500 higher in relatively uneventful trade (Source: TradingView)

MARKETS

  • S&P 500 finished higher in a relatively rangebound session ahead of the US Thanksgiving Day holiday

  • Nasdaq closed higher but off best levels due to weakness from heavyweights Nvidia (-2.5%) and Tesla (-2.9%)

  • Volatile session for oil prices, down 1.4% from a session low of -5.1% after US crude oil inventories increased more than expected

  • Market narrative remains relatively unchanged: Seasonality tailwinds, peak Fed and falling yields, strong earnings from Nvidia (but expectations and positioning elevated into the result), sustained CTA buying

  • Hedge funds short sellers suffer an estimated $43bn of losses in sharp rally in recent days (FT)

  • RBC joins BofA in expectations for S&P 500 to reach 5,000 in 2024 (Yahoo)

  • OPEC delays November 26-30 policy meeting without providing a reason (CNBC)

  • Saudis in difficult talks with other members about their production levels (Bloomberg)

  • Goldman Sachs says OPEC will use its pricing power to keep prices between US$80-100 a barrel and sees a 35% likelihood of deeper production cuts

STOCKS

  • Nvidia's revenue guidance tops expectations as AI chip boom powers on (Bloomberg)

  • Sam Altman returns to OpenAI as CEO (Reuters)

  • Bezos expected to aggressively sell more shares of Amazon (CNBC)

  • John Deere says higher borrowing costs will hit demand, guides to weaker-than-expected 2024 profit outlook (Reuters)

  • HP forecasts downbeat first quarter profit amid slow PC market recovery (Reuters)

CENTRAL BANKS

  • Fed minutes stress careful approach, does not rule out more hikes (Reuters)

  • BOJ reduces JGB purchases at its regular buying operations, yields rise (Reuters)

  • ECB's Lagarde say can't declare victory on inflation until 2% goal met (Bloomberg)

  • ECB's Schnabel says disinflation process projected to slow (Bloomberg)

  • RBA's Bullock says board seeks to cool demand, maintain employment (Bloomberg)

GEOPOLITICS

  • Israel agrees to four-day truce with Hamas, 50 hostages to be released (FT)

  • Biden's diplomatic breakthrough on Israeli hostage release after weeks of talks brokered by Qatar, US and Egypt (FT)

  • Russian parliament approves spending bill to allocate more on defense than social services for first time in decades (AP)

CHINA

  • Chinese government advisers to seek 2024 GDP growth target 4.5% to 5.5% (Reuters)

  • China state bank purchases said to be accelerating, yuan gains (Reuters)

  • Evergrande chairman's mansions seized by company creditor (Bloomberg)

  • Sunac China project secures loan from government-backed asset manager (Bloomberg)

ECONOMY

  • US short-term inflation expectations climbed to a 7-month high in Nov (Bloomberg)

  • US weekly jobless claims fall more than expected (Reuters)

  • US durable goods orders fall on weakness in transportation equipment (Reuters)

  • Japan downgrades economic assessment for first time in 10 months (Reuters)

Industry ETFs

Thu 23 Nov 23, 8:22am (AEDT)

Name Value % Chg
Commodities
Uranium 28.81 +0.35%
Gold Miners 29.25 +0.14%
Steel 68.68 -0.19%
Silver 21.66 -0.51%
Copper Miners 34.44 -0.61%
Lithium & Battery Tech 48.8 -1.29%
Strategic Metals 57.7 -1.72%
Industrials
Aerospace & Defense 118.0 +0.72%
Global Jets 16.75 +0.66%
Construction 55.15 +0.57%
Agriculture 22.075 -0.47%
Healthcare
Biotechnology 118.72 +0.64%
Cannabis 5.4 -
Name Value % Chg
Cryptocurrency
Bitcoin 18.9903 +2.26%
Renewables
CleanTech 9.73 +0.52%
Solar 46.05 +0.02%
Hydrogen 6.34 -0.78%
Technology
FinTech 21.35 +1.04%
Sports Betting/Gaming 16.4799 +1.01%
E-commerce 19.23 +1.00%
Cloud Computing 20.22 +0.45%
Semiconductor 515.07 +0.32%
Video Games/eSports 55.46 +0.27%
Cybersecurity 25.89 +0.12%
Electric Vehicles 22.94 +0.09%
Robotics & AI 26.25 -0.04%

Nvidia Crushes Earnings, Shares Fall on China Trade Concerns

Nvidia shares slipped around 2% after its forecasts failed to meet sky-high expectations.

Third quarter results summary:

  • Revenue up 205% to US$18.1bn – Beat the US$16.1bn expected 

  • Data centre revenues up 278% to US$14.5bn – Beat the US$12.8bn expected 

  • Gross margins up 1,883 bps to 75.0% – Beat the 72.5% expected

  • EPS up 593% to $4.02 – Beat the $3.37 expected

  • Free cash flow up 5,202% to US$7.0bn – Missed the US$7.1bn expected

Nvidia expects fourth quarter revenues to rise 230% year-on-year to US$20.0bn, which was ahead of the US$17.8bn expected by analysts. 

Key management quotes and outlook commentary:

  • "NVIDIA GPUs, CPUs, networking, AI foundry services and NVIDIA AI Enterprise software are all growth engines in full throttle. The era of generative AI is taking off" – CEO Jensen Huang

  • "Our sales to China and other affected destinations, derived from products that are now subject to licensing requirements, have consistently contributed 20-25% of Data Center revenue. We expect that our sales to these destinations will decline significantly in Q4 FY 24..." – CFO Colette Kress 

  • "Export controls will have a negative effect on our China business, and we do not have good visibility into the magnitude of that impact even over the long term.” – CFO Colette Kress

Brokers remained upbeat and most upgraded their share price targets:

  • Bank of America: Reiterated a Buy and raised its target price to $700. “We think the stock could go through some near-term churn, but we expect fundamental strength to help it outperform.” 

  • Goldman Sachs: Reiterated Buy and revised its target price to $625 ($605 prior). “We increase our 2023-25 revenue and non-GAAP EPS estimates, on average, by 11% and 12% respectively.”


A Buying Spree for US Stocks

Commodity trading advisers (CTAs), which are known for using momentum-driven strategies in futures markets, purchased approximately US$70bn in US equities in the past two weeks.

CTA positioning is currently far from extreme, in fact it would need to add an extra ~US$30bn or so to reach 'extreme' levels. This suggests there is a little more wiggle room for upside before positioning becomes an issue.

F gd0mHWoAEd 1w
Source: Goldman Sachs

Lithium Prices are Spiraling Lower

China's most-traded lithium carbonate futures contract tumbled 7% on Wednesday to a record low of 124,000 yuan a tonne.

The VanEck Rare Earths/Strategic Metals ETF (-1.55%) and Lithium & Battery Tech ETF (-1.3%) were also the worst performing ETFs in the above table.

Pilbara Minerals (ASX: PLS) shares tumbled 3.8% on Wednesday, not far off 7-month lows.

Key Events

ASX corporate actions occurring today:

  • Trading ex-div: ALS (ALQ) – $0.196, Cobram Estate Olives (CBO) – $0.033 

  • Dividends paid: None

  • Listing: None

Economic calendar (AEDT):

  • 9:00 am: Australia Manufacturing and Services PMI

  • 8:00 pm: Eurozone Manufacturing and Services PMI

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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