Market Wraps

Morning Wrap: ASX 200 to rally, Dow hits record high + Everything you need to know about the Fed

Thu 14 Dec 23, 8:38am (AEDT)

ASX 200 futures are trading 79 points higher, up 1.08% as of 8:20 am AEDT.

The Dow closed above 37,000 points for the first time, the Fed kept interest rates on hold and projected three rate cuts in 2024, gold reclaims the US$2,000 level as yields tumble, the Fed expects US inflation to ease to 2.6% in 2024, small cap stocks surge as investors cheer for rate cuts and a few sectors to watch as the market opens on Thursday.

Let's dive in.

Overnight Summary

Thu 14 Dec 23, 8:22am (AEDT)

Name Value % Chg
Major Indices
S&P 500 4,707 +1.37%
Dow Jones 37,090 +1.40%
NASDAQ Comp 14,734 +1.38%
Russell 2000 1,944 +3.35%
Country Indices
Canada 20,629 +1.96%
China 2,969 -1.15%
Germany 16,766 -0.15%
Hong Kong 16,229 -0.89%
India 69,585 +0.05%
Japan 32,926 +0.25%
United Kingdom 7,548 +0.08%
Name Value % Chg
Commodities (USD)
Gold 2,035.8 +2.02%
Iron Ore 135.16 -0.21%
Copper 3.832 +0.99%
WTI Oil 69.77 +1.56%
Currency
AUD/USD 0.667 +1.66%
Cryptocurrency
Bitcoin (AUD) 64,146 +3.62%
Ethereum (AUD) 3,385 +3.18%
Miscellaneous
US 10 Yr T-bond 4.033 -4.11%
VIX 12.23 +1.33%

US Sectors

Thu 14 Dec 23, 8:22am (AEDT)

SECTOR % CHG
Utilities +3.72%
Real Estate +3.58%
Health Care +1.83%
Consumer Staples +1.82%
Financials +1.61%
Consumer Discretionary +1.35%
SECTOR % CHG
Energy +1.25%
Materials +1.20%
Industrials +1.14%
Information Technology +0.89%
Communication Services +0.65%

S&P 500 SESSION CHART

S&P 500 intraday
This is not a crypto intraday chart. It's the S&P 500 ripping higher after the Fed pause and dovish projections (Source: TradingView)

MARKETS

  • S&P 500 rallies intraday to finish near best levels, less than 3% away from all-time highs

  • Nasdaq 100 closed off best levels, less than 2% away from all-time highs

  • Dow clears January 2022 peak, marks record close

  • Russell 2000 surges 3.5% to best levels since August 2023

  • US 2-year yield dives 27 bps on dovish Fed forecasts, lowest since June 2023

  • Gold reclaims the US$2,000 level on lower yields and US dollar

  • Investor Intelligence bulls increased to 55.6% for week ended December 12, marks the third straight week of caution territory or a level not seen since the late July peak

  • Oil near 5-month lows as Russian exports add to oversupply fears (Bloomberg)

  • Survey suggests majority think Fed cuts could begin by June 2024, with high chance of soft landing (CNBC)

  • Market-implied inflation expectations fall to lowest levels since June (Bloomberg)

  • Record-breaking US$5tn S&P 500 options expiration expected as dealers work to stabilise US stock swings (Reuters)

  • Argentina devalued peso by more than 50% as new President Milei begins to implement economic agenda (Reuters)

STOCKS

  • Apple to soon face EU antitrust order and potential fine (Bloomberg)

  • Etsy to lay off 11% of workforce citing challenging macro environment (CNBC)

  • OpenAI to offer news in ChatGPT after striking deal with Axel Springer (CNBC)

  • Pfizer shares tumble to 10-year lows as earnings guidance misses expectations (CNBC)

  • Tesla shares eased after recall of 2m vehicles in the US (CNBC)

CENTRAL BANKS

  • Fed keeps rates unchanged, in-line with market expectations (Bloomberg)

  • Fed statement acknowledges inflation has eased over the past year (Federal Reserve)

GEOPOLITICS

  • US officials warn Israeli's war against Hamas to become more targeted as soon as early January (FT)

  • Biden says Israel losing global support over Gaza bombing campaign (FT)

  • Latest US intel suggests Ukraine war has cost Russia 315,000 dead or wounded, losing 90% of personnel it started with (Reuters)

CHINA

  • PBOC seen adding to net MLF injections on Friday but economists expect rate may stay unchanged, markets eye reserve requirement cut (Bloomberg)

  • China economic conference concludes with no view of stronger stimulus (Bloomberg)

  • China says it will step up policy adjustments and focus on industrial policy to drive recovery in 2024 (Reuters)

  • China's export prices decline as domestic demand dries up (Nikkei)

ECONOMY

  • US producer prices flat month-on-month in November, annualised came in a 0.9%, below consensus for 1.0% (Reuters)

  • UK growth sees deeper contraction at start of Q4 (Bloomberg)

  • Japan manufacturer conditions jump to highest in almost two years (Reuters)

  • South Korea unemployment rate rises to four-month high (Yonhap)

Industry ETFs

Thu 14 Dec 23, 8:23am (AEDT)

Name Value % Chg
Commodities
Gold Miners 30.69 +6.34%
Silver 21.7699 +4.46%
Strategic Metals 56.97 +4.07%
Copper Miners 35.945 +3.71%
Lithium & Battery Tech 48.3 +2.61%
Steel 70.619 +2.45%
Uranium 28.8 -1.00%
Industrials
Construction 60.33 +2.04%
Aerospace & Defense 125.63 +1.49%
Global Jets 18.749 +0.64%
Agriculture 21.71 -0.64%
Healthcare
Cannabis 5.68 +4.22%
Biotechnology 131.4 +4.18%
Name Value % Chg
Cryptocurrency
Bitcoin 21.26 +4.27%
Renewables
Solar 46.94 +5.58%
CleanTech 9.85 +3.58%
Hydrogen 6.54 +3.15%
Technology
FinTech 24.49 +3.77%
Sports Betting/Gaming 16.7623 +2.43%
Cloud Computing 21.79 +2.01%
Electric Vehicles 23.83 +1.97%
Robotics & AI 27.44 +1.70%
Cybersecurity 28.86 +1.69%
Semiconductor 551.92 +1.54%
Video Games/eSports 56.41 +1.27%
E-commerce 20.31 +1.20%

Everything You Need to Know About the Fed

The Fed held rates steady at 5.25% to 5.5%. Here are some of the key takeaways from the rate decision and FOMC economic projections:

  • Fed officials see inflation at 2.4% in 2024, returning to 2.0% target by 2026

  • Noted how "inflation eased but remains elevated"

  • Fed says economic growth has slowed since the third quarter of 2023

  • FOMC median forecast shows 75 bps of cuts in 2024 to 4.6%

  • 8 of 19 officials see policy rate above the 2024 median, 5 see it below that

  • 5 officials see 100 bps worth of rate cuts in 2024 vs. zero in October

  • No policymaker sees end-2024 rates above current levels

  • FOMC median forecast shows rates to fall to 3.6% at end of 2025

The S&P 500 surged around 0.5% within the first five or so minutes after the rate decision.

The Fed press conference kicked off 30 minutes after the rate decision. It's important to treat the rate decision and presser as two different events. There have been plenty of instances where the markets sold off on Powell's comments at the presser – Today was quite the opposite. Here are some of Powell's highlights:

  • More is needed: "The lower inflation readings over the past several months are welcome, but we will need to see further evidence to build confidence that inflation is moving down sustainably toward our goal."

  • Inflation progress: "As evident from the SEP, we anticipate that the process of getting inflation all the way to 2% will take some time. The median projection in the SEP is 2.8% this year, falls to 2.4% next year, and reaches 2% in 2026."

  • Rate optionality: "We added 'any' as an acknowledgment that we are likely at or near the peak rate for this cycle. Participants didn't write down additional hikes that we believe are likely, so that's what we wrote down. But participants also didn't want to take the possibility of further hikes off the table, so that's really what we were thinking."

  • Recession odds: "I think you can say that there's little basis for thinking that the economy is in a recession now. I think there's always a probability that there will be a recession in the next year and it's a meaningful probability, no matter what the economy's doing."

  • Sticky services: "We've seen real progress in core inflation. It has been sticky. And famously, the service sector is thought to be stickier, but we've actually seen reasonable progress in non-housing services, which was the area where you would expect to see less progress."


Sectors to Watch

Markets are becoming increasingly overextended but also trying to price in all the 'good stuff' like a soft landing and more rates cuts in 2024 – A view that was validated by the Fed's projections overnight.

Gold: Is it clear skies for gold as the Fed joins the 'rate cuts in 2024' bandwagon? Gold prices reclaimed the key US$2,000 level and the VanEck Gold Miners ETF surged 6.38% overnight. Let's see if this draws a strong response for local gold names.

Resources: BHP and Rio Tinto ADRs rallied 3.06% and 1.47% respectively overnight. A weaker US dollar and lower yields is typically a tailwind for commodity markets.

Small caps: The depressed small cap space surged overnight. The Russell 2000 Growth ETF finished 3.2% higher. Let's see if this brings some life back into growth laggards.

Yield sensitive sectors: Yield sensitive sectors like Utilities and Real Estate outperformed overnight. Those two S&P 500 sectors were up more than 3% overnight.

Key Events

ASX corporate actions occurring today:

  • Trading ex-div: WCM Global (WQG) – $0.01, Metcash (MTS) – $0.11, Plato Income Maximiser (PL8) – $0.006 

  • Dividends paid: Graincorp (GNC) – $0.14, ResMed (RMD) – $0.04, ALS (ALQ) – $0.19, Stanmore Resources (SMR) – $0.08, Civmec (CVL) – $0.03 

  • Listing: None

Economic calendar (AEDT):

  • 11:30 am: Australia Unemployment Rate (Nov)

  • 11:00 pm: UK Interest Rate Decision 

  • 12:15 am: Eurozone Interest Rate Decision 

  • 12:30 am: US Retail Sales (Nov)

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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