Market Wraps

Morning Wrap: ASX 200 to rally, S&P 500 hits all-time high as Fed maintains rate cut projections

Thu 21 Mar 24, 8:36am (AEST)

ASX 200 futures are trading 49 points higher, up 0.63% as of 8:30 am AEDT.

The S&P 500 hit 5,200 for the first time after the Federal Reserve held rates steady and said it would ease three times this year, gold prices hit a fresh all-time high after dovish Fed projections, base metals including copper and palladium also rallied overnight and UK inflation cools to slowest pace since September 2021.

Let's dive in.

Overnight Summary

Thu 21 Mar 24, 8:27am (AEST)

Name Value % Chg
Major Indices
S&P 500 5,225 +0.89%
Dow Jones 39,512 +1.03%
NASDAQ Comp 16,369 +1.25%
Russell 2000 2,075 +1.92%
Country Indices
Canada 22,046 +0.85%
China 3,080 +0.55%
Germany 18,015 +0.15%
Hong Kong 16,543 +0.08%
India 72,102 +0.12%
Japan 40,004 +0.66%
United Kingdom 7,737 -0.01%
Name Value % Chg
Commodities (USD)
Gold 2,189.0 +1.31%
Iron Ore 110.29 -0.38%
Copper 4.0905 +0.54%
WTI Oil 81.84 -1.63%
Currency
AUD/USD 0.6586 +0.83%
Cryptocurrency
Bitcoin (AUD) 102,029 +5.17%
Ethereum (AUD) 5,269 +5.44%
Miscellaneous
US 10 Yr T-bond 4.273 -0.56%
VIX 13.04 -5.64%

US Sectors

Thu 21 Mar 24, 8:28am (AEST)

SECTOR % CHG
Consumer Discretionary +1.45%
Communication Services +1.26%
Financials +1.24%
Industrials +1.21%
Information Technology +1.15%
Materials +0.97%
SECTOR % CHG
Real Estate +0.39%
Consumer Staples +0.23%
Utilities +0.13%
Energy -0.09%
Health Care -0.23%

S&P 500 SESSION CHART

S&P 500 intraday
S&P 500 rallies to finish at best levels (Source: TradingView)

ASX TODAY

  • ASX 200 set to soar following strong lead from Wall Street

  • Gold stocks set to rally after prices for the commodity rallied to all-time highs

  • Other sectors set for a strong session include copper, uranium, tech, retail

  • CSL granted orphan drug designation from FDA for autologous cell therapy for Wiskott-Aldrich Syndrome

  • Cettire customers note issues with duty chargers (AFR)

  • Downer EDI gets ready to reboot mineral processing division auction (AFR)

  • Electro Optic Systems seeking to raise up to $40m (AFR

  • Incitec Pivot fertiliser unit sale drags on with Pupuk Kaltim (The Australian)

BROKER MOVES 

This refers to broker updates since market close on Wednesday.

  • Arafura Rare Earths downgraded to Hold from Buy with 19 cent target (Bell Potter)

  • Bapcor upgraded to Equal-weight from Underweight and target increased to $5.75 from $5.00 (Morgan Stanley)

  • Boral reinstated Buy with $7.13 target (BofA)

  • Evolution Mining upgraded to Overweight from Equal-weight and target increased to $3.95 from $3.35 (Morgan Stanley)

  • Iperionx initiated speculative Buy with $3.70 target (Bell Potter)

  • Karoon Energy initiated Overweight with $2.71 target (Wilsons)

  • Nickel Industries initiated Overweight with 95 cent target (Morgan Stanley)

  • Sonic Healthcare upgraded to Neutral from Underweight and target increased to $26.20 from $26 (JPMorgan)

  • Woolworths upgraded to Outperform from Neutral but target decreased to $35 from $36 (Macquarie)

MARKETS

  • S&P 500 finished higher and rallied after the FOMC decision/press conference

  • S&P 500 notched another record high, pushing through the 5,200 level

  • Big tech, semiconductors, discretionary and small caps among best performers

  • Fed left rates unchanged at 5.25% to 5.50% as widely expected and kept its median dot unchanged at three rate cuts for 2024

  • Bond yields lower after recent six-session streak, US 2-year yield now down 13 bps in the last two sessions

  • Gold prices surge on somewhat dovish Fed, marking a new record close of US$2,185

  • Synchronised global central bank easing expected to support dollar (Bloomberg)

  • US crude inventories drop 1.5m barrels for the week ending 15-March while analysts expected slight build (OilPrice.com)

INTERNATIONAL STOCKS

  • Chipotle board approves 50-1 stock split (Bloomberg)

  • Cisco Systems closes $28bn all-cash acquisition of cybersecurity and analytics company Splunk (MSN)

  • Boeing exploring divesting two of its defense businesses amid 747 crisis (Bloomberg)

  • Intel awarded up to $8.5bn in direct funding form federal government through CHIPS Act grants (CNBC)

CENTRAL BANKS

  • Fed sees three interest rate cuts in 2024 but forecasts fewer cuts in 2025 (Bloomberg)

  • No clear consensus on follow-up BOJ rate hike or terminate rate (Bloomberg)

  • BOJ cutbacks to upper limit of JGB purchase range seen as meaningful (Reuters)

GEOPOLITICS

  • Trump now says US will "100%" remain in NATO, provided EU countries meet their funding commitments (Politico)

  • US mulls blacklisting several Chinese firms linked to Huawei (Bloomberg)

  • Netanyahu vows Israel will proceed with ground assault on Rafah to eliminate remaining Hamas battalions (FT)

  • UK chancellor Hunt hints general election may be held in October (FT)

ECONOMY

  • UK headline inflation slowest since September 2021, services remain sticky (Bloomberg)

  • China keeps loan prime rates unchanged, in-line with expectations (Bloomberg)

Industry ETFs

Thu 21 Mar 24, 8:27am (AEST)

Name Value % Chg
Commodities
Gold Miners 30.26 +4.13%
Strategic Metals 52.67 +3.66%
Uranium 28.7 +3.27%
Copper Miners 41.79 +3.21%
Silver 23.29 +2.19%
Lithium & Battery Tech 46.65 +2.10%
Steel 71.15 +1.26%
Industrials
Global Jets 20.22 +2.90%
Construction 72.44 +1.91%
Aerospace & Defense 129.68 +1.12%
Agriculture 23.79 +1.02%
Healthcare
Cannabis 5.15 +0.78%
Biotechnology 136.49 +0.26%
Name Value % Chg
Cryptocurrency
Bitcoin 30.11 +2.35%
Renewables
Hydrogen 5.5 +2.80%
Solar 44.09 +2.42%
CleanTech 9.41 +2.06%
Technology
FinTech 27.29 +2.90%
Sports Betting/Gaming 18.08 +2.38%
E-commerce 24.12 +2.29%
Electric Vehicles 24.4 +1.84%
Semiconductor 220.45 +1.70%
Cybersecurity 30.15 +1.34%
Cloud Computing 22.01 +1.24%
Robotics & AI 32.27 +1.19%
Video Games/eSports 62.99 +1.12%

The Fed Decision

The Fed kept rates on hold between 5.0% and 5.25%, in-line with market expectations. But there were several dovish takeaways from the decision and press conference.

The Fed's dot plot upgraded economic projects (compared to their December forecasts) including:

  • 2024 real GDP growth of 2.1% (up from 1.4% in December)

  • 2024 nominal GDP growth of 4.5% (from 3.8% in December)

  • 2024 unemployment rate of 4.0% (down from 4.1% in December)

  • However, 2024 core PCE inflation of 2.6% (up from 2.4% in December)

  • But still forecasted 3 rate cuts by year end

While policymakers see the federal funds rate easing to 4.6% by the end of 2024, individual expectations were split – The dot plot showed 10 officials expecting three or more 25 bp cuts this year while nine anticipated two or less.

As for Powell's commentary, here are some of his key comments:

  • Rate outlook: "We are prepared to maintain the current target range for longer if appropriate ... If the economy evolves going forward, the appropriate level of the federal funds rate will be 4.6% at the end of this year, 3.9% at the end of 2025 and 3.1% at the end of 2026."

  • Rate outlook: "We believe that our policy rate is likely at its peak for this time in the cycle and if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year."

  • Inflation outlook: "We will get aggregate inflation down to 2% over time , we will. I will assume that we will continue to see goods prices coming in to a new equilibrium ... where housing services inflation will come back down as current market rents are suggesting that will happen."

Overall – Powell was somewhat dovish and looking for reasons to cut. He flagged that January and February CPI and PCE was high and possibly due to seasonal effects. The story hasn't changed and inflation is coming down gradually. The Fed still seeks greater confidence inflation is moving sustainably down before making its first rate cut. The data could get tricky later in the year due to base effects for the previous 12 months (cycling disinflation in the second half of 2023).

Key Events

ASX corporate actions occurring today:

  • Trading ex-div: Cochlear (COH) – $2.00, Tourism Holdings (THL) – $0.04, Pacific Smiles (PSQ) – $0.021, PRL Global (PRG) – $0.05, Cue Energy (CUE) – $0.02, Service Stream (SSM) – $0.02, Spark New Zealand (SPK) – $0.127, K&S Corp (KSC) – $0.10, Peet (PPC) – $0.015 

  • Dividends paid: 

  • Listing: None

Economic calendar (AEDT):

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

  • 11:00 pm: Bank of England Rate Decision

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.

Get the latest news and insights direct to your inbox

Subscribe free