Morning Wrap: ASX 200 to rise, gold set to shine + S&P 500 caps best week of the year

ASX 200 futures are trading 14 points higher, up 0.20% as of 8:20 am AEST.

The S&P 500 marked its best weekly performance since November 2022, bond yields sold off considerably and near two-month lows, Apple earnings disappoint despite record iPhone revenue, US job gains slow and unemployment rises by more than expected, why gold stocks are set to rise plus the key data points and charts to watch about the current rally.

Let's dive in.

S&P 500 SESSION CHART

S&P 500 gaps up, closed near session highs (Source: TradingView)

MARKETS

• Major US benchmarks continued to rally, finished near session highs

• S&P 500 rallied for a fifth straight session, up almost 6% last week

• Russell 2000 marked its best week since February 2021

• US 2-year yield down 15 bps to lowest since 10 August

• US 10-year yield down 36 bps in the last three sessions

• Oil finished the week down 5.0% to a near two month low

• Markets continue to rally off of oversold indicators including AAII Bull-Bear spread (down to -26%, the lowest since late March) and BofA Bull & Bear indicator (at 1.4, the lowest since last November)

• Bullish focus points for the week: Major pullback in bond yields, softer-than-expected growth data (US employment and ISM manufacturing PMI), Powell’s dovish speech, contrarian buy signals from sentiment indicators, reopening of more corporate buyback windows

• Bearish focus points for the week: Growth concerns beginning to ramp up, US ISM manufacturing PMI marks 12th straight month of contraction, bad news is good news dynamic, Middle east tensions, overhang from BoJ yield-curve control 

• Biggest cross-asset rally in 17 months last week (Bloomberg)

• Systematic funds suffer worst days of the year on stock rally (Reuters)

• South Korea to ban short-selling until June 2024 to give regulators time to improve rules and systems (Bloomberg)

STOCKS

• Apple guides to flat revenue amid softening demand in China (Bloomberg)

• Airlines ramp up oil options amid risk of wider Middle East conflict (Bloomberg)

• Tesla lags Magnificent 7 in both share price and earnings forecasts (Bloomberg)

• Berkshire Hathaway posts ~40% jump in earnings with record $157bn cash (CNBC)

CENTRAL BANKS

• ECB's Schnabel says can't close door to further rate hikes (Bloomberg)

• BoE's Bailey vows to hold line on inflation in face of sickly UK outlook (FT)

GEOPOLITICS

• Israel armed forces complete encirclement of Gaza (FT)

• House Republicans pass US$14.3bn Israel aid package (NY Times)

• US Intelligence Community evaluating Iran efforts to avoid regional war (CNN)

• Israeli PM Netanyahu loses core support after Hamas assault on Israel (FT)

• China warms up to Micro amid easing tensions with the US (Reuters)

ECONOMY

• US labour market loosens as job gains slow (Reuters)

• US unemployment rises by more than expected to 3.9% (Bloomberg)

• Canada unemployment rises to 5.7%, above analyst expectations (Reuters)

• German exports fall more than expected in September (Reuters)

• China services PMI weaker than expected, remains barely in expansion (Bloomberg)

• Depressed guidance ratio, outsized Q4 estimate cuts add to scrutiny on earnings rebound expectations (Bloomberg)

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Sectors to Watch

What a powerful bounce. But if this year has taught us anything it's that the market loves to go up (very fast) and then fall (just as fast). So let's see if we can manage a constructive pullback (whenever that comes around).

Gold: Gold spot prices didn't move much last Friday but a lower US dollar and bond yields sent gold stock soaring. The VanEck Gold Miners ETF (+4.28%) is back near the 200-day moving average (blue) and testing a longstanding trendline. This should see some positive flow for local goldies on Monday.

VanEck Gold Miners ETF daily chart (Source: TradingView)

Real Estate: Real Estate was the best performing S&P 500 sector, up 2.35%. The recent peak and pullback in yields should offer these stocks a little bit of reprieve.

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The State of Play

A few interesting insights about the current bounce.

We highlighted five oversold indicators in last Monday's Morning Wrap. Here's an updated version:

• BofA Bull & Bear Indicator eases to 1.4 from 1.5 last week. The analysts said this marks a "contrarian 'buy' signal for a 3rd week," and noted tailwinds including no oil above US$100 a barrel, no yields above 5% and no S&P 500 below the key 4,200.

Source: Bank of America

• Advancing stocks outpaced decliners last Friday by more than 7:1

• More than 94% of S&P 500 stocks are trading above their 5-day moving average, the second highest level of the year, reflecting the sharp upthrust in price action

• Goldman Sachs says CTA positioning remains short and believes this short squeeze has legs to run. Corporate repurchases are also back online and expected to last through to 8 December 2023.

But before you get too bullish. Here are a few charts to consider.

The S&P 500 is currently on a five day winning streak. Here's how the other streaks have gone this year.

Source: CappThesis

The Nasdaq 100 is rallying into a key inflection point. Can it break out or will it remain grounded to the downward channel?

Source: Bespoke Investment Group

ASX corporate actions occurring today:

• Trading ex-div: Champion Iron (CIA) – $0.115, Embark Early Education (EVO) – $0.02 

• Dividends paid: United Overseas Australia (UOS) – $0.02, Cosol (COS) – $0.01

• Listing: None 

Economic calendar (AEDT):

No major economic announcements.