Morning Wrap: ASX 200 to rise, S&P 500 bounces, Small caps and value continue to outperform

Major US benchmarks finished higher on Friday but investors continued to rotate into cyclicals, value and small caps. A Trump speech sends Bitcoin sharply higher, US PCE inflation tops estimates but reinforces disinflation momentum and JPMorgan releases a sweep of ratings and target changes fro the REIT sector.

Let's dive in.

S&P 500 SESSION CHART

A higher but choppy kind of session for the S&P 500 (Source: TradingView)

OVERNIGHT MARKETS

• Major US benchmarks finished higher but off best levels – S&P 500 up 1.1% from session highs of 1.65%

• Nasdaq now lagging the S&P 500 year-to-date (12.5% vs. 14.1%) and barely outperforming the Russell 2000

• Risk-off has been the path of least resistance as of late amid stretched positioning, high Q2 earnings bar, AI scrutiny (largely around capex and monetisation), seasons headwind and election uncertainty  

• US weekly recap: Russell 2000 +3.47%, Dow +0.75%, S&P 500 -0.83%, Nasdaq -2.08%

• 41% S&P 500 have reported Q2 earnings, with 78% reporting actual EPS beats (FactSet)

• Big tech sell off to continue as rotation into small-caps gains steam (Yahoo)

• Emerging markets poised to rise in popularity for US election volatility (Bloomberg)

• Investors hunting for new drivers to leverage AI boom, with utilities, property firms pushing higher this quarter (Bloomberg)

• Latest EPFR data shows equity funds experienced US$22.2bn in inflows, half of which went into EMs (Yahoo Finance)

• China 10-year yield falls to record low following series of rate cuts (Bloomberg)

STOCKS

• CrowdStrike CEO says 97% of systems were back online as of 25-Jul after massive IT outage (BBC)

• Stellantis struggling to sell Jeeps despite record SUV demand (Bloomberg)

• OpenAI to roll out SearchGPT in latest direct threat to Google Search (Reuters)

• Apple no longer among top 5 smartphone seller in China (FT)

• Lineage's strong IPO debut signals recovery for US listing market (FT)

CENTRAL BANKS

• Fed set to announce latest monetary policy decision Wednesday with recent data showing slowing inflation (Yahoo Finance)

• Market looking for a September rate cut signal from Fed this week (Bloomberg)

• Nagel says ECB should be able to cut if data stay on course (Bloomberg)

• Singapore leaves settings unchanged as expected (Bloomberg)

POLITICS & GEOPOLITICS

• Harris campaign has reportedly raised US$200m over the last week (Reuters)

• US election polls show Trump still ahead, though Harris gaining (The Economist)

• Trump proposes strategic crypto reserve, citing China competition (CNBC)

• Netanyahu returns to Israel from Washington early amid deadly strike (NBC)

• Biden administration fears total war between Israel-Hezbollah after rocket attack (Axios)

• Venezuelans begin voting in crucial presidential election (CNN)

• Putin warns of Cold War-style crisis if US deploys missiles to Germany (Reuters)

• US CEOs met with senior Chinese government officials but received conflicting signals about foreign investment (Bloomberg)

ECONOMY

• US June core PCE rose 0.2% month-on-month, slightly above consensus but reinforces disinflation traction and adds to Fed rate cut narrative (Reuters)

• Tokyo core inflation rises in-line with forecast, supports calls for BOJ rate hike (Bloomberg)

ASX TODAY

• Block’s Jack Dorsey is about to overhaul the company in a reorganisation he warns may feel ‘big and disruptive or uncomfortable’ (Fortune)

• Fletcher Building guides preliminary FY25 earnings impact (NZ$10m) to (NZ$30m) due to issues with shipping at Golden Bay cement business (FBU)

• Super Group reportedly seeking to selldown 53% stake in SG Fleet Group (The Aus)

 WHAT TO WATCH TODAY

ASX 200 set to extend Friday's gains after a strong lead in from Wall Street (every sector finished higher) and the continued rotation into cyclical/value pockets of the market.

• Materials: A few tailwinds for the beaten up Materials sector (BHP, PLS, MIN and ILU at trading around 52-week lows). Several overnight ETFs bounced from recent lows including Uranium +2.1%, Rare Earths/Strategic Metals +2.1% and Copper +1.5%

• Charts of interest: Here's a list of stocks in strong uptrends that have held on to recent gains – ANG, GNP, HMC, OBM, PGC, ZIP

BROKER MOVES

Quite a few conflicting broker moves this morning – Most of which are rating downgrades but share price upgrades (in other words: "We reckon the stock is overvalued but upgrade the share price because the business is in good/better shape".)

• Abacus downgraded to Neutral from Overweight; target cut to $1.25 from $1.30 (JPMorgan)

• Challenger upgraded to Neutral from Sell; target up to $6.95 from $6.65 (Citi)

• Charter Hall Retail REIT upgraded to Overweight from Neutral; target up to $4 from $3.90 (JPMorgan)

• HMC Capital downgraded to Neutral from Overweight; target up to $7.50 from $7.25 (JPMorgan)

• Goodman Group downgraded to Underweight from Neutral; target up to $32 from $31 (JPMorgan)

• JB Hi-Fi downgraded to Sell from Neutral; target up to $60 from $59 (UBS)

• Mineral Resources upgraded Outperform from Hold; target cut to $60 from $75 (CLSA)

• Propel Funeral Partners downgraded to Neutral from Positive; target up to $5.68 from $5.27 (E&P)

• Sandfire Resources upgraded to Accumulate from Hold; target up to $9.65 from $9.45 (Ord Minnett)

• Seek downgraded to Hold from Outperform; target cut to $21 from $26 (CLSA)

Companies trading ex-dividend: 

• Fri: 26 July: None

• Mon 29 July: None

• Tue 30 July: Mirrabooka Investments (MIR) – $0.09, 360 Capital Mortgage REIT (TCF) – $0.042

• Wed 31 July: None

• Thu 1 Aug: None

Other ASX corporate actions today: 

• Dividends paid: RAM Essential Services Property Fund (REP) – $0.014

• Listing: None  

• Earnings: None 

• Quarterlies: St Barbara (SBM), 

• AGMs: None 

Economic calendar (AEST):

No major economic announcements.