Morning Wrap: ASX 200 to rise, S&P 500 rallies on jobs data + How do stocks perform in September?

Major US benchmarks rallied after US job openings data came in much lower than expected, the US 2-year yield falls 15 bps (which buoyed appetite for risk assets), how does the US market tend to perform in September and why investors should keep an eye out for gold, lithium and tech stocks on Wednesday.

Let's dive in.

S&P 500 SESSION CHART

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

MARKETS

• S&P 500 rallies, finished at best levels, crosses the 4,500 level for the first time since 10 August and marks its first three-day win streak this month

• All sectors green, led by growth and resources

• Bond yields fell sharply after lower-than-expected US July job openings data

• US 2-year yield down 15 bps and back below 5.0%

• US Dollar Index down 0.5%, placing upward pressure on commodity prices

• Softer jobs data was the main story overnight, lifting soft landing expectations as the market would rather see loosening labor market data as opposed to job cuts

• Oil rises as risk-on mood outweights increased Russian flows (Bloomberg)

• Wall Street reels from painful month as winning trades sour – Long bonds, meme stocks and shorting volatility among the losers (Bloomberg)

STOCKS

• MMM agrees to pay $6bn to settle faulty earplug lawsuits (Reuters)

• Best Buy scales back outlook as results top expectations (CNBC)

• Coinbase shares rally 15% after a court ruled against the US Securities and Exchange Commission in a lawsuit about spot bitcoin exchange funds (CNBC)

• Alphabet and General Motors are working together to explore AI opportunities across the automaker’s business (CNBC)

CHINA

• China mega banks weigh further deposit rate cuts to boost growth (Bloomberg)

• China stocks post measured gains after Monday whiplash (Bloomberg)

• Iron ore's unexpectedly rally shows pockets of China strength (Bloomberg)

ECONOMY

• UK shop price inflation at 10-month low (Reuters)

• Japan at 'inflection point' in 25-year battle with deflation (Reuters)

• Japan's unemployment rate rises to 2.7% July (Reuters)

US Jobs Data Fuels Risk Appetite

July JOLTs Job Openings came in at 8.8m down from 9.2m in the previous month and well-below consensus expectations of a rise to 9.4m.

In the last three months, approximately 1.4m job openings have been shed, which is among the largest declines on record.

This brings job openings to the lowest level since March 2021. And drags the ratio of job openings to unemployed to 1.51 from almost 2.0 at the beginning of the year, a figure that Powell watches closely and has repeatedly cited in public comments.

The weaker-than-expected jobs data triggered a drop in bond yields, with a notable 15 bp fall in the 2-year.

Risk assets, that have been under pressure from rising yields have been looking for any yield weakness to justify another run. While there's still more high profile economic data ahead (e.g. Australia inflation, Eurozone inflation, US personal consumption expenditures and US unemployment data) this serves as a short-term boost for markets.

US Markets in September

Seasonality has been a bearish talking point in recent weeks. Historically, August and September are the two worst months for both the S&P 500 and Nasdaq.

• Goldman Sachs: "September is the worst month of the year for equities ... median return for the S&P 500 since 1928 is -1.56%."

• CFRA Research: "... Prepare for the possibility of disappointing results for both the S&P 500 and Nasdaq in the month ahead." Since 1945, September is "the only month to see the S&P 500 decline in price more frequently than it rose."

This year could be a little special given the sheer strength we've seen year-to-date. Bespoke Investment Group points out that September has not typically been a weak month when the S&P 500 was already up double-digit percentages through to the end of August.

In the 33 years since 1928 that the S&P 500 was up more than 10% year-to-August, average performance in September has been a gain of 0.44%.

Sectors to Watch

Is this another V-shaped bounce? Markets are beginning to recover quite strongly and that's been backed by factors such as lower VIX, removal of Jackson Hole overhang, China beginning to stimulate and a reset in sentiment/positioning indicators (e.g. CNN's Fear & Greed Index is back to Neutral (50) from Extreme Greed (77) a month ago).

As for ASX sectors to watch on Wednesday:

• Resources: Plenty of beneficiaries from the weakening US dollar.

  • Gold spot prices rallied 0.9% to US$1,936 overnight. On Tuesday, we noted a few gold names that have held up relatively well in recent months including Emerald Resources (ASX: EMR), Bellevue Gold (ASX: BGL) and Ramelius Resources (ASX: RMS)

  • Copper prices rose 1.1% to US$3.8/lb which helped the Global X Copper Miners ETF finish the session 2.7% higher. Could this see some follow through strength for local names like Sandfire Resources (ASX: SFR)?

• Tech: The Nasdaq outperformed other major benchmarks overnight. Nvidia rallied 4.2% to mark its highest closing price on record.

• Lithium: Global X Lithium & Battery Tech ETF rallied 4.1% overnight, bouncing from levels not seen since March 2021. This sector has been hit pretty hard amid weakening lithium prices, Chinese destocking, higher-than-expected capex etc. Does it see some decent support around these levels?

Global X Lithium & Battery Tech ETF weekly chart (Source: TradingView)

ASX corporate actions occurring today:

• Trading ex-div: Telstra (TLS) – $0.085, Ventia Services (VNT) – $0.083, Bapcor (BAP) – $0.115, Wesfarmers (WES) – $1.03, Evolution Mining (EVN) – $0.02

  • See full list of ex-ASX 200 stocks trading ex-dividend here

• Dividends paid: Dexus (DXS) – $0.236, Janus Henderson (JHG) – $0.59, HomeCo Daily Needs REIT (HDN) – $0.02, HealthCo Healthcare and Wellness REIT (HCW) – $0.02 

• Listing: None

Economic calendar (AEST):

• 11:30 am: Australia Building Permits, Construction Work

• 11:30 am: Australia Monthly CPI Indicator

• 10:00 pm: Germany Inflation