Morning Wrap: ASX 200 to tumble, gold and copper prices slide + Russell 2000 turns negative

The S&P 500 and Nasdaq finished in positive territory thanks to the outperformance of megacap tech stocks, the US 10-year yield briefly hits 4.70%, gold prices fall for a sixth straight session while oil prices pull back 2.3%, Goldman Sachs says its clients have been selling energy and loading up tech, the Russell 2000 hits negative year-to-date and brace for a painful session for miners and energy stocks.

Let's dive in.

S&P 500 SESSION CHART

S&P 500 finished breakeven amid choppy trade (Source: TradingView)

MARKETS

• S&P 500 closed breakeven from session highs of 0.29% and lows of -0.65%

• Big tech pushed the benchmarks higher, S&P 500 equal-weight ETF down -1.1%

• Utilities sector marked its worst day since April 2020, the S&P 500 Utilities sector is down 13% in since mid-August 

• Market breadth remains very poor, despite the breakeven close, only 26% or 130 stocks managed to close higher

• US 10-year yield up 10 bps, briefly touched 4.7% overnight after a ~50 bp rally last month

• Gold tumbles for a sixth consecutive session, down a little over 5.0%

• WTI crude settled 2.3% lower after an almost 9% rally last month 

• Russell 2000 turns negative for the year, an indicator of broader weakness in the economy that's been masked by megacap tech stocks (CNBC)

• US averts shutdown until 17 November, markets breath sigh of relief (Bloomberg)

• Goldman Sachs sees earnings-led rally in big tech stocks (Bloomberg)

• Trade in 'fear gauge' at high as investors hedge amid fragile markets (FT)

• Wall Street bankers hope for dealmaking rebound after boom and bust (FT)

STOCKS

• Birkenstock targets US$10bn valuation (Reuters)

• Nvidia (+2.95%) after Goldman Sachs added the stock to its conviction list (CNBC)

• Instacart (-9.2%) after the Wall Street bank that underwrote its IPO forecasted a weak second-half outlook with slower revenue growth (CNBC)

CENTRAL BANKS

• Fed's Bowman urges multiple rate hikes to curb inflation (Bloomberg)

• Powell says economy still working through the impact of the pandemic (Reuters)

• BOJ to buy additional bonds to curb rise in sovereign yields (Bloomberg)

• BoE warns banks not to underestimate impact of higher rates (London Times)

• ECB deputy head warns the 'last mile' of disinflation the hardest (FT)

CHINA

• China stock investors say worst yet to come in property crisis (Bloomberg)

• China Caixin manufacturing PMI grows on stronger domestic demand (Bloomberg)

• China tourism revenue more than doubled over holiday weekend (Bloomberg)

ECONOMY

• Eurozone final September PMI stuck in steep downturn (Reuters)

• UK final manufacturing PMI slows sharply in September (Reuters)

• Australian home prices stay strong as RBA seen standing pat (Bloomberg)

• Japan factory activity falls at fastest pace in seven months in September (Reuters)

• South Korea exports drop in September, down for a 12th straight month (Yonhap)

• UAW strikes have costs the US economy nearly $4bn so far (Fox Business)

Insights from Goldman Sachs

A few interesting tidbits from the Goldman Sachs trading desks:

• Nasdaq's healthy pullback: The Nasdaq 100 is nearly ~10% off recent highs, which "Bulls an arguably make claim to a more supportive backdrop into earnings ... the opportunity for positive resolutions to key overhangs (strikes, China, debt ceiling), healing seasonality and A.I. ‘monetization’ signposts."

• Energy for tech: "Sell energy to buy tech ... Last week's notional long selling in US energy was the largest in more than 6 months and ranks in the 99th percentile vs. the past five years."

• A return to tech: "After 6 consecutive weeks of net selling, Info Tech was the most notionally net bought US sector on our Prime book last week ... the largest in two months."

• The market needs to bounce: "All eyes on S&P 500 200-day moving average of 4,195. If this level is tested and doesn't provide support, history suggests S&P 500 forward 1-month, 3-month, 6-month and 12-month returns are significantly below-average following a break in its 200 day."

Source: Goldman Sachs

Russell 2000 Turns Negative

The Russell 2000 ETF briefly returned to negative year-to-date territory overnight. From a technical perspective, its holding onto dear life. Is a break down a cause for concern?

Nevertheless, it's a warning sign for growth and riskier assets.

Russell 2000 daily chart (Source: TradingView)

Surprisingly, approximately a third of Russell 2000 companies still aren't profitable, which is the highest level in data that dates back to 1985.

Source: Bank of America

Sectors to Watch: Resource Pains

ASX 200 futures are pointing to a drop of almost 1.5%, with the Resource sector likely to lead the market lower.

• Quite a few of our overnight ETFs fell more than 3%, notably Uranium, Copper, Gold and Rare Earths

• Energy was also the second worst performing S&P 500 sector, down almost 2%

• Copper prices fell a sharp 2.6% overnight to US$3.64 and now testing a 4-month low

Copper daily chart (Source: TradingView)

ASX corporate actions occurring today:

• Trading ex-div: Wam Active (WAA) – $0.03, Sims (SGM) – $0.21, Wam Research (WAX) – $0.05, Wam Strategic Value (WAR) – $0.02, London City Equities (LCE) – $0.01, Imperial Pacific (IPC) – $0.06, Genusplus Group (GNP) – $0.02, Wam Microcap (WMI) – $0.05  

• Dividends paid: Beach Energy (BPT) – $0.02, Insignia Financial (IFL) – $0.09, Fleetwood (FWD) – $0.02, Enero Group (EGG) – $0.045, Seek (SEK) – $0.23, NIB Holdings (NHF) – $0.15, Treasury Wine (TWE) – $0.17, Propel Funeral Partners (PFP) – $0.06, Supply Network (SNL) – $0.28, Universal Holdings (UNI) – $0.08, Australian Clinical Labs (ACL) – $0.07, Qualitas (QAL) – $0.05, IPD Group (IPG) – $0.047 

• Listing: None 

Economic calendar (AEST):

• 10:30 am: Australia Building Permits

• 10:30 am: Australia Home Loans

• 1:30 pm: RBA Interest Rate Decision

• 12:00 am: US JOLTs Job Openings