Market Wrap

Morning Wrap: Bear market taking shape, Wall Street plunges, ASX set to slide

Fri 06 May 22, 8:28am (AEST)

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ASX Futures (SPI 200) imply the ASX will open 113 points lower, down -1.6%.

It’s been a good run. I’ll see you guys on the other side. Panic set in across Wall Street as major indices booked their worst daily declines since 2020, investors are concerned that an overly dovish Fed might fall behind the curve, China’s services PMI is in free fall and the US job market is beginning to show some cracks.

Let’s dive in.

Overnight summary

Fri 06 May 22, 8:28am (AEST)

Name Value Chg %
Major Indices
S&P 500 4,147 -3.57%
Dow Jones 32,998 -3.12%
NASDAQ Comp 12,318 -4.99%
Russell 2000 1,871 -4.04%
Country Indices
Canada 20,696 -2.31%
China 3,068 +0.68%
Germany 13,903 -0.49%
Hong Kong 20,793 -0.36%
India 55,702 +0.06%
Japan 26,819 -0.11%
United Kingdom 7,503 +0.13%
Name Value Chg %
Commodities (USD)
Gold 1,877.20 +0.08%
Iron Ore 144.90 -
Copper 4.292 0.00%
WTI Oil 108.70 +0.41%
Currency
AUD/USD 0.7115 +0.07%
Cryptocurrency
Bitcoin (AUD) 51,238 -8.80%
Ethereum (AUD) 3,853 -7.16%
Miscellaneous
US 10 Yr T-bond 3.066 +5.11%
VIX 31 +22.74%

Stocks

  • Wall Street has pulled a 180 after rallying yesterday on news that the Fed was not actively considering a 75 bps rate hike

  • Now, markets are concerned that the Fed was too dovish on its near-term interest rate outlook and might fall behind the curve

  • All 11 US sectors were red

  • Utilities, energy, staples and healthcare staged smaller declines

  • Discretionary and tech stocks fell the most

  • 82% of US stocks declined

  • 70% of US stocks trade below their 200-day moving average (66% on Thursday, 67% a week ago)

  • So far, 78% of S&P 500 companies have reported March quarter earnings

    • 79% have beat earnings expectations

    • Earnings growth expectations for the quarter have moved up 10% year-on-year

  • Shopify (-14.9%) reported a loss per share of -US$11.70 in the first quarter compared to US$9.94 a year ago. The eCommerce platform said the company is no longer benefiting from pandemic-related drivers

  • Doordash (-10.4% but +8.7% after hours) first quarter revenue topped analyst estimates on a record 400m orders. Though, losses were larger-than-expected, sitting at -US$159m compared to a -US$110m loss a year ago 

  • Block (-10.5% but +10.3% after hours) shares are rallying after hours despite missing both top and bottom line earnings expectations 

  • US corporate earnings to watch this week: 

    • Fri: Draftkings, Under Armour 

Economy

  • US jobless claims rose 19,000 last week to 200,000

    • Largest weekly rise in claims since last July

    • Economists polled by The Wall Street Journal forecasted new claims to rise to 182,000

  • US worker productivity fell to 7.5% in the first quarter, the largest decline since 1947

    • Ongoing supply shortages and covid weighed

  • China’s Caixin services PMI fell at its second-steepest pace on record in April to 36.2

    • The index hit 26.5 in February 2020

    • China’s lockdown has disrupted all aspects of demand and supply, supply chains, market confidence and employment

  • The Bank of England raised interest rates for the fourth straight time since December, bringing cash rates to 1.00% - the highest since 2009

Commodities

  • Iron ore futures rose 1.7% to US$145.2 a tonne. Prices rose sightly amid improved sentiment due to the restart of industrial activities in Shanghai, according to Fastmarkets

  • Oil was green but well-off session highs of US$111.3 a barrel. EU outlined its plans on phasing out Russian oil and the latest EIA report flagged historically low strategic petroleum reserves

  • Gold briefly spiked 1.5% to session highs of US$1,909 before fading back to the US$1,870 level

 

US Sectors

Friday, 06 May 2022

Sector Chg %
Communication Services -4.09%
Consumer Discretionary -5.82%
Consumer Staples -1.89%
Energy -1.39%
Financials -2.92%
Health Care -1.96%
Sector Chg %
Industrials -2.66%
Information Technology -4.93%
Materials -3.11%
Real Estate -2.53%
Utilities -1.07%

Industry ETFs

Friday, 06 May 2022

Description Last Chg %
Commodities
Aluminum 62.6299 -1.88%
Copper Miners 40.8 -5.17%
Gold 175.8 -0.38%
Lithium & Battery Tech 68.9 -2.70%
Nickel 41.95 -6.27%
Strategic Metals 99.1899 -4.25%
Steel 63.84 -5.87%
Silver 21.28 -2.35%
Uranium 23.94 -6.52%
Industrials
Aerospace & Defense 106.46 -2.41%
Global Jets 21.73 -3.50%
Healthcare
Biotechnology 121.86 -3.69%
Cannabis 4.18 -5.50%
Description Last Chg %
Cryptocurrency
Bitcoin 24.87 -9.09%
Renewables
CleanTech 14.98 -4.14%
Hydrogen 16.42 -6.21%
Solar 70.55 -4.41%
Technology
Cloud Computing 19.95 -5.51%
Cybersecurity 29.09 -4.85%
E-commerce 19.99 -6.95%
Electric Vehicles 25.64 -4.68%
FinTech 27.98 -6.65%
Robotics & AI 24.96 -4.69%
Semiconductor 433.79 -4.84%
Sports Betting/Gaming 18.27 -4.87%
Video Games/eSports 52.49 -4.92%

ASX Sectors to watch

Major US indices were previously on a three-day win streak, giving investors the impression that last Friday’s selloff marked the low and perhaps that the bottom was in.

Today serves as another reminder that this is exactly what a bear market looks like. Some of the largest rallies come from bear markets. And Thursday was a prime example of the market rallying off extreme levels of pessimism.

These big bounce back rallies tend to bait investors back into a false sense of security and push individual stocks back to key or attractive price points.

That's just my 2 cents this morning.

On the ETF front, everything was smashed (obviously). There's honestly not that much to talk about as pretty much everything closed around intraday lows.

US-listed BHP and Rio Tinto fell between 4-5%. So its all up to the banks to try and keep things together.

Today's events

ASX corporate actions occurring today:

  • Ex-dividend: None today

  • Dividends paid: ECF, OMH, PCI, SEC, SVW, TCF

  • Listing: C79

  • Issued shares: ARF, B4P, BBC, BCA, BGL, BNR, C79, CHK, CRR, CU6, DHG, E2M, EAI, ECT, GT1, GTI, JAV, LAW, LPD, MDR, MFG, MGU, NRZ, ONE, OOK, PET, PIL, PTR, RGL, RMD, SEQ, SLM, SQ2, SSR, TON, TOR, WBT

Other things of interest (AEST):

  • US Non-Farm Payrolls (April) at 10:30 pm

  • US Unemployment Rate (April) at 10:30 pm

Written By

Kerry Sun

Finance Writer & Social Media

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.

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