Market Wraps

Morning Wrap: Defensive stocks lead Wall St higher, Goldman loads up on lithium, ASX to rise

Mon 21 Nov 22, 8:31am (AEST)

ASX Futures (SPI 200) imply the ASX 200 will open 24 points higher, up 0.33%.

Defensive and value sectors outperformed on Wall Street, Fed policymakers stay hawkish, oil extends its selloff as COVID cases surge in China and Goldman Sachs raises its stake in a US-listed lithium miner.

Let's dive in.

Overnight Summary

Mon 21 Nov 22, 8:31am (AEST)

Name Value Chg %
Major Indices
S&P 500 3,965 +0.48%
Dow Jones 33,746 +0.59%
NASDAQ Comp 11,146 +0.01%
Russell 2000 1,850 +0.58%
Country Indices
Canada 19,981 +0.48%
China 3,097 -0.58%
Germany 14,432 +1.16%
Hong Kong 17,993 -0.29%
India 61,663 -0.14%
Japan 27,900 -0.11%
United Kingdom 7,386 +0.53%
Name Value Chg %
Commodities (USD)
Gold 1,752.00 -0.62%
Iron Ore 92.89 -
Copper 3.638 -1.36%
WTI Oil 80.11 -1.87%
Currency
AUD/USD 0.6667 -0.07%
Cryptocurrency
Bitcoin (AUD) 24,779 -1.35%
Ethereum (AUD) 1,763 -3.44%
Miscellaneous
US 10 Yr T-bond 3.818 +1.14%
VIX 23 -3.38%

US Sectors

Mon 21 Nov 22, 8:31am (AEST)

Sector Chg %
Utilities +2.00%
Real Estate +1.29%
Health Care +1.20%
Consumer Staples +1.04%
Financials +0.77%
Industrials +0.71%
Materials +0.65%
Information Technology +0.13%
Consumer Discretionary +0.04%
Communication Services -0.35%
Energy -0.90%

MARKETS

US markets were rather choppy as investors refused to let go of the Fed pivot narrative despite policymakers sticking to their hawkish script. The Fed’s Collins said a 75 bp rate hike is still on the table as there is no ‘clear, significant evidence’ that inflation is coming down. The Nasdaq rallied 1.0% as the market opened, quickly faded to session lows of -0.77% and closed around breakeven. While blue-chip Dow continued to outperform. European markets rallied, led by the German DAX and pan-European Stoxx 600.

  • Defensive sectors led to the upside including Staples, Real Estate and Utilities

  • Risk sectors underperformed including Tech, Discretionary and Communication Services

  • Energy continues to struggle in the face of falling oil prices 

  • 56% of US stocks declined 

  • 46% of US stocks trade below their 200-day moving average (48% last Friday, 44% a week ago)

STOCKS

Nothing too exciting on the stock front. Instead, here are some interesting quotes from last Friday.

  • Expensive cash: “We have to live with the reality that investors expect us to show a little bit more results here-and-now rather than talking about the future .. money isn’t as cheap as it was a year ago. It doesn’t allow you to invest as much into the future as you’d like to.” - Klarna CEO Sebastian Siemiatkowski

  • Retail markdowns: "Consolidated gross margin rate decreased 89 basis points. More than half of the decline was due to markdowns and sales mix in the U.S .. Notably, the rate of decline in gross margin improved from 2Q as inventory remediation efforts are progressing.” - Walmart CFO John David Rainey 

  • Letter to Google: “.. the cost base of Alphabet is too high and management needs to take aggressive action. The company has too many employees and the cost per employee is too high." - TCI Fund letter to Google

WORLD NEWS 

  • UK faces record hit to living standards as tax hikes loom (Reuters)

  • Trump snubs Twitter after ex-President's account was reinstated (Reuters)

  • China's JD.com says worst is over for consumer demand (Reuters)

ECONOMY

UK retail sales rose 0.6% month-on-month in October from -1.5% in September.

  • Beat analyst expectations of 0.3%

  • Year-on-year, sales fell -6.1% from -6.8% in September 

  • Retail volumes are still -0.6% below pre-pandemic levels, according to the Office for National Statistics 

Bank of Boston Fed President Susan Collins comments:

  • "Seventy-five still is on the table; I think it's important to say that as well."

  • "I would say that some of the data that we've seen since then has increased at the top of where I think we might need to go."

  • "We're starting to see some promising signs, although certainly we're not seeing clear consistent evidence of the kind of softening in labor markets, the kind of dynamic that we would like to see and service sector prices are still very high.”

  • "I do not see clear, significant evidence that the overall inflation rate is coming down at this point."

Atlanta Fed President Raphael Bostic comments:

  • "If the economy proceeds as I expect, I believe that 75 to 100 basis points of additional tightening will be warranted.”

  • "Being more cautious as policy moves deeper into restrictive territory seems prudent.”

COMMODITIES

Iron ore futures fell -0.3% to US$93.65 a tonne.

  • Optimism around China’s property rescue plans helped the steelmaking ingredient post a third straight week of gains, up 3.8% last week

Oil extended its aggressive selloff, down -7.7% in the last three sessions. 

  • “Crude demand destruction and technical selling sent oil prices sharply lower this week.  It was a bloodbath for energy bulls, as China’s COVID situation continues to head in the wrong direction and US economic activity continues to soften.” - Oanda senior market analyst, Ed Moya 

  • “Eventually oil will stabilise, but right now no one wants to try to guess the bottom.”

Gold also extended its losing streak, down -1.6% in the last three days.

  • “Gold prices are slumping after multiple Fed members continue to push back on the idea that they will soon be ready to pause their tightening cycle. The economic data is telling us a mixed picture right now, but large parts of the labor market and factory activity resilience suggests inflation could be sticky next quarter.” - Moya

Other commodities of interest:

  • Newcastle coal futures +5.3% to US$337 a tonne

Industry ETFs

Mon 21 Nov 22, 8:31am (AEST)

Description Last Chg %
Commodities
Nickel 33.68 +1.29%
Uranium 20.48 +0.29%
Silver 19.29 -0.21%
Steel 59.1 -0.54%
Gold 163.92 -0.69%
Strategic Metals 90.6 -0.72%
Aluminum 50.6151 -0.82%
Copper Miners 33.74 -0.83%
Lithium & Battery Tech 68.49 -1.20%
Industrials
Aerospace & Defense 109.01 +0.75%
Global Jets 18.12 +0.33%
Healthcare
Biotechnology 133.28 +0.35%
Cannabis 15.25 -1.84%
Description Last Chg %
Cryptocurrency
Bitcoin 10.16 -0.20%
Renewables
Hydrogen 11.85 -0.17%
CleanTech 15.96 -0.69%
Solar 82.62 -1.34%
Technology
Cybersecurity 22.9 +0.57%
Electric Vehicles 22.39 +0.40%
Sports Betting/Gaming 15.47 +0.26%
Semiconductor 371.87 +0.22%
Robotics & AI 20.99 -0.38%
FinTech 20.17 -0.79%
Cloud Computing 15.99 -1.06%
Video Games/eSports 44.26 -1.11%
E-commerce 16.47 -1.34%

ASX Morning Brief

US stocks seem to be adamant on defending recent gains. A few risk-led sessions from last week saw the Nasdaq outperform but the Dow has now found its groove again.

Is capital continuing to rotate back into these defensive and value sectors like Utilities, Real Estate, Health Care and Staples? Perhaps that's something to take note of as the market works its way through the bear market.

Dow Jones chart
Dow Jones chart (Source: TradingView)

The ASX 200 is set to open 0.33% higher, which suggests a push above the recent trading range and a fresh five month high.

XJO chart
XJO chart (Source: TradingView)

There weren't too many exciting catalysts or headlines overnight, so the sectors to watch section is going to be rather dull. Overall, the market is in a rather comfortable place. There was hardly any pull back after the recent rally, the VIX is falling and bond yields/US dollar appear rather top-heavy.

FOMC minutes will be released on Thursday morning - which might be the next market moving catalyst to look out for.

Sectors to watch

Our overnight ETF watchlist was rather choppy and consistent with the theme of value outperforming growth. If you're unfamiliar with how the overnight ETF watchlist works and what's on it, you can check out our explainer here.

Lithium: Nothing high alert worthy, just some interesting goss. We know that Goldman Sachs released a note last week suggesting the lithium market will enter a surplus in 2023. At the same time, they boosted their ownership in Lithium Americas by 48.1% or US$9.8m, according to Fintel.

Key Events

Stocks going ex-dividend over the next week:

  • Mon:Elders (ELD)

  • Tue: Amcor (AMC), Sunland Group (SDG), Tamawood (TWD)

  • Wed: Embark Education (EVO), US Student Housing REIT (USQ)

  • Thu: ALS (ALQ), Nufarm (NUF), Australian Vintage (AVG), TerraCom (TER)

  • Fri: None

ASX corporate actions occurring today:

  • Dividends paid: Reckon (RKN)

  •  Listing: Tiger Tasman Minerals (T1G)

Other things of interest (AEDT):

  • 12:15 pm: China loan prime rate

  • 6:00 pm: Germany producer price index

  • 12:30 am: Chicago Fed national activity index 

Written By

Kerry Sun

Content Strategist

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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