Market Wraps

Morning wrap: Fed meeting batters US market, ASX to tumble

Thu 06 Jan 22, 8:40am (AEDT)

ASX Futures (SPI 200) imply the ASX will open 61 points lower, down -0.9%.

All three major US indices slumped overnight after the release of minutes from the latest Federal Open Market Committee meeting in December. 

Markets rolled over in response to a more hawkish tone by Fed officials, with plans for more interest rate hikes and cutting its current US$8.8 trillion balance sheet quicker than anticipated to help tackle surging inflation. 

Overnight Summary

Thu 06 Jan 22, 8:40am (AEDT)

Name Value Chg %
US Indices
S&P 500 4696.0498 -0.10%
Dow Jones 36,236 -0.47%
NASDAQ 100 15,081 -0.13%
Russell 2000 2,206 +0.56%
Country Indices
Canada 0 0.00%
China 0 0.00%
Germany 16,052 -1.35%
Hong Kong 23,073 +0.72%
India 0 0.00%
Japan 28,488 -2.88%
United Kingdom 0 0.00%
Name Value Chg %
Commodities (USD)
Gold 1,791.10 +0.11%
Iron Ore 126.21 -
Copper 4.352 -0.07%
WTI Oil 79.52 +0.08%
Currency
AUD/USD 0.7162 +0.04%
Cryptocurrency
Bitcoin 0 0.00%
Ethereum 0 0.00%
Miscellaneous
U.S. 10 Year Treasury 1.733 +1.64%
VIX 20 -0.61%

The Dow Jones and S&P 500 slid from all-time highs amid a broad-based selloff on Wall Street. 

Technology-related stocks were wrecked by the Fed’s shifted tone, with the Nasdaq down 2.8% year-to-date. 

A jump in the benchmark 10-year US Treasury yield was also contributing pressure on tech plays, as investors factor in the prospect of higher borrowing costs and more humble valuations for fast growing companies. 

The 10-year Treasury yield has surged almost 20 basis points to a 9-month high of 1.7% in the first three trading days of 2021.

The market is currently pricing in a 64% probability of 4 rate hikes by December 2022, according to the Fed fund futures expectations.


US Sectors

Thu 06 Jan 22, 8:40am (AEDT)

Sector Chg %
Communication Services 0.00
Consumer Discretionary 0.00
Consumer Staples 0.00
Energy 0.00
Financials 0.00
Health Care 0.00
Industrials 0.00
Information Technology 0.00
Materials 0.00
Real Estate 0.00
Utilities 0.00

The Materials sector topped the overnight leaderboard led by gains from construction companies like Caterpillar (+0.8%).

The US-listed counterparts of BHP (ASX: BHP) and Rio Tinto (ASX: RIO) outperformed the market, up 1.3% and 1.8% respectively. 

The prospect of higher interest rates drove investors away from risky pockets of the market. In turn, driving a better performance out of defensive sectors including consumer staples and utilities.

Financials slipped almost 1% despite the tailwinds that higher interest rates provide for their net interest margins. 

Technology stocks fell off a cliff amid efforts to reprice these high growth and richly valued companies. Headlining the losses was electric vehicle maker Rivian (-10.9%), bookmaker DraftKings (-8.6%) and brokerage firm RobinHood (-8.1%). 

Tech titans Amazon, Apple, Meta Platforms, Microsoft and Google fell between -1.6% and -4.4%. 


Industry ETFs

Thu 06 Jan 22, 8:40am (AEDT)

Description Last Chg %
Commodities
Aluminum 0 0.00%
Steel 54.83 -0.15%
Nickel 27.1 -0.22%
Lithium & Battery Tech 81.46 -0.47%
Copper Miners 36.91 -0.54%
Strategic Metals 112.19 -1.13%
Gold 169.06 -1.22%
Silver 21 -2.33%
Uranium 24.75 -5.50%
Industrials
Aerospace & Defense 105.19 +0.33%
Global Jets 21.71 0.00%
Healthcare
Biotechnology 142.5 -0.06%
Cannabis 5.73 -2.27%
Description Last Chg %
Cryptocurrency
Bitcoin 27.64 -1.30%
Renewables
Solar 71.21 -0.81%
CleanTech 16.72 -1.76%
Hydrogen 19.91 -2.71%
Technology
Cybersecurity 29.34 +0.92%
Semiconductor 532.67 +0.78%
E-commerce 25.89 +0.70%
Sports Betting/Gaming 23.57 +0.04%
Electric Vehicles 0 0.00%
Cloud Computing 24.43 -0.12%
Video Games/eSports 62.5 -0.24%
FinTech 37.53 -0.27%
Robotics & AI 34.8 -0.95%

ASX Sectors in play

ETF GAINERS

Aluminium could be a rare pocket of strength on Thursday amid supply concerns and higher power costs. Aluminium prices have edged higher to US$2,925/t and closer to 13-year highs of US$3,200 hit in October last year. 

Rising power costs and higher input costs in Europe has led to reduced output at Europe’s largest aluminium smelter. Also, production in China may face further headwinds after authorities asked local producers to slash emissions by 5% before 2025. 

  • Tight supply expectations and higher aluminium prices could see stocks like South 32 (ASX: S32) and Alumina (ASX: AWC) hold up better than most amid today’s selloff

ETF LOSERS

The sudden risk-off sentiment is driving investors away from speculative areas of the market, most notably cryptocurrencies. The Bitcoin Strategy ETF tumbled to a fresh all-time low after Bitcoin slumped 3.5% to 3-month lows of US$44,240. 

  • The renewed weakness for Bitcoin could mean further headwinds for local players like DigitalX (ASX: DCC

  • The Beta Shares Crypto Innovators ETF (ASX: CRYP) will likely follow through with Bitcoin’s overnight weakness 

After an electrifying start to the year, the Lithium & Battery ETF might take some heat out of ASX-listed players after sliding 4.8% overnight.

  • Lithium prices are expected to continue trending higher amid heightened demand, lackluster supply and increasing supply 

  • Lithium stocks are however, richly valued and at risk when it comes to the prospect of higher interest rates 

  • ASX-listed players like Pilbara Minerals (ASX: PLS) and Allkem (ASX: AKE) might take a breather from yesterday’s all-time highs

The Cloud ETF skidded to a fresh 7-month low amid the broad-based selloff taking place across technology stocks. 

  • Given the Nasdaq’s -3% overnight decline, investors should expect weakness across local technology stocks like Xero (ASX: XRO), WiseTech Global (ASX: WTC) and NextDC (ASX: NXT

Likewise, the FinTech ETF slid to 14-month lows. 

  • Block (formerly Square) tumbled 8.2% overnight, setting up Afterpay (ASX: APT) for sharp declines at open  


Today's events

Corporate Calendar

No relevant corporate events. Check for upcoming dividends here.

Economic Calendar

ecocal 060122

Upcoming Listings

No companies are expected to list on Thursday.

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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