Market Wrap

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

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

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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 (AEST)

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

Thursday, 06 January 2022

Sector Chg %
Communication Services 0.00
Consumer Discretionary 0.00
Consumer Staples 0.00
Energy 0.00
Financials 0.00
Health Care 0.00
Sector Chg %
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

Thursday, 06 January 2022

Description Last Chg %
Commodities
Aluminum 0 0.00%
Copper Miners 36.91 -0.54%
Gold 169.06 -1.22%
Lithium & Battery Tech 81.46 -0.47%
Nickel 27.1 -0.22%
Strategic Metals 112.19 -1.13%
Steel 54.83 -0.15%
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
CleanTech 16.72 -1.76%
Hydrogen 19.91 -2.71%
Solar 71.21 -0.81%
Technology
Cloud Computing 24.43 -0.12%
Cybersecurity 29.34 +0.92%
E-commerce 25.89 +0.70%
Electric Vehicles 0 0.00%
FinTech 37.53 -0.27%
Robotics & AI 34.8 -0.95%
Semiconductor 532.67 +0.78%
Sports Betting/Gaming 23.57 +0.04%
Video Games/eSports 62.5 -0.24%

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

pmw ecocal 060122

 

Upcoming Listings

No companies are expected to list on Thursday.

Written By

Kerry Sun

Finance Writer & Social Media

Kerry holds a Bachelor of Commerce from Monash University and was Vice President of the University Network for Investing and Trading (UNIT). He is an avid swing trader, and drawn to breakouts and technical set ups. Outside of writing and trading, Kerry is a huge UFC fan, loves poker and bouldering.

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