Market Wraps

Morning Wrap: Hotter-than-expected inflation smashes US tech stocks, ASX set to fall

Thu 12 May 22, 8:38am (AEDT)

ASX Futures (SPI 200) imply the ASX will open 35 points lower, down -0.5%. 

US stocks sold off again after April inflation figures came in hotter-than-expected - triggering a reset in Fed rate hike expectations, tech stocks that are down 80-90% from all-time highs continue to get smashed, Shanghai has managed to control covid and oil prices rebound.

Let’s dive in.


Overnight Summary

Thu 12 May 22, 8:38am (AEDT)

Name Value Chg %
Major Indices
S&P 500 3,935 -1.65%
Dow Jones 31,834 -1.02%
NASDAQ Comp 11,364 -3.18%
Russell 2000 1,718 -2.48%
Country Indices
Canada 19,837 -0.27%
China 3,059 +0.75%
Germany 13,829 +2.17%
Hong Kong 19,825 +0.97%
India 54,088 -0.51%
Japan 26,214 +0.18%
United Kingdom 7,348 +1.44%
Name Value Chg %
Commodities (USD)
Gold 1,851.40 -0.12%
Iron Ore 134.26 -
Copper 4.211 +0.04%
WTI Oil 105.53 -0.17%
AUD/USD 0.6938 +0.09%
Bitcoin (AUD) 41,956 -5.61%
Ethereum (AUD) 3,030 -9.33%
US 10 Yr T-bond 2.921 -2.41%
VIX 33 -1.30%


  • The S&P 500 has logged its 2nd worst start to a year in history, down -17.4% in the first 90 trading days

    • The worst start in history was in 1932 where the S&P 500 was down -26.1%

    • From day 91 to year-end, the S&P 500 rose 15.3%. Year-to-date the S&P 500 was down -14.8%

  • Stocks sold off sharply amid growing concerns that the Fed is well behind the curve with fighting inflation

    • The hotter-than-expected inflation reading might make some Fed members feel uneasy with 50 bp rate hikes and put more aggressive plays on the table

  • 8 out of 11 US sectors were red 

  • Energy, utility and materials sectors were positive

  • Discretionary, tech and financials fell the most

  • 210 large caps were higher overnight but only 6 were from tech

  • 68% of US stocks declined

  • 76% of US stocks trade below their 200-day moving average (75% on Wednesday, 66% a week ago)

  • Disney (-2.3%, after hours: -2.5%) reported stronger-than-expected streaming numbers and a doubling of parks/experiences revenues

  • Netflix (-6.4%) - The New York Times reported the streaming giants plans to launch an ad-supported pricing tier and crack down on password sharing

  • Rivian Automotive (-9.6%, after hours: +4%) reported a slightly narrower-than-expected loss in the first quarter. The EV maker generated US$95m revenue and expects to produce 25,000 vehicles this year as it ramps up production 

  • Coinbase (-26.4%) fell again after saying it lost 2.2m crypto traders from its platform. Yes, a stock that was down -80% (from all-time highs) yesterday just fell another -26.4%


  • US consumer price index hit 8.3% year-on-year in April compared to expectations of a 8.1% gain

    • St Louis Fed President James Bullard said some of April's inflation numbers is ‘transitory’ but a ‘big chunk’ is likely persistent and will need a policy response

  • US core inflation - which removes volatile segments like food and energy prices, rose 6.2% in April against expectations of a 6.0% gain

  • China’s consumer price index rose 2.1% year-on-year in April, an uptick from March’s 1.5% increase

  • Shanghai has effectively curbed covid transmission risk, according to health authorities on Wednesday

    • Fewer and fewer positive cases have been detected outside quarantined areas

    • Authorities reiterate the city should stick to preventive and control measures as any relaxation could cause a rebound

  • US posted a US$308bn budget surplus in April thanks to higher tax receipts

    • The government is on track to register a budget deficit below US$1tn for the first time since the start of the pandemic 


  • Iron ore futures rose 3.0% to US$134.2 a tonne. The outlook for downstream steel demand in June was showing signs of improvement, according to Fastmarkets

  • Oil prices are pushing US$105 a barrel as China’s covid situation is showing signs of improvement and the US dollar eased after a hot inflation report

  • Gold initially sold off after the inflation data which will likely force the Fed to deliver a more hawkish view on interest rates 


US Sectors

Thu 12 May 22, 8:38am (AEDT)

Sector Chg %
Energy +1.37%
Utilities +0.77%
Materials +0.03%
Real Estate -0.16%
Consumer Staples -0.35%
Health Care -0.64%
Industrials -0.93%
Financials -1.00%
Communication Services -1.51%
Information Technology -3.30%
Consumer Discretionary -3.57%

Industry ETFs

Thu 12 May 22, 8:38am (AEDT)

Description Last Chg %
Silver 19.55 +1.64%
Copper Miners 35.2 +0.88%
Gold 171.42 +0.82%
Lithium & Battery Tech 64.28 +0.62%
Strategic Metals 87.79 -0.09%
Steel 56.24 -0.14%
Aluminum 58.5309 -0.82%
Nickel 37.295 -1.60%
Uranium 20.11 -3.18%
Aerospace & Defense 98.8 -1.09%
Global Jets 19.28 -2.39%
Biotechnology 110.14 -3.34%
Cannabis 3.56 -6.46%
Description Last Chg %
Bitcoin 19.44 -6.48%
Hydrogen 12.9 -2.87%
CleanTech 12.78 -3.29%
Solar 60.32 -4.19%
Video Games/eSports 46.34 -1.58%
Robotics & AI 21.69 -2.17%
Sports Betting/Gaming 15.44 -2.27%
Cybersecurity 25.27 -2.57%
Electric Vehicles 22.76 -2.68%
Semiconductor 397.1 -2.95%
Cloud Computing 17.27 -3.42%
E-commerce 16.98 -3.53%
FinTech 22.97 -4.70%

ASX Morning Brief

Did you buy the dip? Or the dip's dip? Or the dip's dip dip?

The market is in an awful state.

  • Tech stocks that are down 80-90% from all-time highs are still logging massive declines

  • Market breadth is terrible (76% of US stocks trade below 200-day)

  • Indices are slicing through key support areas like they don't exist

I love quoting US trader Mark Minervini because he's one of few figureheads that takes both a fundamental and technical view on markets, and most importantly, respects risk.

Minervini took a stab against brokers and analysts this morning, saying:

"The problem with these analysts that arrogantly cling onto their fundamental thesis until death do us part is: they are completely clueless about the discounting nature of markets."

Some of the ETFs and sectors that regularly feature in the Morning Wrap (e.g. uranium and lithium) are coming under fire despite a sound fundamental backdrop.

Without getting too wordy, respect risk and the broader state of the markets.

#1 Tech

Tech valuations continue to deflate at a fleeting pace.

US-listed BNPL rival Affirm fell another -19.5% overnight, ahead of its first quarter results tomorrow. And yes, a stock that's down -89% from last November highs just fell another double digit percentage.

Other notable US losers include:

  • Block -15.6%

  • Tesla -8.3%

  • Etsy -7.4%

  • Zoom -6.5%

  • Apple -5.2%

The weakness in US tech names and a potentially more aggressive Fed could once again flag a difficult session for the local tech sector.

#2 Energy

The S&P 500 Energy Sector outperformed, up 1.37% overnight.

Oil prices bounced back after briefly trading below the symbolic US$100 level.

"The oil market can’t justify oil prices below US$100 given the potential shock that will occur once the EU is able to move forward with their ban on Russian crude," said Oanda senior market analyst, Ed Moya.

"The oil market seems to have made up its mind and it will focus on how tight supplies will be and not the eventual demand destruction that might happen later this year."

USOIL 2022-05-12 08-09-06
WTI Crude Oil (Source: TradingView)

#3 Coal

Newcastle Coal Futures were unphased by the market's selloff, sitting around US$377 a tonne.

Leading US coal names like Consol Energy (-0.1%) and Arch Resources (2.5%) continue to sit around multi-year if not all-time highs.

NCF1! 2022-05-12 08-23-49
Newcastle Coal Futures (Source: TradingView)


Key Events

ASX corporate actions occurring today:

  • Ex-dividend: SSR

  • Dividends paid: KKC, MYR, NPR, SPY

  • Listing: None 


Other things of interest (AEST):

  • UK GDP Growth Rate (March Quarter) at 4:00 pm

  • US Producer Price Inflation (April) at 10:30 pm

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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