Market Wrap

Morning Wrap: Inflation chips away at US retailer earnings, Wall Street plunges, ASX set to fall

Thu 19 May 22, 8:33am (AEST)

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ASX Futures (SPI 200) imply the ASX will open 126 points lower, down -1.78%.

What a trainwreck of an overnight session. The Dow Jones and S&P 500 booked their worst declines in two years, cost inflation is eating away at US retailer profits, commodity prices dipped as risk appetite fell off a cliff and US Treasury Secretary Janet Yellen warns of greater stagnation risks. 

Let’s dive in.

Overnight summary

Thu 19 May 22, 8:33am (AEST)

Name Value Chg %
Major Indices
S&P 500 3,924 -4.04%
Dow Jones 31,490 -3.57%
NASDAQ Comp 11,418 -4.73%
Russell 2000 1,775 -3.56%
Country Indices
Canada 20,101 -1.90%
China 3,086 -0.25%
Germany 14,008 -1.26%
Hong Kong 20,644 +0.20%
India 54,209 -0.20%
Japan 26,911 +0.94%
United Kingdom 7,438 -1.07%
Name Value Chg %
Commodities (USD)
Gold 1,815.10 -0.04%
Iron Ore 130.81 -
Copper 4.157 -0.51%
WTI Oil 109.44 -0.14%
AUD/USD 0.6961 +0.12%
Bitcoin (AUD) 41,837 -5.10%
Ethereum (AUD) 2,811 -6.84%
US 10 Yr T-bond 2.886 -2.76%
VIX 31 +18.62%


  • Wall St erased this week’s hard earned gains after major US retailers reported weaker-than-expected profits

    • Investors and economists pay close attention to Walmart earnings for clues about how the American consumer is holding up

  • The S&P 500 is down -17.7% in the first 95 trading days of 2022, the 2nd worst start to the year in history

    • The worst was a -32.9% drawdown in 1932

    • In the 1932 selloff, from day 96 to year-end, the S&P 500 was up 27%. (Still finished the year -14.8%)

  • All 11 US sectors were red

  • All sectors fell at least -2.6% except utilities 

  • Discretionary, staples and tech fell the most

  • 80% of US stocks declined

  • 74% of US stocks trade below their 200-day moving average (70% on Wednesday, 76% a week ago) 

  • Target (-24.9%) earnings were well-below expectations as the retailer was slammed by freight costs, higher markdowns and lower-than-expected sales

  • Walmart (-6.8%) extended losses after falling -11.4% on Wednesday. Higher fuel prices, labour costs and aggressive inventory levels weighed on profits

  • Lowe’s (-5.3%) missed Wall St revenue expectations as cooler weather hurt demand for outdoor do-it-yourself projects. The home improvement retailer managed to meet profit forecasts and reaffirmed its full-year outlook

    • “I’m not saying the macro environment does not matter. I’m saying that for home improvement we are not seeing any material impact,” said CEO Marvin Ellison

  • Cisco (-4.4%, after hours: -12.1%) missed revenue expectations and issued an unexpected decline in its earnings outlook. Cisco said it expects fourth quarter revenue to fall between -1% to -5.5% vs. estimates of a 5.7% gain


  • US new home construction fell -0.2% in April

    • Marks a consecutive three-month decline

    • Housing permits fell -3.2%

  • US housing market beginning to show cracks. In May:

    • MBA (Mortgage Bankers Association) mortgage applications -11%

    • Purchase index -11.9% 

    • Refinancing index -9.5%

    • 30-year mortgage rate at 5.49%  

  • UK inflation rose 9% year-on-year in April

    • Highest reading since Margaret Thatcher was Prime Minister 40 years ago

    • Economists had expected a 9.1% gain

    • The increase is more than double the pace of wage growth, likely to squeeze consumers in the near-term

  • Canada inflation hit 6.8% in April

    • Highest reading since 1991


  • Iron ore prices fell sharply, breaking below US$130/t

  • Oil prices dipped as persistent pricing pressures could lead to weaker demand in the short-to-medium term

  • Gold prices stood tall as investors fled to safe haven assets


US Sectors

Thursday, 19 May 2022

Sector Chg %
Communication Services -3.41%
Consumer Discretionary -6.60%
Consumer Staples -6.38%
Energy -2.75%
Financials -2.80%
Health Care -2.60%
Sector Chg %
Industrials -3.75%
Information Technology -4.74%
Materials -3.18%
Real Estate -2.95%
Utilities -1.03%

Industry ETFs

Thursday, 19 May 2022

Description Last Chg %
Aluminum 60.86 -2.27%
Copper Miners 37.81 -3.15%
Gold 169.33 +0.05%
Lithium & Battery Tech 70.34 -1.82%
Nickel 34.96 -1.14%
Strategic Metals 96.75 -2.71%
Steel 59.17 -3.67%
Silver 19.92 -0.95%
Uranium 21.38 -4.63%
Aerospace & Defense 100.89 -2.51%
Global Jets 20.2 -3.42%
Biotechnology 116.52 -2.54%
Cannabis 3.9 -5.02%
Description Last Chg %
Bitcoin 18.67 -2.89%
CleanTech 13.4 -0.45%
Hydrogen 13.3 -1.13%
Solar 63.99 -0.23%
Cloud Computing 17.3 -4.22%
Cybersecurity 25.4 -4.09%
E-commerce 17.74 -5.36%
Electric Vehicles 23.91 -3.18%
FinTech 24.12 -3.69%
Robotics & AI 23 -2.74%
Semiconductor 420.79 -5.04%
Sports Betting/Gaming 16.52 -3.15%
Video Games/eSports 50.68 -2.01%

ASX Sectors to watch

We all went to bed feeling bullish about a 4-day win streak for the ASX.

Now, we wake up to absolute carnage.

#1 Retailers

It will be interesting to see whether or not weak earnings from Target, Walmart and Lowe's will have an impact on local retailers.

Wesfarmers (ASX: WES) arguably has the most similarities with the three US retailers above, given its ownership of Target/Kmart, Officeworks and Bunnings.

Its worth noting that a lot of ASX retail stocks have already faced significant year-to-date declines, including:

By comparison, Target was down just -7% before the -25% crash overnight.

#2 Uranium

The Global X Uranium ETF dipped -4.6% overnight.

Uranium prices are back to last September levels of US$48/lb, a sharp U-turn from April 15 highs of almost US$65/lb.

Sprott has also been rather quiet in the past few weeks with its uranium purchases.

Despite the strong medium-to-long term outlook for uranium and nuclear adoption, its interesting to see that its near-term performance hinges on one buyer taking supply off the market and pushing up prices.

2022-05-19 08 06 13-Uranium - 2022 Data - 1988-2021 Historical - 2023 Forecast - Price - Quote - Cha
Source: TradingEconomics

#3 Tech

Its not a real selloff if tech isn't getting smashed.

The Nasdaq headlined losses, down a grueling -4.7%. Mega cap names fell heavily, including:

  • Amazon -7.2%

  • Tesla -6.8%

  • Apple -5.6%

  • Meta -5.1%

  • Microsoft -4.8%

The S&P/ASX 200 Info Tech Index managed to rally 1.9% on Wednesday.

I wonder what's in store for Thursday.

#4 Energy

Oil struggled to withstanding the risk-off environment, down almost -4% overnight to US$109 a barrel.

Surging inflation in the UK and persistent pricing pressures is leading to a less optimistic outlook for oil demand.

"China’s zero COVID policy will remain intact and that is why the crude demand outlook will get downgraded if more outbreaks occur. Beijing saw 69 new cases and Tianjin’s Binhai area saw two buildings put into lockdown," said Oanda senior market analyst, Ed Moya.

"The EIA crude oil inventory showed a surprise draw and a small recovery of US production. The production increase is not matching the steady rise in rig counts, which suggests this market will remain tight."

#5 Other

Other honorable ETF mentions include:

  • Steel -3.7%

  • Jets -3.4%

  • Copper -3.2%

  • Rare Earth/Strategic Metals -2.7%


Today's events

ASX corporate actions occurring today:

  • Ex-dividend: PDL, USQ, VUK, WBC

  • Dividends paid: None

  • Listing: None


Other things of interest (AEST):

  • Australia Unemployment Rate (April) at 11:30 am

  • US Philadelphia Fed Manufacturing Index (May) at 10:30 pm

  • US Initial Jobless Claims (week ending May 14) at 10:30 pm 


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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