Morning Wrap: Nasdaq jumps as Meta shares pop 23%, ASX to open within 1% of all-time highs

The Nasdaq surges more than 3%, Facebook-parent Meta announces an outsized US$40bn share buyback alongside better-than-expected fourth quarter revenue, US 30-year mortgage rates fall to a five-month low, OPEC+ agrees to maintain output levels as they wait for further Chinese data and three ASX companies with interesting charts.

Let's dive in.

S&P 500 SESSION CHART

Source: TradingView

MARKETS

• Bullish talking points for the market include: Positioning, technicals, disinflation, near peak Fed, soft landing, lower earnings bar, China reopening and no European energy crisis (StreetAccount) 

• Stocks and bonds rally after Powell struck a far less hawkish tone (Bloomberg)

• Share buybacks in January surged to $132bn, more than triple a year ago (Bloomberg)

• Retail traders account for 23% of volume in January, above 2021 peaks of 21% (Bloomberg)

• Markets ramp up Fed rate cut bets (Bloomberg)

STOCKS 

• ChatGPT hype leading to surge in demand for AI-related stocks (Bloomberg)

• Microsoft receives EU's list of worries about Activision deal (Bloomberg)

EARNINGS

• Less than 70% of S&P 500 companies that have reported Q4 earnings are beating consensus EPS estimates, according to FactSet

• The ‘low bar dynamic and broader risk-on narrative has helped put the focus on some relative bright spots’, says StreetAccount

• Positive earnings themes include: Accelerated cost-cutting, moderation in input cost pressure, easing supply chain constraints and inventory de-stocking

• Meta Platforms (+22.1%) staged its largest rally in almost a decade after Q4 revenue beat analyst expectations. The company has been aggressively cutting costs (including 11,000 layoffs) and revealed a $40bn buyback

  • Ad demand: "Consistent with our expectations Q4 revenue remained under pressure from weak advertising demand, which we believe continues to be impacted by the uncertain and volatile macroeconomic landscape." - Susan Li, Incoming CFO

• FedEx (+6.0%) said it will lay off 10% of its officers and directors as part of a broad cost cutting effort. More than 12,000 staff have been cut since June

ECONOMY

• Bank of England hiked rates by 50 basis points to 4.0%. The statement was much more hawkish than markets expected, but Governor Bailey didn't push back against a view that inflation had peaked in the UK

• European Central Bank, in contrast, hiked rates by 50 basis points as well but essentially committed to another one in March

• US initial jobless claims for the week to 28 January was 183,000, below consensus expectations for 200,000 and the lowest since April 2022

• US non-farm payrolls due tomorrow – expected to show 185,000 in job gains, which would be the weakest monthly gain since December 2020

• US 30-year mortgage rate falls to five-month low (NY Times)

• South Korean inflation unexpectedly accelerates (Reuters)

• German manufacturers still facing shortages of materials (Reuters)

• OPEC+ producers agree to maintain output levels (Bloomberg)

Talking Technicals: ASX200 – And then there was one …

ASX 200 chart (Source: Commsec)

There is only one level left for the bulls to overcome, and that is the 7600 level (region more precisely), which encompasses the all-time high at 7633. Looking at the chart, it seems the bulls are getting increasingly sheepish the closer they get to this level, but all it would take is some further signs of inflation slowing globally, and/or a better-than-expected local earnings season to blast through this resistance level.

‘Unlikely’, you say? Well, In January this year it was ‘unlikely’ the market would be here with the global economy on the brink of recession, whilst in October last year if you predicted the market being where it is now, you would have been called bat$#@% crazy. In that content, a break to all-time highs doesn’t seem so farfetched. Bring it on, I say.

Charts of the week

As a new instalment to the Morning Wrap, I will be producing my stocks Charts of the Week. These are the best-looking or most interesting charts I can see, based on the technical analysis tools I have used throughout my career as a trader. The tools that I use are fairly rudimentary and comprise a multiple moving average system, key levels (support/resistance/round numbers), volume, RSI, and continuation patterns – all the key ingredients for a trend trader. These combination of these tools in identifying trending stocks, was taught to me by Stuart McPhee and used in my previous employment for picking stocks. And whilst I won’t be giving outright recommendations here, I will be talking about the technical characteristics that make for strongly trending equities. I hope you enjoy the new segment. If you like stocks you should, if you like technical analysis, you will.

Please note the analysis below is for educational purposes only. These are not meant as recommendations. As always, do your own research. Any discussion of past performance is for illustrative purposes only, and past performance is not a reliable indicator of future return.

STOCK #1 – Arafura Rare Earths (ARU)

Source: Commsec

Whilst ARU occupies the smaller and more speculative end of the market, it also has one of the best-looking charts on the ASX from a trend following perspective. The bulls were finally able to break the price above the 50c round number with conviction towards the end of last month (previous attempts had stalled out), and have since powered the stock north of 60c. There has been uptrend support since November last year, which has coincided with increased volume – showing more and more people interested in the stock. Now trading at all-time highs, the stock is flying in ‘clean air’.

STOCK #2 – Fisher and Paykal Healthcare Corp (FPH)

Source: Commsec

After spending around three-quarters of a year bottoming out, FPH has come to life since November/December last year. The price action has formed an uptrend (series of higher lows and higher highs), there is uptrend support, the EMAs are showing bullish momentum across multiple timeframes, we see uptrend support, and just recently volumes have been starting to pick up. Furthermore, the RSI is not overcooked. There is plenty of bullish technical evidence for FPH right now.

STOCK #3 – Iluka Resources (ILU)

(Source: Commsec)

Whilst ILU does not look as explosive as the other two stock featured, it is no less interesting. And that’s because, after multiple attempts over an extended period, the price action has finally broken above the $11 level. What’s more, is that the price action has been back to retest and confirm the break higher. The latest rally has also come increased volume and again, the RSI is not overcooked. Whilst it is still early doors, the current evidence suggests that the break could be sustainable. Time will tell.

Great reads

If you liked that analysis, be sure to check out the article by my colleague and fellow technical analysis boffin, Kerry Sun. Yesterday he wrote a superb piece called 13 stocks making 52-week highs (and why it matters). Be sure to check it out.

Feedback: We'd love to hear from you

Hello! Kerry here with a quick update. Hans and I will be looking after the Wrap from Monday to Thursday, and Chris will be taking the reigns on Friday.

In 2023, we've made some small tweaks to the Wrap.

• The 'first-half' now includes the S&P 500 intraday chart and overnight news has become more headline oriented

• The 'second half' has become more focused on fostering ideas and includes various sub-headers covering stuff like technicals, sectors to watch, macro and broker stuff

Last time I asked for feedback about sectors to watch, I received way more emails than expected. It was awesome. We'd love to hear your thoughts again about the above changes, what you like, what you don't like, what needs work, what's missing etc.

You can contact me here: [email protected].

ASX corporate actions occurring today:

• Trading ex-div: Advanced Share Registry (ASW) – $0.005, Qualitas Real Estate Income Fund (QRI) – $0.011 

• Dividends paid: Select Harvest (SHV) – $0.02 

• Listing: None

Economic calendar (AEDT):

• 11:30 am: Australian Home Loans

• 12:45 pm: China Caixin Services PMI

• 12:30 am: US Unemployment Rate

• 2:00 am: US ISM Non-manufacturing PMI