Market Wraps

Morning Wrap: S&P 500 extends pullback, ASX 200 performance on rate hike days

Tue 07 Feb 23, 8:22am (AEST)

ASX 200 futures are trading 1 point higher, up 0.01% as of 8:20 am AEDT.

The S&P 500 falls for a second-straight session, US hedge funds are aggressively covering their short positions, Goldman Sachs cuts its recession odds, Australian retail trading volumes posts largest non-pandemic fall in 12 years and how does the ASX 200 perform on interest rate decision days?

Let's dive in.

Overnight Summary

Tue 07 Feb 23, 8:22am (AEST)

Name Value Chg %
Major Indices
S&P 500 4,111 -0.61%
Dow Jones 33,891 -0.10%
NASDAQ Comp 11,887 -1.00%
Russell 2000 1,958 -1.40%
Country Indices
Canada 20,629 -0.62%
China 3,239 -0.76%
Germany 15,346 -0.84%
Hong Kong 21,222 -2.02%
India 60,507 -0.55%
Japan 27,694 +0.67%
United Kingdom 7,837 -0.82%
Name Value Chg %
Commodities (USD)
Gold 1,882.30 +0.30%
Iron Ore 125.26 -
Copper 4.038 -0.47%
WTI Oil 74.44 +1.43%
Currency
AUD/USD 0.6885 -0.56%
Cryptocurrency
Bitcoin (AUD) 33,408 -0.11%
Ethereum (AUD) 2,389 +1.04%
Miscellaneous
US 10 Yr T-bond 3.634 +2.89%
VIX 19 +6.00%

US Sectors

Tue 07 Feb 23, 8:22am (AEST)

Sector Chg %
Utilities +0.87%
Consumer Staples +0.02%
Consumer Discretionary -0.13%
Financials -0.14%
Industrials -0.21%
Energy -0.40%
Health Care -0.60%
Real Estate -0.68%
Materials -1.08%
Information Technology -1.22%
Communication Services -1.31%

S&P 500 Session Chart

SPX intraday
S&P 500 gaps down and chops around those levels through to close. (Source: TradingView)

MARKETS

  • Risk off start to the week amid a bounce in bond yields, dollar strength, overbought conditions and heightened geopolitical risks

  • Strong US jobs data flips Fed rate path risk to the upside says BoFA

  • US jobs data reflects a goldilocks moment, with strong payrolls growth alongside improving economic growth and disinflation says JPMorgan

  • Hedge funds covering short positions at faster pace than 2021 meme stock frenzy (FT)

  • Binance temporarily suspends US dollar withdrawals (Axios)

STOCKS

  • Dell cuts over 6,000 jobs due to plunging PC sales (Bloomberg)

  • Tesla raises price of Model Y in US in response to strong demand (CNBC)

EARNINGS

Key stats about US fourth quarter earnings, according to FactSet:

  • 50% of the S&P 500 has now handed down results. 

  • Of these, 70% of S&P 500 companies have reported a positive EPS surprise and 61% of S&P 500 companies have reported a positive revenue surprise

  • Blended earnings decline for the S&P 500 at the moment is -5.3%. If this holds, it will mark the first time the index has reported a year-over-year decline in earnings since Q3 2020

  • For Q1 2023, 37 S&P 500 companies have issued negative EPS guidance and 6 S&P 500 companies have issued positive EPS guidance

Big tech has failed to impress, notably:

  • Netflix, and Google have all announced layoffs while Microsoft’s disappointing revenue forecast fell flat with investors

  • Meta also reported a disappointing result but Zuckerberg also used that as a chance to initiate a $40 billion share buyback. Cue 23% pop

  • Bigger takeaway is the re-rate in earnings estimates from the sell-side

ECONOMY

  • German factory orders improve in December (Bloomberg)

  • Fed's Daly sees rates at 5.1% due to sticky inflation and strong jobs (Reuters)

  • ECB 's Holzmann says risk of over-tightening policy dwarfed by risk of doing too little (Bloomberg)

  • BoE's Mann says next move likely to be another 25bp hike (Bloomberg)

  • Goldman Sachs cuts recession odds on labor-market strength, improvement in business surveys (Bloomberg)

Industry ETFs

Tue 07 Feb 23, 8:22am (AEST)

Description Last Chg %
Commodities
Gold 173.46 +0.21%
Silver 20.57 -0.44%
Aluminum 53.5876 -1.10%
Lithium & Battery Tech 70.38 -1.79%
Steel 67.87 -1.90%
Uranium 22.16 -1.94%
Copper Miners 39.77 -2.29%
Strategic Metals 93.6 -2.67%
Nickel 37.31 -3.27%
Industrials
Aerospace & Defense 113.51 +0.71%
Global Jets 20.74 -0.68%
Healthcare
Biotechnology 136.59 -0.72%
Cannabis 12.71 -1.10%
Description Last Chg %
Cryptocurrency
Bitcoin 14.63 -1.57%
Renewables
Hydrogen 13.73 -0.66%
Solar 79.73 -0.71%
CleanTech 16.63 -1.02%
Technology
Electric Vehicles 24.53 -1.47%
Robotics & AI 24.55 -1.51%
Video Games/eSports 49.74 -1.59%
Semiconductor 426.09 -1.62%
Cybersecurity 23.1 -1.73%
E-commerce 20.54 -1.78%
Sports Betting/Gaming 16.78 -1.85%
FinTech 22.97 -2.31%
Cloud Computing 18.82 -2.39%

ASX Morning Brief

Data Insights: ASX 200 on rate hike days

The RBA interest rate decision is at 2:30 pm AEDT for a widely expected 25 bp hike. In Monday's Evening Wrap, I looked at how the ASX 200 performed on rate hike days in 2022.

Date

ASX 200 close

Versus expectations

3 May

-0.42%

Larger-than-expected

7 June

-1.53%

Larger-than-expected

5 July

+0.25%

In-line

2 August

+0.07%

In-line

6 September

-0.38%

In-line

4 October

3.48%

Smaller-than-expected

1 November

+1.65%

In-line

6 December

-0.78%

In-line

 

Sectors to watch

There wasn't anything too exciting overnight as US stocks continue to turn after a very strong January. Several ETFs that slumped on Monday extended declines, including Nickel (-3.27%), Rare Earth/Strategic Metals (-2.7%), Fintech (-2.35%) and Uranium (-1.9%).

Quick bites

Today’s quick bites is dedicated to yesterday’s local retail sales data. Retail volumes fell by 0.2% in the December quarter. On any other data point, a 0.2% fall is peanuts. But the 0.2% fall in retail volumes is the largest non-pandemic fall in 12 years. 

What does it prove? The RBA’s rate hikes are definitely having an effect on the consumer wallet. And the concerns about a retail recession (or at least, major downturn) may be completely warranted.

Australian retail trade volumes
Source: ABS, Indeed

Today's good reads

So are consumer staples any better than their discretionary counterparts given the above? Livewire’s Glenn Freeman has explored that question alongside Morningstar’s Johannes Faul in this sector deep-dive worth reading.

Key Events

ASX corporate actions occurring today:

  • Trading ex-div: None

  • Dividends paid: Perpetual (PPT) – $0.35, Advanced Share Registry (ASW) – $0.005, New Energy Solar (NEW) – $0.135

  • Listing: None

Economic calendar (AEDT):

  • 11:30 am: Australia Balance of Trade

  • 2:30 pm: RBA Interest Rate Decision

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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