Market Wraps

Morning Wrap: S&P 500 fades early gains, Apple hits June 2021 lows, ASX set to bounce

Wed 04 Jan 23, 8:35am (AEST)

ASX 200 futures are up 0.85%, or 58 points, as of 8:30 am AEDT.

New year, same stories but with a twist. China’s finally beginning to reopen but travel restrictions imposed on its citizens by other nations are already creating rumbles in Beijing. German inflation continues to soar and the S&P Global Manufacturing PMI is now at a 30-month low, suggesting that the worst is not over yet (at least in the data). And in what must be some sort of 2022 reversal wake up moment, energy stocks led the S&P 500’s declines.

Let’s go. 

Overnight Summary

Wed 04 Jan 23, 8:35am (AEST)

Name Value Chg %
Major Indices
S&P 500 3,824 -0.40%
Dow Jones 33,136 -0.03%
NASDAQ Comp 10,387 -0.76%
Russell 2000 1,750 -0.61%
Country Indices
Canada 19,444 +0.30%
China 3,117 +0.88%
Germany 14,182 +0.80%
Hong Kong 20,145 +1.84%
India 61,294 +0.21%
Japan 26,095 +0.00%
United Kingdom 7,554 +1.37%
Name Value Chg %
Commodities (USD)
Gold 1,842.90 +0.91%
Iron Ore 117.15 -
Copper 3.761 -1.30%
WTI Oil 76.74 -4.39%
Currency
AUD/USD 0.6728 -1.08%
Cryptocurrency
Bitcoin (AUD) 24,777 -1.03%
Ethereum (AUD) 1,800 -1.29%
Miscellaneous
US 10 Yr T-bond 3.793 -2.22%
VIX 23 +5.31%

MARKETS

US equity futures were pointing higher in Asian trade yesterday but bright-eyed traders had other plans. The S&P 500 was negative by 10:00 am ET (30 minutes after the opening bell) and languished lower thereafter. The lower move comes ahead of two key risk events for investors - the US Federal Reserve’s latest meeting minutes and the stateside jobs report. 

Unlike what we saw stateside, major equity benchmarks across Europe finished the first session higher.

  • Only four of the S&P 500’s 11 sectors finished the trading day higher with communication services and financials leading the charge

  • Energy was the worst performing S&P 500 sector, with some big names like ConocoPhillips and Halliburton leading the declines

  • US bonds were heavily bought overnight (apparently, the “buy bonds” chorus has started). The 10-year yield now fetches 3.79%, up nine basis points from the prior trading session

  • US Dollar Index inched 1% higher overnight, supporting the risk-off tone on markets

  • Spot gold prices are sitting at their highest since June while silver prices have not been this high since April 2021

  • 48% of stocks declined

  • 53% of stocks trade below their 200-day moving average (52% on Tuesday, 55% a week ago)

STOCKS

Apple (AAPL) fell more than 4%, threatening to close below a $2 trillion market value for the first time since 2021.

Tesla (TSLA) fell more than 13% on Tuesday, after falling 65% for 2022 after it reported lower-than-expected deliveries for the quarter and year.

But it’s not all bad news for Elon Musk. Per CNBC reporting, SpaceX has raised an extra $750 million in a funding round. By their calculations, the company is now worth $137 billion. 

Casino stocks were rising on the prospect of China's Macau gambling mecca reopening after COVID-related shutdowns and restrictions. Wynn Resorts Limited shares were up 2%, while Las Vegas Sands shares were up 1.7%. The earlier of these names was also upgraded by Wells Fargo’s equity broking team.

WORLD NEWS

ECONOMY

Global manufacturing remains in contraction for the fourth month running, with the S&P Global Manufacturing PMI falling to a 30-month low of 48.6 in December.

S&P Global Manufacturing PMI December 2022

German inflation cooled on a year-on-year basis but is still up 8.6% from 12 months ago. The month-on-month headline figure contracted by 0.8% in December.

Germany Inflation December 2022

Industry ETFs

Wed 04 Jan 23, 8:35am (AEST)

Description Last Chg %
Commodities
Nickel 39.7253 +4.47%
Copper Miners 35.43 +0.93%
Gold 169.64 +0.84%
Silver 22.02 +0.14%
Uranium 20.08 -0.30%
Lithium & Battery Tech 58.61 -1.14%
Steel 57.84 -1.56%
Strategic Metals 76.16 -2.07%
Aluminum 50.16 -2.75%
Industrials
Aerospace & Defense 111.86 -0.30%
Global Jets 17.08 -0.64%
Healthcare
Cannabis 11.13 -0.36%
Biotechnology 131.29 -0.95%
Description Last Chg %
Cryptocurrency
Bitcoin 10.43 +0.58%
Renewables
Hydrogen 10.88 +0.18%
CleanTech 14.61 -0.73%
Solar 72.94 -1.06%
Technology
E-commerce 16.19 +1.24%
Video Games/eSports 42.86 +1.19%
Cloud Computing 16.03 +0.94%
Sports Betting/Gaming 14.31 +0.91%
Robotics & AI 20.55 +0.49%
Electric Vehicles 19.87 +0.25%
FinTech 19.25 +0.10%
Cybersecurity 20.75 -0.14%
Semiconductor 347.98 -0.97%

ASX Morning Brief

Hello! Kerry here. Everything above this line was written by my colleague Hans from Livewire. He'll be looking after the Morning Wrap while I'm on leave from 9-20 January.

What an abysmal start to the year for both markets.

The ASX 200 spent most of Tuesday selling off after a brief 0.46% rally at the open. The market closed near a two month low, down -1.31%. Similarly, the S&P 500 briefly rallied 1.01% overnight but closed the session -0.4% lower.

Volatility and distribution remains heavy – which is quite a precarious sign of an unhealthy market.

Sectors to watch

Nickel: Nickel futures rose 3.7% overnight, according to the Bloomberg Nickel Subindex – which tracks a series of nickel futures. Looking at the chart below, nickel has rallied into previous highs and formed some higher highs along the way. Still, the bearish price action of the broader market and ongoing weakness across battery metal stocks has outweighed the strength in nickel prices. Names like Mincor, Centaurus Metals and Panoramic Resources have mostly drifted lower in recent weeks.

Nickel futures
Bloomberg Nickel Subindex (Source: TradingView)

Gold: Spot prices rallied 0.7% to US$1,836 while the Australian Dollar fell -1.0% to 0.67 cents. This means that gold is trading around a 6 month high in US dollars but it also hit a fresh 9 month high in Aussie dollar terms. The Fed minutes on Thursday morning could be a catalyst to watch out for. In short: the market is currently pricing in a terminal rate of under 5.0% but the Fed has been adamant on bringing rates above 5.0%.

Gold prices
Gold in US dollars (top) and Australian Dollar (bottom)

Lithium: Tesla’s disappointing Q4 earnings alongside the broader market weakness triggered another fall for local lithium names on Tuesday. This is mostly yesterday's news but still something to take note of. Interesting comments from Bernstein analysts below:

“Despite aggressive price discounting, Tesla reported Q4 delivery of 405%, up 31% year-on-year and below consensus expectations of 418k … We believe that Tesla is facing a significant demand problem … We expect demand challenges to persist in 2023, particularly since no Tesla models appear to currently qualify for any IRA rebates except the 7-seat Model Y,” said AB Bernstein analysts in a note on Tuesday.

Tech: Junky US tech names continued to fall overnight, including Affirm (-5.8%), Etsy (-5.2%), Coinbase (-5.1%) and Draftkings (-2.9%). There was also some selling across heavyweight names like Apple (-3.7%) and Nvidia (-2.1%). Does this spell more weakness for local names?

Key Events

ASX corporate actions occurring today:

  • Dividends paid: None

  •  Listing: None

Economic calendar:

  • 6:45 pm: France inflation rate

  • 2:00 am: US ISM manufacturing PMI

  • 6:00 am: FOMC minutes

Written By

Hans Lee

Senior Editor

Hans is one of the Senior Editors at Livewire Markets and Market Index. He created Signal or Noise and leads the team's coverage of the global economy and fixed income markets.

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