Morning Wrap: S&P 500 higher ahead of US inflation data and earnings season, ASX to rise

ASX 200 futures are trading 9 points higher, up 0.12% as of 8:20 am AEDT.

Welcome back – Hope everyone enjoyed some time off. US markets eked out a small gain in the last two sessions, Costco posts its lowest sales growth in almost three years, US first quarter earnings season will kick off this week and 87% of S&P 500 market cap will report by the week ending May 5, US commercial bank lending flags largest decline on record in the second half of March and all eyes on US inflation this Thursday.

Let's dive in.

S&P 500 SESSION CHART

S&P 500 recoups early losses in the last two sessions (Source: TradingView)

MARKETS

• US markets were open on Monday and last Thursday

• S&P 500 edged higher both days amid choppy trade and weak opens

• US 2-year Treasury yield rose 18 bps since Thursday to 4.01%

• Barclays sees investors pouring US$1.5tn more into safe money funds (Bloomberg)

• US consumer prices seen staying firm, testing the Fed (Bloomberg)

• 20 megacap stocks account for ~90% of S&P 500's gains this year (FT)

• Swaps markets pricing ~80% chance of a 25 bp hike at May meeting (Bloomberg)

STOCKS

• Costco falls on lowest US sales growth in almost three years (Bloomberg)

• Google, Amazon mass layoffs in Europe stalled due to labor protections (Bloomberg)

• First Republic to suspend dividend payments on preferred stock (Reuters)

• Tesla announces plans for Shanghai Megapack energy storage system plant (FT)

• Taiwan Semiconductor Manufacturing misses sales estimates for the second quarter in a row and provides a cautious outlook (Bloomberg)

EARNINGS

US earnings season will begin to ramp up this week. On Friday, we will see first quarter results from JPMorgan, Wells Fargo, BlackRock and Citi. S&P 500 companies are expected to report a 6.8% year-on-year decline in first quarter earnings, the biggest decline since the second quarter of 2020, according to FactSet. In terms of reporting dates: 

Source: Goldman Sachs Global Investment Research

ECONOMY

• US commercial bank lending falls US$105bn second half of March, the biggest decline on record (Bloomberg)

• US commercial real estate faces big refinancing risk with ~US$1.5tn of debt due for repayment before 2025; office, retail property valuations could fall 40% (Bloomberg)

• US economy still churning out jobs as brisk clip, wage pressure subsiding (Reuters)

• US weekly jobless claims drop, revisions suggest labor market looser (Reuters)

• India unexpectedly holds rates, keeps door open for more hikes (Reuters)

• China March services activity accelerates on new orders (Reuters)

• Global PC shipments fell 29% year-on-year in Q1(IDC)

• Food prices are new inflation threat for governments and central banks (WSJ)

Deeper Dive

Economic Data: A Heavy Week

It's a pretty stacked week for economic data, including (AEST):

• Wed 10:30 pm: US inflation rate

• Thu 4:00 am: FOMC minutes

• Thu 10:30 pm: US PPI

• Fri 10:30 pm: US Retail Sales

US inflation was 6.0% year-on-year in February and consensus expects that figure to ease to 5.2% in March. Goldman Sachs expects a 5.1% print and some key areas to look out for include:

• Headline inflation forecast to rise 0.13% month-on-month (vs. consensus +0.20%) reflecting declining energy prices and higher food prices

• A pullback in travel categories (airfares -2.0%, hotel lodging -0.5%)

• Modest declines in apparel and electronic prices on the back of slowing sales and increased discounting

• Modest increase in used (+0.5%) and new (+0.2%) car prices, reflecting rebounding auction prices

• Another hot shelter reading albeit sequentially slower than in February (we estimate rent +0.73% and OER +0.65%) as weakness in new rental pricing begins to offset continued upward pressure on renewing leases

Talking Technicals: Into Resistance

Nasdaq 100, Treasury bonds and gold starting to fatigue as they rally into key resistance areas aka 'head banging'.

Nasdaq 100 (Source: TradingView)

Treasury bond futures (Source: TradingView)

Gold (Source: TradingView)

Sectors to Watch

Not a whole lot happened in the last two days. Most of our sector ETFs were marginally higher after being sold off last Monday through to Wednesday.

Gold: Gold is on a four-day losing streak after peaking at US$2,032 last Wednesday. Prices fell -0.8% overnight to US$1,990, which could see some weakness follow through for local gold miners.

ASX corporate actions occurring today:

• Trading ex-div: WAM Active (WAA) – $0.03, Cosol (COS) – $0.01, Seven Group Holdings (SVW) – $0.23, WAM Research (WAX) – $0.05 

• Dividends paid: DDH1 (DDH) – $0.033, Humm Group (HUM) – $0.01, Link Administration (LNK) – $0.045, Southern Cross Media (SXL) – $0.046, Saunders International (SND) – $0.02, Kinda Securities (KSL) – $0.065, Downer (DOW) – $0.05, Chorus (CNU) – $0.135 

• Listing: Evergreen Lithium (EG1) 

Economic calendar (AEST):

• 3:00 pm: Japan Consumer Confidence