Market Wraps

Morning Wrap: S&P 500 logs best day since July, bond yields tumble, ASX set to jump

Tue 04 Oct 22, 8:39am (AEST)

ASX Futures (SPI 200) imply the ASX 200 will open 102 points higher, up 1.58%.

US stocks kicked off October on a positive note, Tesla missed third quarter vehicle delivery expectations, General Motors has an inventory problem, BHP upgraded its long-term steel outlook, oil prices ripped higher ahead of OPEC's meeting on Wednesday and all eyes on the RBA rate hike at 2:30 pm AEST.

Let’s dive in.

Overnight Summary

Tue 04 Oct 22, 8:39am (AEST)

Name Value Chg %
Major Indices
S&P 500 3,678 +2.59%
Dow Jones 29,491 +2.66%
NASDAQ Comp 10,815 +2.27%
Russell 2000 1,709 +2.65%
Country Indices
Canada 18,881 +2.37%
China 3,024 -0.55%
Germany 12,209 +0.79%
Hong Kong 17,080 -0.83%
India 56,789 -1.11%
Japan 26,216 +1.07%
United Kingdom 6,909 +0.22%
Name Value Chg %
Commodities (USD)
Gold 1,708.60 +2.19%
Iron Ore 95.30 -
Copper 3.417 +0.12%
WTI Oil 83.34 +4.84%
AUD/USD 0.6515 +0.02%
Bitcoin (AUD) 30,014 +1.17%
Ethereum (AUD) 2,027 +0.95%
US 10 Yr T-bond 3.651 -4.02%
VIX 30 -4.81%


Things got so bearish that it became contrarian bullish. Major US indices rallied from rather dire levels, with the S&P 500 posting its largest rally since July and best start to a quarter since 2009. This follows the worst start to a year after three quarters since 2002.

  • All 11 US sectors were green

  • Energy rallied an outsized 5.8% ahead of a possible OPEC production cut

  • Materials, Tech and Industrial sectors rose more than 3%

  • Healthcare, Real Estate, Staples and Discretionary underperformed benchmarks

  • 77% of US stocks advanced

  • 70% of US stocks trade below their 200-day moving average (73% on Monday, 74% a week ago)


  • General Motors (+2.4%) posted 24% annual growth in third quarter US vehicle sales

    • GM earnings announcement: "General Motors ended Q3 with 359,292 vehicles in dealer inventory ... an increase of 111,453 units from the previous quarter and nearly 3 times the inventory available at the end of the third quarter of 2021, when COVID-related supply chain issues impacted production."

  • Credit Suisse (+2.3%) shares reversed a sharp -5.6% decline in early trade

  • Livent (-0.03%) shares underperformed benchmarks after Bank of America downgraded the stock to Underperform from Neutral due to “limited upside”

  • Tesla (-8.6%) said it delivered 343,000 vehicles in the third quarter, below analyst expectations 364,660


  • October the bear market killer: "In the past 5 times when the S&P 500 lost more than 1% in September, the following October has seen a positive bounce 4 out of 5 times," according to JP Morgan.

  • Oversold momentum: "Another 10-15% decline for equities wouldn't surprise me, but on a short-term basis, the market is oversold. This suggests that the old lows may well hold up for a bit at first ... But with valuations still too high and the earnings outlook at risk, sooner or later those lows will likely give way," said Jurrien Timmer, Director of Global Macro at Fidelity

US stocks oversold momentum
Source: Fidelity
  • Another glance at seasonality: Seasonality didn't play out at the beginning of the year as the market began to price in a new rate cycle and rising growth fears. However, we did see an August top and heavy selling in September. Could this lead into a market bottom in October and rally into Christmas?

S&P 500 seasonality
Source: Sentiment Trader
  • Dumb vs. Smart money: "Dumb Money Confidence is very pessimistic and Smart Money Confidence is extremely optimistic. This suggests an excess return of 4.4 over the next 2 months," according to Sentiment Trader.

Dumb vs Smart money confidence
Source: Sentiment Trader


  • China property woes trigger decline in global cement output (FT)

  • BHP lifts steel consumption forecast on surging demand from renewable power farms (Reuters)

  • Truss backs Kwarteng even after humiliating U-turn on UK tax cut (Bloomberg)

  • Ocean freight orders are signaling a big drop in consumer demand (CNBC)

  • OPEC+ mulling largest cuts since 2020 crisis (Reuters)


  • UK manufacturing PMI was 48.4 in September up from 47.3 in August

    • “Manufacturers linked lower production to a reduction in new work intakes. The level of new business declined for a fourth month running,” said S&P Global

    • “Price indices tracking input costs and output charges both strengthened in September, halting the recent slower inflationary trend at manufacturers.”

  • Eurozone manufacturing PMI hit a 27-month low of 48.4 in September

    • "Excluding the initial pandemic lockdowns, Eurozone manufacturers have not seen a collapse of demand and production on this scale since the height of the global financial crisis in early-2009,” said S&P Global

  • US manufacturing PMI was 50.9 in September from 52.8 in August

    • Well-below analyst expectations of 52.9

    • The lowest PMI reading since May 2020

    • “Companies are now managing head counts through hiring freezes and attrition to lower levels, with medium- and long-term demand more uncertain,” observed ISM Committee chair Timothy Fiore 

Fed speeches:

Atlanta Fed President Bostic

  • “Up to now, indicators do not suggest that long-run inflation expectations are dangerously untethered.”

  • But he expects inflation to remain above the Fed’s 2% target moving forward

Bank of Richmond Fed President Barkin

  • Premature to say that the US faces an era of more inflation

  • A more inflationary climate suggests tighter Fed policy

Bank of New York Fed President Williams

  • Inflation could ease to 3% next year

  • “I see inflation moving close to our 2% goal in the next few years.” 

  • "Tighter monetary policy has begun to cool demand and reduce inflationary pressures, but our job is not yet done."


  • Iron ore futures rose 2.1% to US$95.55 a tonne 

    • BHP lifted its long-term demand forecast for steel as a global shift towards the decarbonisation of power generation will boost demand for the commodity

    • The miner forecasts global steel consumption to increase by a respective 42m tonnes and 76m tonnes in 2030 and 2050, primarily due to demand for solar and wind equipment

  • Oil prices rallied ahead of OPEC’s closely watched meeting on Wednesday

    • The petroleum group is considering cutting production by more than 1m barrels a day to boost oil prices

    • “The collapse in investor participation, driving liquidity and prices lower, is also a likely strong catalyst for such a cut, as it would increase the carry in oil and start to claw back investors who have instead turned to USD cash allocation following the aggressive Fed hikes,” Goldman Sachs said in a note

  • Gold prices rallied and trading around the US$1,700 level thanks to falling bond yields

    • “A new month has Treasury yields in freefall, which is great news for bullion. ​ Downward pressures on inflation are growing and that should put a top on Treasury yields for now,” said Oanda senior market analyst, Ed Moya

Other commodities of interest:

  • Silver rallied 8.9% to US$20.7/oz

  • Copper rose 0.12% to US$3.42/lb

  • Newcastle Coal futures fell -2.5% to US$402.5 a tonne

US Sectors

Tue 04 Oct 22, 8:39am (AEST)

Sector Chg %
Energy +5.77%
Materials +3.40%
Information Technology +3.15%
Industrials +3.05%
Utilities +2.99%
Communication Services +2.98%
Financials +2.84%
Health Care +2.13%
Real Estate +1.86%
Consumer Staples +1.74%
Consumer Discretionary +0.24%

Industry ETFs

Tue 04 Oct 22, 8:39am (AEST)

Description Last Chg %
Silver 17.5 +9.14%
Steel 47.75 +6.24%
Copper Miners 28.26 +4.56%
Uranium 19.82 +3.99%
Aluminum 44.92 +3.21%
Strategic Metals 83.33 +2.50%
Gold 154.67 +2.39%
Lithium & Battery Tech 66.09 +1.13%
Nickel 28.2322 +0.45%
Aerospace & Defense 91.19 +2.90%
Global Jets 15.01 +1.53%
Cannabis 13.7 +2.90%
Biotechnology 116.96 +1.95%
Description Last Chg %
Bitcoin 11.99 +0.58%
CleanTech 13.9057 +2.91%
Hydrogen 11.16 +2.78%
Solar 73.61 +2.39%
Semiconductor 318.73 +3.46%
Electric Vehicles 20.12 +3.13%
Robotics & AI 18.08 +2.99%
E-commerce 15.17 +2.37%
Cloud Computing 15.96 +2.32%
FinTech 20.28 +2.27%
Cybersecurity 24.04 +2.25%
Video Games/eSports 40.6 +1.77%
Sports Betting/Gaming 13.05 +1.76%

ASX Morning Brief

We've seen no shortage of rallies fizzle and fade this year. This is a start and much more is needed.

The rally was supported by falling Treasury yields and the US manufacturing report showing a noticeable decline in inflation. An index of prices paid by manufacturers was 51.7, the lowest reading since June 2020.

Still, some of the biggest rallies occur during bear markets amid short covering and bounces from extremely oversold levels.

ASX sectors to watch

Most of the ETFs we watch rallied around 2-4%. Notable ETFs like Hydrogen, Rare Earths, Solar, Cloud, FinTech and Biotech all rallied around 2%. SPI futures are pointing towards a strong start, which could see many depressed and oversold stocks rally at the open.

Markets remain in a vulnerable and volatile state. The RBA is due to make its interest rate decision at 2:30 pm AEST. ASX 200 performance on rate decision days include:

  • 3 May -0.42% (larger-than-expected)

  • 7 June -1.53% (larger-than-expected)

  • 5 Jul +0.25% (in-line)

  • 2 Aug +0.07% (in-line)

  • 6 Sep -0.38% (in-line)

Gold: Is it finally time for dormant gold bears to emerge from the ashes? Falling inflation expectations and yields has helped fuel a rally back up to the US$1,700 level. The overnight rally could see a gap up for local gold names.

Earlier this week, Macquarie released a note that maintained a bearish outlook for gold, with the expectation that prices will hit a trough of US$1,500 in the second quarter of 2023. The analyst said that gold prices are expected to bottom once the market begins to price in a Fed pivot.

Gold chart
Gold chart (Source: TradingView, Annotations by Market Index)

Steel: Defending the double bottom. US-listed BHP rallied 3.2% in overnight trade.

Steel ETF
Global X Steel ETF chart (Source: TradingView, Annotations by Market Index)

Copper: Also showing a double bottom.

Copper Miners ETF chart
Global X Copper Miners chart (Source: TradingView, Annotations by Market Index)

Key Events

Stocks going ex-dividend:

  • Tue: SGM, WAX

  • Wed: CAM, X64, RIC 

  • Thu: ANG, ARB, BIS, N1H, WCG

  • Fri: COS, MFF

  • Mon: None 

ASX corporate actions occurring today:

  • Dividends paid:PGC, EGG, SEK, GOR, SYM, SXL, NHF, KSL, PFP, MTO

  • Listing: BGE

Other things of interest (AEST):

  • 11:30 am: Australia Building Permits

  • 11:30 am: Australia Home Loans

  • 2:30 pm: RBA Interest Rate Decision

  • 1:00 am: US JOLTs Job Openings 

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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