Market Wraps

Morning Wrap: S&P 500 reverses sharp selloff after hot November jobs report, ASX to rise

Mon 05 Dec 22, 8:31am (AEST)

ASX Futures (SPI 200) imply the ASX 200 will open 19 points higher, up 0.26%.

Major US benchmarks closed just below breakeven after a hotter-than-expected nonfarm jobs report triggered a sharp selloff in early trade. OPEC+ kept its oil output unchanged, US unemployment remains near 50-year lows, China's steel output continues to improve and a look at when exactly does the Santa Rally come about.

Let's dive in.

Overnight Summary

Mon 05 Dec 22, 8:31am (AEST)

Name Value Chg %
Major Indices
S&P 500 4,072 -0.12%
Dow Jones 34,430 +0.10%
NASDAQ Comp 11,461 -0.18%
Russell 2000 1,893 +0.59%
Country Indices
Canada 20,486 -0.19%
China 3,156 -0.29%
Germany 14,529 +0.27%
Hong Kong 18,675 -0.33%
India 62,869 -0.66%
Japan 27,778 -1.59%
United Kingdom 7,556 -0.03%
Name Value Chg %
Commodities (USD)
Gold 1,811.40 -0.21%
Iron Ore 107.44 -
Copper 3.855 +0.98%
WTI Oil 80.34 -1.08%
Currency
AUD/USD 0.6782 +0.04%
Cryptocurrency
Bitcoin (AUD) 25,195 +0.36%
Ethereum (AUD) 1,883 +0.60%
Miscellaneous
US 10 Yr T-bond 3.506 -0.65%
VIX 19 -3.93%

US Sectors

Mon 05 Dec 22, 8:31am (AEST)

Sector Chg %
Materials +1.10%
Industrials +0.62%
Consumer Staples +0.44%
Health Care +0.22%
Communication Services +0.06%
Consumer Discretionary -0.19%
Real Estate -0.42%
Financials -0.43%
Utilities -0.47%
Information Technology -0.55%
Energy -0.60%

MARKETS

Major US benchmarks sold off in early trade after nonfarm payrolls added 263,000 jobs in November, smashing even the most optimistic estimates. Adding further insult to injury was the acceleration in wage growth, which feeds into ongoing inflationary pressures. Still, Wall Street managed to reverse most of the early declines, perhaps a sign of an increasingly healthy market. Some interesting reversals below (close versus session low/high):

  • S&P 500 -0.12% (from -1.23%)

  • Nasdaq Composite -0.18% (from -1.56%)

  • US Dollar Index -0.22% (from +0.81%)

  • US 2-year Treasury Yield +1.04% (from +4.16%)

  • 53% of stocks advanced

  • 40% of stocks trade below their 200-day moving average (40% last Friday, 43% a week ago) 

STOCKS

Nothing too interesting on the company announcement front. I will leave you with a funny quote from Asana's earnings call.

“I'm CEO of the Asana company, but lately, Jay Powell has been CEO of the stock price.” - CEO Dustin Moskovitz.

WORLD NEWS

  • Chinese cities ease covid restrictions following nationwide protests (FT)

  • Global growth to be as weak next year as 2009 (Bloomberg)

  • OPEC+ keeps steady policy amid weakening economy (Reuters)

ECONOMY

Germany’s exports fell to 5.3bn euros in October from 8.1bn euros in September.

  • “Germany’s trade surplus in the first 10 months of 2022 is down 10bn euros on average per month from the same period in 2021. Two-thirds of that drop is due to energy. One-third is a lower non-energy surplus. Weaker German competitiveness starting to show up.” - Robin Brooks, Chief Economist at the Institute of International Finance 

US unemployment rate was unchanged at 3.7%.

  • In-line with consensus expectations

  • Near its lowest level in 50 years

  • Labor force participation rate was at 62.1%, roughly where it was earlier this year 

US nonfarm payrolls eased to 263,000 in November from 284,000 in October. 

  • Well-ahead of analyst expectations of 200,000 jobs 

  • “Very strong wage figures in this morning’s nonfarm payroll report. November average hourly earnings plus the higher revisions from September/October shows wages up 6.0% annual rate for the average 3-month period. This compares to last month at 3.8% annual rate. This is not friendly for the Fed.” - Stephanie Link, Chief Investment Strategist at Hightower Advisors 

  • To add some perspective, February 2018 nonfarm payrolls added 200,000 jobs with 2.9% annualised wage growth, which at the time, was the fastest wage growth since 2009 

COMMODITIES

Iron ore futures 0.5% to US$106.55 a tonne. 

  • “The most recently released data shows that daily crude steel output at large and medium-sized mills in China averaged 2 million tons during November 11 - 20.  This is 1% more than was seen during the first ten days of the month and is up year-on-year by 14%.” - Breakwave Advisors

  • “Overall, it remains encouraging that China’s steel output has stayed well above last year’s level.  We remain of our view that China’s steel output likely bottomed in late July.” - Breakwave Advisors 

Oil snapped a three day rally. Prices were under pressure after a strong-than-expected nonfarm payroll report pushed the US dollar higher in early trade.

  • Over the weekend, OPEC+ decided to keep its oil production unchanged

Gold finished the session -0.3% lower, reversing an outsized -1.3% fall after the hot nonfarm payroll report. 

  • “Gold has had a nice rally since early November and profit taking could settle in, but a significant pullback doesn’t seem warranted. ​ The economy is slowing down and inflation should steadily decline here and justify a pause in Fed rate hikes after the first quarter.” - Oanda senior market analyst, Ed Moya 

QUICK BITES

  • Jobs, jobs, jobs: "4.3 millions jobs created so far in 2022, that's the second most ever. If you look at previous years that created at least 3 million jobs it shows that the following year only once fell into a recession." - Ryan Detrick, Chief Market Strategist at Carson Investment Group

US jobs and recessions
Source: Carson Investment Group
  • Santa comes later: "Really nice reversal today, right near the 200-day moving average. After a 15% rally off the lows, some chop around here would be perfectly normal. Remember, the first half of December usually isn't very strong, it is later in the month the gains tend to arrive." - Detrick

S&P 500 Santa rally
Source: Carson Investment Group

Industry ETFs

Mon 05 Dec 22, 8:31am (AEST)

Description Last Chg %
Commodities
Strategic Metals 93.66 +2.69%
Aluminum 51.9 +1.98%
Nickel 36.82 +1.63%
Steel 62.39 +1.54%
Lithium & Battery Tech 69.26 +1.49%
Silver 20.98 +1.48%
Copper Miners 36.79 +0.41%
Uranium 20.94 +0.33%
Gold 167.84 -0.35%
Industrials
Aerospace & Defense 112.01 +1.87%
Global Jets 18.66 +0.43%
Healthcare
Cannabis 15.68 +5.61%
Biotechnology 137.16 +0.93%
Description Last Chg %
Cryptocurrency
Bitcoin 10.54 +0.95%
Renewables
Solar 81.5 +2.77%
CleanTech 16.16 +2.10%
Hydrogen 12.6 +1.19%
Technology
Video Games/eSports 45.8 +1.11%
E-commerce 17.49 +0.97%
Electric Vehicles 23.07 +0.61%
Sports Betting/Gaming 16.09 0.00%
Robotics & AI 21.74 -0.09%
FinTech 20.67 -0.19%
Cloud Computing 17.15 -0.87%
Semiconductor 385.24 -1.13%
Cybersecurity 23.82 -1.51%

ASX Morning Brief

The S&P 500, Dow and Nasdaq Composite reversed early declines to close between -0.1% to -0.2% lower.

Of note, nonfarm payroll reports in September and October both beat consensus expectations, which triggered the S&P 500 to sell off -1.3% and -3.8% respectively.

Now that inflation is beginning to ease, could positive economic data reiterate the likelihood of a soft landing instead of a factor fueling inflation?

The ASX 200 is set to open +0.26% according to SPI futures. Even though the US markets finished red, they're handballing us a lot of momentum, given the sharp reversal for both equities, bond yields and the dollar.

XJO chart
XJO chart (Source: TradingView)

Sectors to watch

Aluminium: Spot prices closed at a 5-month high and above the 200-day moving average for the first time since May.

Energy: Energy was the worst performing sector on Wall Street, down -0.60%. Oil prices fell -1.45% and US natural gas prices tumbled -8.96%.

Copper: On a four-day winning streak, up 6.6%. Spot prices rose 0.86% last Friday but the Global X Copper ETF rallied on 0.41%. Perhaps showing some signs of fatigue amid its V-shaped rally.

Lithium: VanEck Rare Earth/Strategic Metals ETF rallied 2.7%.

Key Events

Stocks going ex-dividend over the next week:

  • Mon: Collins Foods (CKF), Incitec Pivot (IPL), Qualitas Real Estate Income Fund (QRI)  

  • Tue: Dalrymple Bay Infrastructure (DBI)  

  • Wed: Civmec (CVL) 

  • Thu: Hitech Group (HIT), Fisher & Paykel (FPH), Select Harvests (SHV) 

  • Fri: None

ASX corporate actions occurring today:

  • Dividends paid: None

  •  Listing: Patriot Lithium (PAT)

Economic calendar: 

  • 12:45 pm: China Caixin services PMI

  • 9:00 pm: Eurozone retail sales 

  • 2:00 am: US ISM services PMI

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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