Market Wraps

Morning Wrap: S&P 500 soars on Powell's declining inflation remarks, ASX to rise

Wed 08 Feb 23, 8:24am (AEST)

ASX 200 futures are trading 34 points higher, up 0.45% as of 8:15 am AEDT.

The S&P 500 snaps a two-day losing streak after Powell said he expects 2023 to be a "year of significant declines in inflation", megacap tech stocks rally between 2-5% and oil prices jump almost 4% on China optimism.

Let's dive in.

Overnight Summary

Wed 08 Feb 23, 8:24am (AEST)

Name Value Chg %
Major Indices
S&P 500 4,164 +1.29%
Dow Jones 34,157 +0.78%
NASDAQ Comp 12,114 +1.90%
Russell 2000 1,972 +0.74%
Country Indices
Canada 20,725 +0.47%
China 3,248 +0.29%
Germany 15,321 -0.16%
Hong Kong 21,299 +0.36%
India 60,286 -0.37%
Japan 27,685 -0.03%
United Kingdom 7,865 +0.36%
Name Value Chg %
Commodities (USD)
Gold 1,882.80 +0.18%
Iron Ore 124.34 -
Copper 4.07 +0.86%
WTI Oil 77.30 +4.30%
Currency
AUD/USD 0.6950 +0.97%
Cryptocurrency
Bitcoin (AUD) 33,416 +0.41%
Ethereum (AUD) 2,401 +0.88%
Miscellaneous
US 10 Yr T-bond 3.674 +1.10%
VIX 19 -4.58%

US Sectors

Wed 08 Feb 23, 8:24am (AEST)

Sector Chg %
Energy +3.08%
Communication Services +2.48%
Information Technology +2.46%
Materials +1.30%
Financials +1.16%
Health Care +0.64%
Industrials +0.25%
Consumer Discretionary +0.22%
Utilities -0.08%
Real Estate -0.31%
Consumer Staples -0.36%

S&P 500 Session Chart

SPX
S&P 500 nosedives and bounces after Powell’s speech, which offered nothing new  (Source: TradingView)

MARKETS

  • Choppy but higher overnight session after Powell’s speech offered minimal pushback after Friday’s stronger-than-expected jobs report

  • Hedge funds caught in bigger squeeze than 2021 meme stock frenzy (Reuters)

  • Oil up on China outlook and supply concerns amid Turkey earthquake (Reuters)

  • Copper deficit set to hit global markets throughout 2023 (CNBC)

STOCKS

  • Bed Bath & Beyond plans to raise US$1bn to avoid bankruptcy (Reuters)

  • Microsoft hosts ChatGPT event (CNBC)

  • Baidu rallies after revealing ChatGPT-style product (CNBC)

  • Zoom rallies on plans to cut 1,300 jobs or 15% of its workforce (Bloomberg

EARNINGS

  • BP (+8.3%): Softer than expected but record annual profit of US$27.7bn, increased quarterly dividend payout by 10% and spending a further US$2.75bn buying back its own shares 

    • “We need continuing near-term investment into today’s energy system – which depends on oil and gas – to meet today’s demands and to make sure the transition is an orderly one.” – CEO Bernard Looney 

  • Hertz (+7.5%): Posted a net income of US$116m in the December quarter compared to a US$710m loss a year ago 

  • Pinterest (-6.4%): Revenue miss but EPS beat, declared a US$500m buyback program and now searching for a new CFO after resignation 

ECONOMY

  • Wholesale egg prices down more than 50% since December (CNBC)

  • German industrial output falls more than expected in December (Reuters)

  • Citi says markets underestimating peak Fed rate, may reach 6.0% (Bloomberg)

  • Fed's Bostic says strong jobs report may see higher rates (Bloomberg)

  • BoE Chief Economist Pill ready to do more on inflation if necessary (Reuters)

  • RBA raises cash rate by 25 bps to 3.35%, hints at more hikes (Bloomberg)

  • Goldman Sachs sees lower risk of US recession due to strong jobs market and improved business sentiment (Bloomberg)

Industry ETFs

Wed 08 Feb 23, 8:24am (AEST)

Description Last Chg %
Commodities
Nickel 35.959 +2.84%
Copper Miners 38.86 +2.62%
Uranium 21.73 +2.25%
Strategic Metals 91.1 +1.72%
Lithium & Battery Tech 69.12 +0.51%
Gold 173.82 +0.09%
Steel 66.58 -0.32%
Silver 20.48 -0.49%
Aluminum 53.055 -0.50%
Industrials
Aerospace & Defense 114.28 +0.87%
Global Jets 20.6 0.00%
Healthcare
Biotechnology 135.61 +0.52%
Cannabis 12.57 -2.23%
Description Last Chg %
Cryptocurrency
Bitcoin 14.4 +0.76%
Renewables
CleanTech 16.46 +0.73%
Solar 79.16 -0.28%
Hydrogen 13.64 -0.37%
Technology
Semiconductor 419.17 +3.18%
Cybersecurity 22.7 +2.56%
Cloud Computing 18.37 +2.34%
FinTech 22.44 +2.09%
Robotics & AI 24.18 +1.99%
Sports Betting/Gaming 16.47 +1.52%
Electric Vehicles 24.17 +1.45%
Video Games/eSports 48.95 +1.16%
E-commerce 20.143 +0.33%

ASX Morning Brief

Powell Rundown: Nothing New

Some key quotes from Powell's speech:

  • 2023 is the year: "We expect 2023 to be a year of significant declines in inflation."

  • On goods: "We're seeing disinflation in the goods sector. We expect to see it in the housing services sector."

  • As for the other 56% of the core basket: "We're not seeing disinflation there yet and that's going to take some time ... we're going to need to be patient."

  • Data-driven: "We're going to react to the data so if we continue to get, for example, strong labour market reports or higher inflation reports, it may well be the case that we have to do more and raise rates more than what has been priced in."

Sectors to watch

Tech: The Nasdaq surged more than 2% after Powell speech. Megacaps led the charge including Alphabet (+5.0%), Microsoft (+4.4%), Meta (+3.3%) and Apple (+2.0%). This could see some positive flow for local tech names like Wisetech, Xero and NextDC, after a two-day pullback.

XIJ chart
ASX 200 Info Tech Index (Source: TradingView)

Oil: WTI up almost 4.0% overnight. Do we get to see a strong reaction from Woodside?

WDS chart
Woodside (Source: TradingView)

Coal: Most local coal stocks rallied 2-5% on Tuesday after the Australian Energy Market Operator (AEMO) said it expects supply issues to persist in 2023. This triggered a 6.8% rally for Newcastle coal futures. What does day two look like?

Uranium: Global X Uranium ETF breaks a three-day losing streak where it fell -7.6%. Can we see local uranium names catch a bid after a similar selloff?

Global X Uranium ETF
Global X Uranium ETF (Source: TradingView)

Quick bites 

Earnings flop: Forward S&P 500 EPS estimates just turned negative for the fifth time since 2000. Then again, of course its negative after Energy sector EPS jumped 154% last year. To compensate, this suggests downside pricing risk for the market.

FoSEf73WIAATaME
Source: Morgan Stanley

Japanese wages: Real wages in Japan jump by the biggest margin in almost 26 years.

Japan wage growth

Key Events

ASX corporate actions occurring today:

  • Trading ex-div: Resmed Inc (RMD) – $0.043

  • Dividends paid: Perpetual (PPT) – $0.35, New Energy Solar (NEW) – $0.135

  • Listing: None

Economic calendar (AEDT):

No major economic events during market hours. Overnight we'll see:

  • 1:15 am: Fed Williams speech

  • 2:00 am: Fed Barr speech

  • 5:45 am: Fed Waller speech 

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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