ASX Futures (SPI 200) imply the ASX 200 will open 36 points lower, down -0.54%.
Soft earnings and intensifying recession pressures weigh on Wall Street, heavyweights Microsoft and Alphabet release results after hours and European gas prices are skyrocketing.
Let’s dive in.
Wed 27 Jul 22, 8:35am (AEST)
|US 10 Yr T-bond||2.787||-1.17%|
8 out of 11 US sectors declined
Defensives sectors outperformed
Utilities, Healthcare and Real Estate were the only green sectors
Discretionary, Communication Services and Tech underperformed
57% of US stocks declined
67% of US stocks trade below their 200-day moving averages (68% on Tuesday, 70% a week ago)
General Electric (+4.6%) earnings beat Wall Street expectations thanks to a recovery in its jet engine business. The industrial conglomerate warned that its full-year results will likely hit the low end of its guidance due to supply chain and inflationary challenges
“Working capital will be pressured as GE protects customers from the impact of supply chain challenges, as well as Renewable Energy-related orders,” said GE
McDonalds (+2.6%) reported second quarter earnings of US$2.55 per share, ahead of Wall St expectations of US$2.47. Global comparable sales for the quarter rose 9.7%, ahead of analyst estimates of 6.8%, according to FactSet
Coca Cola (+1.6%) quarterly earnings topped expectations as sales from restaurants, theaters and other venues began to recover from the pandemic
Coke upgraded its full-year organic revenue growth forecast from 7-8% to 12-13% thanks to higher pricing and volumes
General Motors (-3.4%) second quarter earnings missed Wall St expectations as supply chain issues led to fewer vehicle shipments. The company maintained its full-year guidance and confident that it will be able to ramp up production in the second half
GM CEO Mary Barra said the company has “binding agreements” in place to build 1m electric vehicles annually by 2025
United Parcel Service (-3.4%) said higher prices offset lower-than-expected delivery volumes in the second quarter. Volumes fell short of internal forecasts by 222,000 packages per day, partially due to reductions in contracts from customers like Amazon
Shopify (-14.1%) shares tumbled after announcing plans to lay off around 1,000 employees or 10% of its workforce
After hours announcements include:
Alphabet (-2.3%, after hours: +5.3%) reported earnings per share of US$1.21 vs. US$1.28 expected. Advertising and Google Cloud revenues fell short of analyst expectations
Advertising revenue increased 12% to US$56.3bn, a massive slowdown compared to last year. This was most notable in its Youtube division, where sales rose 5% compared to 84% a year ago
Google Cloud lost US$858m in the quarter as it tries to take market share from Amazon Web Services and Microsoft Azure
Microsoft (-2.7%, after hours: +4.8%) quarterly earnings fell just shy of Wall Street consensus. Revenue growth was at its slowest since 2020, at 12% year-on-year
A strong US dollar reduced revenue by US$595m
US corporate earnings we’re watching next week:
Wednesday: Boeing, Shopify, Etsy, Ford, Meta Platforms
Thursday: Pfizer, Mastercard, Amazon, Intel, Apple
Friday: Exxon Mobil, Chevron, Procter & Gamble
The International Monetary Fund trimmed its global economic growth forecast to 3.2% in 2022, down from 3.6%
The IMF warned that the global economy is facing a possible severe downturn that would rank in the bottom 10% of outcomes since 1970
““Tighter monetary policy will inevitably have real economic costs, but delay will only exacerbate them,” said the IMF report
US new home sales fell -8.1% month-on-month to 590,000 in June, down from 642,000 in May
New home sales is at the lowest since April 2020
Sales have almost halved from a peak of 1.04m in August 2020
Year-on-year, new home sales are down -17.4%
Iron ore futures rose 1.3% to US$106.4 a tonne
Iron ore is making a comeback amid a stream of positive news from China including the proposed real estate fund to support property developers, positive home sales in Beijing and two of China’s largest policy banks announcing their first projects under a recent 300bn yuan stimulus plan
Oil prices faded from session highs of 2.8% and now -0.8% lower at US$95.5 a barrel. Recession concerns are again beginning to set in amid a slump in corporate earnings and consumer confidence
Gold is trying to consolidate around the US$1,700 level ahead of another pivotal Fed interest rate decision
Wednesday, 27 July 2022
Wednesday, 27 July 2022
|Lithium & Battery Tech||72.89||-1.07%|
|Aerospace & Defense||100.38||-1.47%|
|Robotics & AI||21.64||-2.31%|
The Nasdaq fell an outsized -1.9% but futures are currently up 1.4% as Alphabet and Microsoft shares rally in extended trading. This creates a rather confusing session for the local tech sector.
Notable overnight fallers include:
It will be interesting to see if the positive futures can outweigh the weak overnight session.
From a chart perspective, the S&P/ASX 200 Info Tech Index is staging a slight pullback from the 100-day (yellow) and channel. It's worth keeping an eye out for how it behaves around these levels (i.e. does it hold up or does it freefall).
Commodities held up relatively well amid a rather risk-off session on Wall Street.
ETFs including Rare Earth/Strategic Metals, Lithium & Battery Tech, Copper Miners, Steel and Uranium all traded around flat to -1.2%.
Local lithium stocks had a very strong day on Tuesday. As we pointed out in yesterday's wrap, the Rare Earth/Strategic Metals ETF is trying to turn bullish, rallying above the trendline (black) and 20-day moving average (red).
Still, most of these ETFs are coming out of massive downtrends. More consolidation and strength is needed.
ASX corporate actions occurring today:
Ex-dividend: MIR, PSC
Dividends paid: PMV, TGP, TOT
Issued shares: AZL, CSS, DUB, E2E, EBO, EIQ, EOS, FGR, HVY, KOV, MNS, NAB, NBI, NTO, PIC, RDY, SGH, SGLLV, SRX, SYN, VMY, WAT
Other things of interest (AEST):
Australia Inflation Rate (Q2) at 11:30 am
German Consumer Confidence (August) at 4:00 pm
US Durable Goods Orders (June) at 10:30 pm
Finance Writer & Social Media
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