Market Wraps

Morning Wrap: Unstoppable yields reverse Wall St gains, Snap stock plunges, ASX to fall

Fri 21 Oct 22, 8:32am (AEST)

ASX Futures (SPI 200) imply the ASX 200 will open 25 points lower, down -0.37%.

Major US indices reversed early gains, down for a second straight session. UK Prime Minister Liz Truss resigns after just 44 days in office, Tesla expects to miss vehicle delivery targets for 2022, Snapchat shares plunge -25% in after hours and US interest rates now expected to peak at 5.0% in early 2023.

Let's dive in.

Overnight Summary

Fri 21 Oct 22, 8:32am (AEST)

Name Value Chg %
Major Indices
S&P 500 3,666 -0.80%
Dow Jones 30,334 -0.30%
NASDAQ Comp 10,615 -0.61%
Russell 2000 1,704 -1.24%
Country Indices
Canada 18,579 -0.51%
China 3,035 -0.31%
Germany 12,767 +0.20%
Hong Kong 16,280 -1.40%
India 59,203 +0.16%
Japan 27,007 -0.92%
United Kingdom 6,944 +0.27%
Name Value Chg %
Commodities (USD)
Gold 1,632.50 -0.10%
Iron Ore 94.86 -
Copper 3.399 +2.43%
WTI Oil 85.71 +0.19%
AUD/USD 0.6278 -0.06%
Bitcoin (AUD) 30,324 -1.50%
Ethereum (AUD) 2,041 -1.69%
US 10 Yr T-bond 4.226 +2.40%
VIX 30 -2.54%


Major US benchmarks briefly rallied in early trade, posting gains of more than 1.0%. But weaker-than-expected earnings from Tesla and Snapchat, political turmoil in the UK and rising bond yields meant the rally was short-lived, with all three major indices closing in negative territory, towards session lows.

  • 8 out of 11 sectors declined

  • Communications was an exception to the selling, up 0.36% thanks to solid earnings from AT&T

  • Energy and Tech also managed squeeze out a small gain

  • Utilities and Industrials, often susceptible to rising bond yields, led to the downside

  • Discretionary, Financials and Staples also underperformed 

  • 57% of stocks declined

  • 67% of stocks trade below their 200-day moving average (66% on Thursday, 68% a week ago)


  • AT&T (+7.7%) earnings beat Wall Street expectations. The telco said it expects its full year revenues to be at the upper end of its 4.5-5% guidance range 

    • Last quarter, AT&T observed that some consumers were taking a little longer to pay their bills. Management said they’re “not seeing any material change relative to what we saw last quarter,” with payment cycles holding steady at pre-pandemic levels  

  • IBM (+4.7%) beat third quarter estimates and lifted its guidance for the full year, now expecting mid-single digit percentage growth 

  • American Airlines (-3.8%) posted a US$483m profit in the third quarter despite flying approximately 10% less and the almost doubling of fuel expenses

    • CEO: "Demand remains strong and it’s clear that customers in the US and other parts of the world continue to value air travel and the ability to reconnect post-pandemic …. Demand for domestic and short-haul international travel remains very strong"

  • Tesla (-6.6%) posted an earnings beat but revenue miss. Musk said he expects the company to miss vehicle delivery targets this year but downplayed concerns about softening demand   

    • Musk: “Over a multi-year horizon, we expect to achieve 50% annual growth in vehicle deliveries.”

    • "I see a potential path with Tesla worth more than Apple and Saudi Aramco combined...this is the first time I've seen that potential"

Of course Snapchat breaks the market after hours, nosediving -25.9%. This is also causing selling for other social media names like Meta, Pinterest and Alphabet, all down between 2-7% in extended hours.

  • Snap revenues rose 6% year-on-year, the first time its dipped into single digit territory since 2017

  • Adjusted losses jumped 400% to -US$360m, partly due to a US$155m restructuring charge

  • Investor letter notes “total time spent watching content in the United States decreased 5% year-over-year.”


  • Fed swaps price in 5.0% peak for policy rate in 1H23 (Bloomberg)

  • Liz Truss announces resignation after only 44 days in charge (Reuters)

  • German gas importer Uniper may need up to 40bn euros in additional support (Reuters)


  • US Philadelphia manufacturing index was -8.7 in October from -5 in September

    • Missed estimates of a -5 reading

    • General activity remains in contraction territory for a second straight month

    • The employment sub-index strengthened to +28.5 in October, the best since April, suggesting labor markets remain buoyant even as activity softens

  • US initial jobless claims unexpectedly fell to 214,000 last week

    • Ahead of analyst expectations of 230,000

    • Suggests that the labour market remains tight even as demand eases 

Fed speech highlights:

  • Philadelphia Fed President Harker:

    • Officials are likely to raise interest rates to “well above” 4.0% this year and hold the them at restrictive levels to combat inflation, while leaving the door open to doing more if needed 

  • Fed Governor Cook:

    • “Inflation is too high, it must come down and we will keep at it until the job is done.”

    • “Policy must be based on whether we see inflation actually falling in the data, rather than just in forecasts.”


  • Iron ore futures rose 0.2% to US$94.2 a tonne 

    • The World Steel Association forecasts a -2.3% year-on-year decline in 2022 global steel demand followed by 1% growth in 2023

    • The fall in 202 reflects “"the repercussion of persistently high inflation and rising interest rates globally," but demand from the infrastructure construction may give a marginal boost to steel demand in 2023

    • China’s steel demand is forecast to fall -4% this year and in 2023, “new infrastructure projects and a mild recovery in the real estate market could prevent further contraction of steel demand.”

  • Oil finished the overnight session flat

  • Gold faded from session highs of US$1,645 as yields and the dollar trended higher 

Other commodities of interest (US$):

  • Platinum +3.9% to $196/oz

  • Palladium +2.9% to $2,053/oz

  • Natural gas -1.1% to $5.7/MMboe


  • Too many Tesla's: Tesla sales usually exceed production, but not last quarter, according to Bloomberg

Tesla inventory
Source: Bloomberg
  • What does Truss's resignation mean for markets: The resignation did not see much reaction from UK government bonds or the sterling. "The absence of a sell-off suggests a widespread assumption that the process of finding a new leader – which is expected to take at most a week – won’t deliver any more political uncertainty, on top of what the UK is already suffering," notes ING analysts.

US Sectors

Fri 21 Oct 22, 8:32am (AEST)

Sector Chg %
Communication Services +0.36%
Energy +0.18%
Information Technology +0.07%
Real Estate -0.41%
Materials -0.70%
Health Care -0.81%
Consumer Staples -1.42%
Financials -1.58%
Consumer Discretionary -1.74%
Industrials -1.91%
Utilities -2.51%

Industry ETFs

Fri 21 Oct 22, 8:32am (AEST)

Description Last Chg %
Aluminum 45.7004 +1.68%
Steel 51.33 +1.68%
Silver 17.01 +0.94%
Uranium 19.59 +0.71%
Copper Miners 28 -0.04%
Gold 151.69 -0.15%
Nickel 29.2109 -0.76%
Strategic Metals 84.53 -0.93%
Lithium & Battery Tech 66.66 -1.05%
Aerospace & Defense 99.83 -0.19%
Global Jets 16.61 -0.78%
Cannabis 13.78 -0.22%
Biotechnology 118.53 -0.80%
Description Last Chg %
Bitcoin 11.84 -0.84%
Hydrogen 10.27 -0.19%
Solar 66.1 -1.10%
CleanTech 13.06 -1.30%
Cybersecurity 23.55 +1.19%
Cloud Computing 15.72 +1.08%
Semiconductor 308.02 +0.62%
Video Games/eSports 39.34 +0.51%
E-commerce 14.68 +0.48%
Sports Betting/Gaming 13.71 +0.15%
FinTech 20.25 +0.05%
Robotics & AI 18.41 -0.43%
Electric Vehicles 20.18 -0.55%

ASX Morning Brief

We're entering a little bit of a rough patch now bad news begins to compound. Notably:

  • UK in shambles

  • Unstoppable bond yields

  • Crappy Snapchat earnings

How terrifying does the weekly US 2-year Treasury yield look? As we noted in Thursday's Morning Wrap, the next leg up for yields has typically seen the S&P 500 undercut previous lows.

Yields briefly traded sideways in late September and early August, which coincides with the recent relief rally.

US 2 year yield
US 2-year Treasury yield (Source: TradingView)

Sectors to watch

Overnight ETF gainers: Steel (+1.68%), Aluminium (+1.68%), Cloud (+1.08%), Uranium (+0.71%)

Overnight ETF losers: Lithium (-1.05%), Rare Earth/Strategic Metals (-0.93%), Biotech (-0.8%), Jets (-0.78%)

SPI futures imply a modest fall of -0.37%. Commodities posted broad-based gains overnight, which is a positive for the local sharemarket. But US-listed BHP (ASX: BHP) still fell -0.66% in overnight trade.

As bond yields rally to levels not seen since 2007-08, this could pressure yield sensitive and long duration sectors like Tech, Health Care, Utilities and Industrials.

Snapchat's bearish earnings also came in after hours, which means its not reflected in how the indices performed overnight. Other social media and advertising names like Twitter, Meta and Alphabet also sold off in after hours. This could see a little more negative flow follow through for the ASX, especially for Tech and Discretionary.

Key Events

Stocks going ex-dividend in the next week:

  • Fri: SNC

  • Mon: NHC

  • Tue: CLV 

  • Wed: MMS

  • Thu: BOQ, GNP, ACF 

ASX corporate actions occurring today:

  • Dividends paid: ARB, CAJ, COG, CQE, AHX, EDC 

  • Listing: None

Other things of interest (AEDT):

  • 10:00 am: UK consumer confidence

  • 10:30 am: Japan inflation

  • 5:00 pm: UK retail sales

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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