Market Wrap

Morning wrap: US bank stocks slump, oil prices jump, ASX to rise at open

Mon 17 Jan 22, 8:38am (AEST)

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ASX Futures (SPI 200) imply the ASX will open 28 points higher, up 0.38%.

Looming interest rate hikes continue to drive a bumpy rotation from fast growing technology stocks to cyclicals.

Except this time, US tech stocks rebounded while bank stocks underperformed amid weaker-than-expected earnings.

Overnight summary

Mon 17 Jan 22, 8:38am (AEST)

Name Value Chg %
US Indices
S&P 500
0 0.00%
Dow Jones
0 0.00%
NASDAQ 100
0 0.00%
Russell 2000
0 0.00%
Country Indices
Canada
21,537 +0.84%
China
3,570 +0.80%
Germany
15,934 +0.32%
Hong Kong
24,113 -0.43%
India
60,755 -0.90%
Japan
28,257 -0.27%
United Kingdom
7,611 +0.91%
Name Value Chg %
Commodities (USD)
Gold
1,818.80 +0.13%
Iron Ore
127.48 -
Copper
4.435 +0.32%
WTI Oil
84.23 +0.49%
Currency
AUD/USD
0.7211 +0.03%
Cryptocurrency
Bitcoin
57,839 -4.00%
Ethereum
4,380 -6.20%
Miscellaneous
U.S. 10 Year Treasury
0.00 0.00%
VIX
0 0.00%

US stocks were mixed last Friday.

The Dow Jones (blue-chip) underperformed, but closed well above its intraday low of -1.3%. 

The S&P 500 (large caps) eked out a small gain, bouncing from session lows of -0.95%. 

The Nasdaq Composite (tech) outperformed and closed at session highs.

On the economic front, the US Department of Commerce reported a -1.9% decline in retail sales in December, well below the -0.1% decline forecasted by economists polled by The Wall Street Journal.

Furthermore, US consumer sentiment fell to 68.8 in January vs. 70.6 in the prior month.

This reading marks the second-lowest figure in a decade. Surging omicron cases and a sharp rise in inflation are likely drivers of the decline. 

Benchmark US 10-year Treasury yields climbed 4.8% overnight to 1.79%. This represents the highest close since 21 January, 2020. 

US10Y 2022-01-17 08-12-43

US 10-year Treasury yields, weekly chart, TradingView

Investors should note that the US market will be closed on Monday, 17 January in observance of Martin Luther King Jr. Day.


US Sectors

Monday, 17 January 2022

Sector Chg %
Communication Services 0.00
Consumer Discretionary 0.00
Consumer Staples 0.00
Energy 0.00
Financials 0.00
Health Care 0.00
Sector Chg %
Industrials 0.00
Information Technology 0.00
Materials 0.00
Real Estate 0.00
Utilities 0.00

The ASX energy sector is expected to outperform on Monday following a jump in oil prices. 

▲ Energy 

Oil stocks are within an arm's reach of 8-year highs, with crude oil closing at US$84.4. 

“Crude prices continue to rally on optimism that the oil market will remain tight as COVID pandemic starts to move into the endemic phase,” said OANDA senior market analyst, Ed Moya. 

“Money managers are turning very bullish with Brent crude, sending bullish bets to an 11-week high.  Today’s oil price rally is very impressive given how strong the [US] dollar is today,” he added. 

▲ Technology 

Mega cap technology stocks including Microsoft, Tesla and Meta Platforms all closed 1% higher. 

Despite the overnight gain, the Nasdaq Composite is still down -1.2% for the week and down -4.8% year-to-date

The ASX tech sector could be mixed on Monday, given the -2.7% decline in Block shares. This will see Afterpay (ASX: APT) weigh on the broader tech sector.

▼ Financials

US bank stocks closed mostly lower as quarterly results struggled to impress investors

JPMorgan Chase topped revenue and profit estimates, but the company’s stock closed -6.2% lower. CFO Jeremy Barnum flagged that the bank would likely miss key profit targets in the next two years. 

Similarly, Citigroup shares fell -1.3% amid a -26% decline in profits.


Industry ETFs

Monday, 17 January 2022

Description Last Chg %
Commodities
Aluminum 0 0.00%
Copper Miners 0 0.00%
Gold 0 0.00%
Lithium & Battery Tech 0 0.00%
Nickel 0 0.00%
Strategic Metals 0 0.00%
Steel 0 0.00%
Silver 0 0.00%
Uranium 0 0.00%
Industrials
Aerospace & Defense 0 0.00%
Global Jets 0 0.00%
Healthcare
Biotechnology 0 0.00%
Cannabis 0 0.00%
Description Last Chg %
Cryptocurrency
Bitcoin 0 0.00%
Renewables
CleanTech 0 0.00%
Hydrogen 0 0.00%
Solar 0 0.00%
Technology
Cloud Computing 0 0.00%
Cybersecurity 0 0.00%
E-commerce 0 0.00%
Electric Vehicles 0 0.00%
FinTech 0 0.00%
Robotics & AI 0 0.00%
Semiconductor 0 0.00%
Sports Betting/Gaming 0 0.00%
Video Games/eSports 0 0.00%

ASX Sectors to watch

#1 Hydrogen

The Hydrogen ETF closed at yet another all-time low amid a broader rotation away from risky investments. 

The ETF is now down -12.5% year-to-date and down -37.7% from November 2021 all-time highs. 

Hydrogen demand is expected to expand 44% by 2030, according to the International Energy Agency (IEA).

Its analysis of the current hydrogen pipeline suggests that only circa 18% of 2030 demand will be met.

The recent tech-driven selloff has weighed on speculative hydrogen stocks.

Notable names at risk include: 

#2 Aluminium 

Aluminium prices continued to push the US$2,900 level amid declining inventories and expectations of a large deficit. 

2022-01-17 08 30 23-Window

Source: TradingEconomics

According to TradingEconomics, stocks of aluminium in LME approved warehouses fell more than 50% since March 2021. 

Stocks that have rallied from the recent price surge include: 

#3 FinTech 

The FinTech ETF closed at fresh 18-month lows, weighed by a -2.7% decline from Block and -7.4% decline from payments company Adyen.  

This will send mixed signals towards the local tech sector, as Afterpay is expected to open lower.


Today’s events 

ASX corporate actions occurring today:

  • Ex-dividend: TRA

  • Dividends paid: FOR, KKC, QRI

  • IPOs: VTX 

  • Issued shares: 92E, ACW, AIV, BRN, CAN, CDX, CXO, FDV, GMD, IRE, JRV, MCT, MGF, NOV, POL, RHY, RUL, STK, WAM, WC8

Other things of interest 

  • Quarterly GDP growth (CN): China will release Q4 GDP growth figures at 1:00 PM AEDT 

  • Industrial production (CN): China’s year-on-year industrial growth is forecast to come in at 3.7% according to TradingEconomics. Figures will be released at 1:00 PM AEDT 

  • Retail sales (CN): China will release December retail figures at 1:00 PM AEDT 

 

Written By

Kerry Sun

Finance Writer & Social Media

Kerry holds a Bachelor of Commerce from Monash University and was Vice President of the University Network for Investing and Trading (UNIT). He is an avid swing trader, and drawn to breakouts and technical set ups. Outside of writing and trading, Kerry is a huge UFC fan, loves poker and bouldering.

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