Morning Wrap: US rally loses steam, Goldmans cuts jobs, ASX to open flat

US stocks extended Friday’s gains, thanks to an uplift in sentiment from the most recent jobs report. Reporting from Bloomberg suggests Goldman Sachs will be cutting its workforce just as it gets set to report earnings. Semiconductor chip stocks are higher off the back of some broker upgrades. And crude oil prices also finished the New York session higher - but is it all as simple as China reopening to the world?

Let’s go.

MARKETS

We think this chart sums it up.

• 5 S&P 500 sectors finished in the green, five finished in the red, and one was unchanged.

• Technology stocks led the gains, up 1.4% while health stocks led the declines.

• The US 10-year yield dropped another 3 basis points to 3.539%.

• 55% of stocks advanced

• 50% of stocks traded above the 200-day moving average

STOCKS

Shares of Tesla (TSLA) rose 8% Monday despite the company facing protests in China from owners over price cuts. In related news, Elon Musk has urged a Californian judge to shift a shareholder lawsuit trial out of San Francisco because he says negative local media coverage has biased potential jurors against him.

Zillow (ZG) shares gained nearly 10% after Bank of America double upgraded the stock to BUY, citing its improved growth outlook despite a challenging macroeconomic environment.

Wells Fargo named AMD (AMD) and rival NVIDIA (NVDA) as two top picks in the semis space. Both shares finished the session up more than 7% each.

AstraZeneca (AZN) will buy U.S.-based drug developer CinCor Pharma (CINC) for up to $1.8 billion to increase its stock of heart and kidney drugs. The price represents a 121% premium to CINC's closing price on Friday.

WORLD NEWS

Goldman to Cut About 3,200 Jobs This Week After Cost Review (Bloomberg)

Brazilian troops clear pro-Bolsonaro camp after protesters storm capital (Reuters)

Daly becomes latest Fed official to raise prospect of 0.25 point rate rise (FT)

In the Philippines, Onions Are Now More Expensive Than Meat (TIME)

ECONOMY

Apart from a slew of Tier 3 data, there were two lots of Federal Reserve speak overnight. First, Atlanta Fed President Raphael Bostic, argued the case for not cutting interest rates in 2023.

“Three words: a long time … I am not a pivot guy. I think we should pause and hold there, and let the policy work”

San Francisco President Mary Daly argued a similar point. In a conversation with the Wall Street Journal, she argued that the Fed will have to keep going until they are sure the job is absolutely done.

“I think something above 5 is absolutely, in my judgement, going to be likely.”

Neither Daly nor Bostic are voting members on the Federal Reserve this calendar year, but have been in the past. 

QUICK BITES

Ben Carlson, who runs the institutional portfolios of New York-based Ritholtz Wealth Management, has updated a matrix I’m sure you’ve all seen before - which asset classes performed the best and worst in a calendar year. While the findings probably won’t surprise you, it’s still interesting to look at the change in market leadership.

Reported by Chris Conway of Livewire Markets.

The Aussie market added 41 points (+0.6%) yesterday with nine of 11 sectors finishing higher. Energy, mining and banks were the major winners. It was the fourth consecutive winning session for the ASX 200 and, as mentioned yesterday, the technical picture is looking constructive.

As highlighted in the chart below, the index is not far away from forming an uptrend – the classical definition of an uptrend, that is. The classical definition is a series of unbroken higher lows and higher highs.

We already have a higher low, i.e. the swing low from early January. If the bulls can really get going and clear the late November/early December swing high just shy of 7400, then a new uptrend we shall have.

So, what has been driving the market over this period? Undoubtedly, it has been the materials sector, which has just broken higher and is trading at levels not seen since early last year.

For the moment, it seems the bull run in commodities is not over. Also, note the correlation between the ASX 200 and the materials sector. It seems for the moment that where the market goes will depend heavily on where commodities go.

Sectors to watch

• It was a bit of a nothing night on Wall Street in the end, with early gains fading into the close. There also weren’t any major moves in commodity markets. Oil was the biggest mover, up 1.2%.

• In the US overnight, autos (particularly EVs), semis, oil services, airlines, trucking, and software were among the big gainers. Pharma, biotech, department stores, and insurance were the laggards.

• Coal miners could come under pressure today after US coal prices plunged from record highs. Coal prices in the US have fallen between 30% and 45% over the past week. The Australian benchmark price has declined 6.6% since the start of the year, and the European benchmark is down 4.2%. The Aussie price has fallen despite recent rumours that China is about to lift the ban on AU coal imports.

ASX corporate actions occurring today: Trading ex-div: Premier Investments (PMV); 79 cps Dividends paid: None Listings: None

Economic calendar: Japan – Governor Kuroda speaks US – Fred chair Powell speak tonight, 1 am AEDT