Market Wrap

Morning wrap: US sell-off deepens, ASX set for another tumble

Mon 24 Jan 22, 8:40am (AEST)

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ASX Futures (SPI 200) imply the ASX will open 49 points lower, down -0.7%.

Major US indices continued to crater, with the S&P 500 (large-cap) and Nasdaq (tech) posting their biggest weekly decline since March 2020. 

A bearish mood has been cast over global equity markets. There’s lots of carnage out there as markets attempt to price in looming interest rate hikes and less stimulus.

Overnight summary

Mon 24 Jan 22, 8:40am (AEST)

Name Value Chg %
US Indices
S&P 500 4410.1299 +0.28%
Dow Jones 34,365 +0.29%
NASDAQ 100 13,855 +0.63%
Russell 2000 2,034 +2.29%
Country Indices
Canada 20,571 -0.24%
China 3,433 -2.58%
Germany 15,011 -3.80%
Hong Kong 24,244 -1.67%
India 57,858 +0.64%
Japan 27,131 -1.66%
United Kingdom 7,297 -2.63%
Name Value Chg %
Commodities (USD)
Gold 1,843.90 +0.12%
Iron Ore 129.94 -
Copper 4.462 +1.11%
WTI Oil 84.11 +0.96%
Currency
AUD/USD 0.7154 +0.18%
Cryptocurrency
Bitcoin 51,432 +3.06%
Ethereum 3,429 +0.09%
Miscellaneous
U.S. 10 Year Treasury 1.735 -0.69%
VIX 30 +3.64%

Key points

  • In the past week, the US market has consistently faded into close. A snippet from last Friday's morning wrap, the “bearish price action suggests investors are selling into strength instead of relief buying or buying the dip” 

  • The Nasdaq correction continues to deepen, down -5.1% since its close below the 200-day moving average last Tuesday 

  • Netflix shares added further insult to injury for the struggling tech sector after sliding -21.8% on slowing subscriber growth. From a revenue perspective, the streaming service posted its slowest year-on-year revenue since 2012

  • The S&P 500 closed right on its 200-day moving average. The index needs to bounce in the next few sessions to stay out of trouble

  • Bitcoin also faltered amid the flight to safety, down -13.5% since last Friday to a 7-month low

2022-01-24 08 14 03-Window

Nasdaq and S&P 500, daily chart, TradingView


US Sectors

Monday, 24 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

Negative ASX SPI futures and the sea of red for US markets suggests another difficult session for local sectors.

▲ Consumer staples 

Defensive pockets of the market including real estate and utilities have managed to hold up better than most. 

US retail names like Walmart, Home Depot and Costco all fell less than -1%. 

▼ Consumer discretionary

In stark contrast to necessities, large cap discretionary names headlined the losses including Amazon (-5.9%), Netflix (-21.8%) and Tesla (-5.3%).   

▼ Materials 

Mining stocks tumbled despite commodity prices like iron ore and copper holding up relatively well. This goes to show just how bearish the markets have become.

Iron ore prices continued to march north, up another 2.8% to US$137.4/t. Prices have rallied 8.4% in the past week. 

The US-listed counterparts of BHP (ASX: BHP) and Rio Tinto (ASX: RIO) fell -4.5% and -2.4% respectively. 


Industry ETFs

Monday, 24 January 2022

Description Last Chg %
Commodities
Aluminum 63.3835 +1.16%
Copper Miners 39.17 -2.40%
Gold 171.09 +0.53%
Lithium & Battery Tech 78.82 -0.01%
Nickel 31.95 -6.42%
Strategic Metals 104.7 -1.01%
Steel 52.45 -0.21%
Silver 22.38 -1.21%
Uranium 20.75 +0.10%
Industrials
Aerospace & Defense 102.22 +0.68%
Global Jets 20.86 -0.58%
Healthcare
Biotechnology 128.68 +0.92%
Cannabis 4.9 -1.63%
Description Last Chg %
Cryptocurrency
Bitcoin 24.1 -2.57%
Renewables
CleanTech 14.7 -1.84%
Hydrogen 16.2 -3.70%
Solar 63.74 +1.07%
Technology
Cloud Computing 22.36 +1.92%
Cybersecurity 27.93 +0.64%
E-commerce 24.22 +0.62%
Electric Vehicles 28.33 -0.46%
FinTech 33.06 -0.79%
Robotics & AI 29.49 -0.64%
Semiconductor 472.64 +1.14%
Sports Betting/Gaming 21.27 -0.75%
Video Games/eSports 61.99 -1.40%

ASX Sectors to watch

It was absolute carnage across specialty ETFs, notably the ones that had a strong run up in 2021. 

#1 Uranium

Last Friday, we flagged that the Uranium ETF “needed to bounce off the 200-day to stay out of trouble”. 

Unfortunately, the ETF did not hold up, sliding to a 5-month low on heavy volume.

5.6m shares were traded compared to a 20-day average of just 2.2m. 

uravol

Global X Uranium ETF, daily chart, TradingView

Most local names posted heavy losses on Friday, with Paladin Energy (ASX: PDN) down -10.9%.

With the ETF rolling over, this could flag more negative flow for ASX-listed uranium stocks.

#2 Lithium and rare earths 

The Lithium ETF closed just below its 200-day moving average. From a technical perspective, if it struggles to bounce in the next few sessions, it could begin to roll over.

lit

Global X Lithium ETF, daily chart, TradingView

That said, lithium prices continued to go from strength-to-strength. According to Fastmarkets, lithium prices rose last week amid "firm demand, tight supply and strength from China's lithium carbonate market".

Let's see if underlying fundamentals can prevail against a bearish market.

#3 Fintech and cloud

The Fintech and Cloud ETFs both fell around -4% to at least 16-month lows. 

Investors are fleeing from fast growing technology stocks ahead of the four interest rate hikes expected from the US Federal Reserve. 

This could flag another challenging session for local tech names including:

#4 Nickel

Nickel prices hit 12-year highs last week as the supply-tight narrative continues to take shape.

2022-01-24 08 33 04-Window

Nickel prices, TradingEconomics

It will be difficult to gauge whether or not bullish nickel prices can outweigh the broader market's weakness.

Notable ASX nickel names include:

 

Today's events

ASX corporate actions occurring today:

  • Ex-dividend: TGA, MIR

  • Dividends paid: EDC

  • IPOs: VMM

  • Issued shares: AZL, BCT, BEM, BIO, CHN, COB, CY5, FCT, FDV, GSS, HGO, IMA, JAT, MCE, MEL, MGF, MNS, MXI, NAB, PGY, RNU, SBW, SCL, SGH, VEN, VMM, WAM, WHK

Other things of interest:

  • Australia manufacturing PMI: local manufacturing purchasing managers index (PMI) figures will be released at 9:00 AM AEDT 

  • US manufacturing PMI: likewise, US PMI figures will be released on Tuesday, 1:45 AM AEDT

Written By

Kerry Sun

Finance Writer & Social Media

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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