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

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.

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

Nasdaq and S&P 500, daily chart, TradingView

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. 

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. 

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.

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:

• Xero (ASX: XRO)

• WiseTech Global (ASX: WTC)

• Altium (ASX: ALU)

#4 Nickel

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

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:

• Blackstone Minerals (ASX: BSX) 

• IGO (ASX: IGO) 

• Panoramic Resources (ASX: PAN) 

• Mincor Resources (ASX: MCR) 

• Nickel Mines (ASX: NIC)

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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