Morning Wrap: US stocks close at one-month highs, bank earnings begin, ASX to bounce

The S&P 500 crossed its 200-day moving average on Friday, thanks to traders who believe the Federal Reserve may have just pulled off a soft landing. We’re also on milestone watch as the ASX could hit an eight-month high today. Jobs data tops the local economic calendar this week while a whole raft of overseas inflation data should give us a better idea of the global fight against public enemy number one.

Let’s go.

MARKETS

• All three US indices had weekly gains of over 2%

• US 10-year yields rose 5 basis points to 3.5%, yields are down 38 basis points so far in January

• Bets are increasing on a Federal Reserve cut by as soon as May or June, according to the CME Group’s FedWatch tool.

• Most major commodities were higher across the board, with gold inching again towards US$2,000/ounce

US EARNINGS

JP Morgan shares rose more than 2% after it posted fourth-quarter profit and revenue that topped expectations. Profit jumped 6% to $11 billion in the past year with interest income surging 48% thanks to higher rates.

Bank of America rose more than 2% on Friday after it beat estimates on the top and bottom lines for the fourth quarter. A sharp rise in net interest income helped the results but CEO Brian Moynihan also said that a mild recession was the firm’s baseline assumption for 2023.

In contrast, Citigroup reported a 21% decline in fourth-quarter profits despite a record fourth quarter for fixed income. Wells Fargo also reported shrinking profits with its net income tumbling 50% to $2.86 billion. 

And among the non-banks… Delta Airlines stock edged 3.5% lower after the company said in its outlook that higher labour costs would hurt its first-quarter profits. Delta topped analysts’ expectations on the top and bottom lines for the fourth quarter.

The Delta results follow a similarly strong earnings projection from American Airlines. It expects fourth-quarter revenue to rise as much as 17% from 2019.

WORLD NEWS

Tech’s Slump Camouflages a Rally Sweeping Across Most of S&P 500 (Bloomberg)

Wall St banks stockpile funds, see uncertain outlook and competition for deposits (Reuters)

US stockpiles natural gas as warm winter temperatures cut demand (FT)

BOJ to buy more government bonds Monday after record purchasing spree (Nikkei Asia)

ECONOMY

Japanese PPI inflation is due out today, with the Bank of Japan’s latest monetary policy decision and CPI out later this week. We know that inflation is rising and we know the Bank has already tweaked its unconventional monetary policy. But will it do even more? We’ll find out on Wednesday.

Source: CNBC

Most of the top-line data is coming in the middle of the week but a famous annual event does kick off today - the World Economic Forum in Davos. The meeting, held at one of Switzerland’s most expensive ski resorts, will once again focus on the war in Ukraine. But this time, they will also need to consider the COVID-19 reopening in China as well.

50 heads of state are expected to take part, as are 19 central bank presidents or governors. I hope they enjoy their $50 burritos and $22 french fries (If you think I’m kidding, read this.)

Reported by Chris Conway at Livewire Markets.

The Aussie market enjoyed a solid end to a strong week on Friday, adding 48 points to settle at 7328. The ASX 200 rose four out of the last week's five sessions and added 218 points for the week. Can the bulls maintain the rage this week? Well, if commodity prices keep rallying, as they did on Friday night, then it's possible. The 7400 level will be the main test for the bulls.

US equities finished higher in Friday trading, ending near best levels. Major equity indices logged a second straight weekly gain to start 2023.

Sectors to watch

• In the US on Friday night, banks (earnings), department stores, precious metals, insurance, hotels, cruise lines, and building products were among the stronger areas. Autos (TSLA), airlines were some of the worst performers.

• Gold cleared US$1900 an ounce on Friday night, for the first time since late April. In the process, a golden cross technical pattern was created (50-day moving average crossing above the 200-day moving average). Bullion finished up US$22.90 (+1.2%), settling at $1921.70 an ounce.

• Our commodities heavy market should continue to find support. In addition to gold, iron ore (+0.9%) and oil (Brent +1.5% and WTI +1.9%) continued to rally.

ASX corporate actions occurring today:

• Trading ex-div: None

• Dividends paid: GLG Corp, $0.02182, Australian Unity Limited, $1.2697

• Listings: Today - Dynamic Metals Limited, 12pm, tomorrow – ACDC Metals Limited, 1pm.

Economic calendar:

• AU – None

• UK – Governor Bailey speaks @ 2am AEDT