Morning wrap: US stocks extend gains ahead of inflation data, ASX set to surge

ASX Futures (SPI 200) imply the ASX will open 95 points higher, up 1.3%. 

A tech-led rally drove most US stocks higher overnight as investors put recent interest rate concerns behind them.

Wall Street digested another batch of upbeat earnings, reinforcing the view that strong earnings growth could outweigh looming rate hikes.

Key points

• Chipotle Mexican Grill shares jumped 10% after doubling its earnings in 2021. The fast-food chain reported adjusted earnings of US$25.42 per share compared to $10.73 a year ago 

• Cybersecurity software provider Mandiant, Solar stock Enphase and Lyft also rose on quarterly earnings

• Investors are bracing for the US Labor Department’s Consumer Price Index report. The reading is expected to show a 0.4% increase in prices for January and a 7.2% gain compared to last year 

• US markets have so far shown an encouraging bounce, though a lot more is needed to prove we’re truly out of the recent rut

• 60% of US stocks remain below their 200-day moving averages, meaning the trend is still weak or neutral

• Investors aren’t rushing to buy stocks either. Overnight, 82% of US stocks were trading at volume below their usual averages, according to Wallmine

Noteworthy US stocks reporting for the rest of the week:

• Thurs: Twitter, Coca-Cola, Affirm 

• Fri: Under Armour, Apollo

The broad-based rally on Wall Street and SPI futures trading 1.3% higher is pointing to an upbeat open for most ASX sectors.

Here are the ones that could benefit from overnight catalysts:

#1 BNPL 

The tech-led rally helped beaten up fintech stocks like Affirm and Block surge 14.4% and 10.3% respectively.

Affirm is up more than 40% from its late January lows and Block is still trying to stabilise.

This means that Block CDIs (ASX: SQ2) will open sharply higher. Hopefully some positive flow comes through for local BNPL stocks, notably Zip (ASX: Z1P) and Sezzle (ASX: SZL).

#2 Uranium 

The Global X Uranium ETF rallied 7% to close at intraday highs and right on its 200-day moving average. The ETF had declined almost -40% between November highs and late January.

Source: TradingView

To truly rid off the Uranium ETF's recent bearish mood, it needs to follow through with another positive session and close above the 200-day.

Nevertheless, this could translate into a positive session for local uranium names such as: 

• Paladin Energy (ASX: PDN) 

• Boss Energy (ASX: BOE) 

• Deep Yellow (ASX: DYL) 

#3 Lithium and rare earths 

The Rare Earths/Strategic Metals ETF has shrugged off recent selling pressure to bounce almost 10% in the last four sessions. 

According to Benchmark Mineral Intelligence, the price of lithium spodumene has rallied 480% in January compared to a year ago. Prices were fetching US$2,400 a tonne, up from US$1,650 in December. 

The ETF remains 15% away from all-time highs, so don’t expect local large cap names like Allkem (ASX: AKE) and Pilbara Minerals (ASX: PLS) to set record highs too soon.

That said, there are some recent bullish runners towards the small-mid cap end of town, including:

• AVZ Minerals (ASX: AVZ)

• Arizona Lithium (ASX: AZL)

#4 Iron Ore 

BHP (ASX: BHP), Rio Tinto (ASX: RIO) and Fortescue Metals (ASX: FMG) reversed sharply on Wednesday after Chinese regulators vowed to take further measures to ensure stability for iron ore prices. 

Fortescue rallied 1.7% after open before closing -3.6% lower. Looking at the 1-minute chart below, I wonder when the Chinese news was announced ...

Fortescue, 1-minute chart, TradingView

Following the announcement, the most actively traded iron ore futures on China’s Dalian Commodity Exchange plummeted -5.1%. 

Investors should keep an eye out on whether or not the selloff was based on fear, or if any substantial action comes out of China. 

#5 Copper 

Yesterday's morning wrap said the Copper Mines ETF was taking shape and eyeing a potential breakout. 

Overnight, the ETF extended gains, up 3.5% to 8-month highs.

Copper prices also rallied strongly, up 3.9% and testing the upper bound of its stubborn US$4.1/lb to US$4.7/lb trading range.

Global X Copper Mines ETF, TradingView

Notable stocks to watch include:

• Oz Minerals (ASX: OZL)

• Sandfire Resources (ASX: SFR)

ASX corporate actions occurring today:

• Ex-dividend: VUK

• Dividends paid: NIC

• Listing: KLI

• Issued shares: ADX, AHI, ARN, ATU, CNI, DGL, EMP, EPY, FIN, INF, IOD, KLI, MXI, NBI, NWE, PSC, PSI, RNE, SW1, SWK, UWL, VUL, WAM, WQG

Other things of interest 

• US Inflation Rate for January will be released at 12:30 am AEDT on Friday