Morning wrap: US stocks extend tech led rally, ASX set to follow

ASX Futures (SPI 200) imply the ASX will open 42 points higher, up 0.6%.

US stocks bounced for a second consecutive session, once again led by recovering tech stocks.

Despite closing January on a more positive note, the S&P 500 (large cap) still logged its worst month since the March 2020 selloff.

Key points

• The S&P 500 and Dow Jones (blue chip) have both reclaimed their 200-day moving averages, keeping the long-term upward trend intact 

• Despite the market rallying for a second straight session, investors should remain cautious. Sentiment remains bearish and there’s no shortage of stocks down 40-80% from last year’s highs

• The markets are now pricing in at least five 25 basis point interest rate hikes by year-end 

• Tech shares have been the most hard hit as higher rates expose lofty valuations and raises funding costs 

US AAII Investor Sentiment Survey

▲ Consumer discretionary

Amazon lifted the sector higher after rallying 3.9%.

Other notable winners include Etsy (7.7%), Expedia (5%), eBay (4.4%) and Royal Caribbean Cruises (4.4%).

▲ Tech

Netflix and Spotify both rallied more than 10% following an upgrade from Citi. The broker said that the recent selloff represents an attractive buying opportunity. Before today’s rebound, Netflix was down -36% in January while Spotify was down -26%.

Tesla was another recipient of a broker upgrade, up 10.7% by market close. Credit Suisse upgraded the stock to outperform, saying the broader market pullback had brought Tesla into oversold territory.

This week is another big week of tech-oriented earnings. What we’re watching this week: 

• Tues: Alphabet, PayPal, Starbucks, ExxonMobil, AMD

• Weds: Meta, Spotify

• Thurs: Amazon, Ford

▲ Materials

The US-listed counterparts of BHP (ASX: BHP) and Rio Tinto (ASX: RIO) fell -0.9% and -2.4% respectively, going against the market's broad-based rally.

Iron ore prices fell rather substantially, down -4.25% to US$141.75 a tonne.

Most traders believe that iron ore prices should stay relatively stable until the end of China's Lunar New Year holiday on February 8, according to Fastmarkets. 

Iron ore sentiment might be weighed by an announcement from China’s National Development and Reform Commission (NDRC) last Friday, vowing to strengthen oversight of iron ore prices and crack down on speculation. 

#1 Tech

The FinTech, Cloud and eCommerce ETFs all closed at least 4.9% higher. Wall Street’s tech-led rally could see another positive session for local names.  

Notably, US-listed BNPL players like Block and Affirm continued to bounce, up 6.4% and 10.2% respectively. This could drive another positive session for local players including: 

• Zip Co (ASX: Z1P) 

• Sezzle (ASX: SZL) 

#2 Travel 

The Global Jets ETF has hovered close to 14-month lows on three separate occasions in the past two months. 

Encouragingly, its managed to bounce off the low $19 mark each and every time.

US Global Jets ETF, TradingView

Most US airlines rallied between 3-5% overnight. While other travel names including cruise line operator Carnival Corp, Airbnb and Expedia closed the session 4.4%, 5.1% and 7.8% higher respectively.

#3 Hydrogen 

The Hydrogen ETF topped the leaderboards as investors returned to more speculative pockets of the market.

Before today’s bounce, the ETF had declined -50% from November 2021 highs. 

This could see some positive flow for local names, notably Hazer (ASX: HZR). 

ASX corporate actions occurring today:

• Ex-dividend: AAA, NBI, 

• Dividends paid: None today

• IPOs: APS*

• Issued shares: ADO, AGE, AGY, AHX, AM7, AQX, ARO, ARR, AZI, BET, CAM, CBE, CHK, CIP, CIW, CNB, COB, COF, CPH, DKM, DRX, DUB, EMD, FZO

Other things of interest 

• ABS lending indicators at 11:30 am AEDT

• ABS retail trading at 11:30 am AEDT

• RBA interest rate decision at 2:30 pm AEDT

The RBA is expected to keep rates on hold at 0.1%