Morning wrap: US stocks fade into close, ASX set for a soft open

ASX Futures (SPI 200) imply the ASX will open 11 points lower, down -0.16%.

All three major US indices closed in negative territory amid a last-minute selloff.

Key points

• It was a relatively quiet overnight session with lesser-known stocks like Tyson Foods, Hasbro and medical device company Zimmer Biomet reporting December quarterly results 

• So far 56% of S&P 500 (large cap) companies have released quarterly earnings, with 77% beating earnings estimates, according to FactSet 

• However, not all earnings are made equal with mega cap stocks able to swing the entire market on better or weaker-than-expected earnings

• 54% of US stocks closed higher last night as the market struggled for direction. However, breadth is clearly lacking as 65% of US stocks are currently trading below their 200-day moving averages

• US consumer price index data for January is due on Friday, with expectations that the inflation reading will come in at 7.2% higher than last year 

• An inflation surprise plus last Friday’s stronger-than-expected jobs report could see the US Federal Reserve get even more aggressive with interest rates. Markets are now pricing in a 35% chance that the Fed will hike rates by 50 basis points in March 

This week remains another big week for company earnings, notably Dow Jones (blue chip) components. What we’re watching this week: 

• Tues: Pfizer, Peloton, BP, Chipotle, Lyft 

• Wed: CVS, Uber, Disney 

• Thurs: Twitter, Coca-Cola, Affirm 

• Fri: Under Armour, Apollo

All but one US sector was trading in positive territory up until the last hour of trade.

With SPI futures pointing to a modest decline for the ASX, local sectors could be poised for a soft open.

Notable overnight sectors include:

▲ Energy

Oil prices lost a little momentum after rallying through US$90 a barrel for the first time in almost 8-years. Despite relatively unchanged oil prices, US energy stocks like ExxonMobil and ConocoPhillips both rallied more than 1.2%.

“Biden has an additional incentive to reach a deal (US and Iran nuclear talks), given the sky-high crude prices and what a deal could do to ease the tightness in the market just before the midterms,” said Oanda senior market analyst Craig Erlam. 

“He’s tried a coordinated SPR release and let’s be honest, it achieved very little. This could make a real difference at a time when crude appears destined for US$100 and OPEC+ can’t hit their output targets.”

▼ Tech

Facebook-parent Meta, Alphabet and Netflix posted heavy declines overnight, down -5.1%, -2.9% and -2% respectively. 

Alphabet shares have declined -8% since the release of its better-than-expected earnings last Tuesday.

Investors might want to be careful heading into ASX reporting season - even the most impressive earnings can get sold into.

#1 Travel 

Travel stocks rallied on Monday after Prime Minister Scott Morrison said international borders are set to reopen to those who are fully vaccinated. This is expected to come into place on Monday, 21 February. 

Earlier this month, we observed the Global Jets ETF and its tenacity to bounce off the $19 level on three separate occasions in the last two months. 

US Global Jets ETF, TradingView

With omicron turning out to be a lesser concern and the imminent reopening of international borders, could local travel names rise to the occasion?

#2 Nickel 

Nickel prices advanced to a one-week high after hitting 11-year highs in January. 

Nickel prices, TradingEconomics

The recent pullback in nickel prices was in-line with the broader market selloff which wiped off 10-15% off most major global indices. 

Nickel's ability to rebound quickly could put local ASX players back into the spotlight.

• Nickel Mines (ASX: NIC) 

• Blackstone Minerals (ASX: BSX)

• Mincor Resources (ASX: MCR) 

• Panoramic Resources (ASX: PAN) 

#3 Iron ore

There’s a lot of mixed news to digest as China returns from its week-long Lunar New Year holiday. 

Fastmarkets said that “there have been more inquiries for seaborne cargoes since the start of business on Monday … this signals that iron ore prices will most likely trend higher, at least for this week.” 

That said, upside was said to be capped amid ongoing steel restrictions.

“Some mills are still facing these restrictions, while market chatter suggests that steel mills in Qinhuangdao have been issued with additional sintering restrictions from Tuesday until February 20.” 

On top of that, the global steel purchasing managers index is slipping into contraction (below 50).

Despite the looming headwinds, iron ore prices marched 1.9% higher overnight to US$149.40 a tonne.

The US-listed counterparts of BHP (ASX: BHP) and Rio Tinto (ASX: RIO) both rallied 3.5% and 3.7% overnight.

#4 BNPL 

Local BNPL stocks might continue to struggle after Block declined -5.6%.

Affirm shares hit intraday highs of 9.7% before closing just 0.4% higher.

ASX corporate actions occurring today:

• Ex-dividend: None today

• Dividends paid: ASW, GCI, MOT, MXT

• Listing: WA1

• Issued shares: 1AD, ADT, AGE, AGY, BEN, BUD, CCR, CLE, CLZ, CM8, CNB, CXO, DVP, EFE, EN1, EXO, FG1, FHS, FLT, FZO, GRX, WA1

Other things of interest 

• NAB Business confidence for January will be released at 11:30 am AEDT

• US balance of trade for December will be released on Wednesday, 12:30 am AEDT