Market Wrap

Morning wrap: US stocks higher ahead of key inflation data, ASX set to rise

Wed 09 Feb 22, 8:34am (AEST)

Stocks in article

fmg
MktCap:
-
bhp
MktCap:
-
flt
MktCap:
-
s32
MktCap:
-

Share article

ASX Futures (SPI 200) imply the ASX will open 18 points higher, up 0.25%.

US stocks closed higher as investors digested another batch of strong December quarter earnings.

Overnight summary

Tue 08 Feb 22, 9:34pm (AEST)

Name Value Chg %
US Indices
S&P 500 4521.54 +0.84%
Dow Jones 35,463 +1.06%
NASDAQ 100 14,194 +1.28%
Russell 2000 2,045 +1.61%
Country Indices
Canada 21,377 +0.67%
China 3,453 +0.67%
Germany 15,242 +0.24%
Hong Kong 24,329 -1.02%
India 57,809 +0.33%
Japan 27,285 +0.13%
United Kingdom 7,567 -0.08%
Name Value Chg %
Commodities (USD)
Gold 1,828.10 +0.35%
Iron Ore 150.11 -
Copper 4.475 +0.27%
WTI Oil 89.67 -1.81%
Currency
AUD/USD 0.7143 +0.25%
Cryptocurrency
Bitcoin (AUD) 61,659 -0.96%
Ethereum (AUD) 4,356 -2.07%
Miscellaneous
U.S. 10 Year Treasury 1.954 +1.98%
VIX 22 -5.25%

Key points

  • Harley-Davidson shares jumped 15% on a surprise profit result. Chegg, Lyft, Amgen and Pelton all rose after quarterly earnings

  • Pfizer shares fell -3.2% after missing fourth-quarter earnings expectations. The drugmaker said it expects to generate US$32bn from its covid vaccine and US$22bn from its antiviral covid treatment pill in 2022  

  • So far, around 60% of S&P 500 (large cap) companies have reported, with 77% beating earnings estimates, according to Factset 

  • Bond yields continued to push 2-year highs overnight. The US 2-year Treasury yield - which reflects short-term interest rate expectations - closed at 1.34%

  • On Friday, the US Labor Department will release January’s consumer price index data. The reading is expected to show a 0.4% on-the-month increase and a 7.2% gain compared to last year

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

  • Wed: CVS, Uber, Disney 

  • Thurs: Twitter, Coca-Cola, Affirm 

  • Fri: Under Armour, Apollo


US Sectors

Tue 08 Feb 22, 9:34pm (AEST)

Sector Chg %
Communication Services -0.10%
Consumer Discretionary +1.50%
Consumer Staples +0.33%
Energy -2.12%
Financials +1.38%
Health Care +0.79%
Sector Chg %
Industrials +1.00%
Information Technology +1.28%
Materials +1.57%
Real Estate -0.80%
Utilities +0.11%

US sectors closed mostly higher overnight, combined with the positive SPI futures, the ASX could be in for an encouraging session.

▲ Consumer Discretionary

US travel and retail stocks rose strongly overnight, led by names including Royal Caribbean Cruises (5%), Bath & Body Works (4.5%) and Etsy (4.2%). 

Earnings from Norwegian Cruise Line helped boost sentiment for travel names after the cruise operator said it expects to be profitable in the second half of 2022

▼ Energy 

Oil prices cooled off overnight as the US and Iran continue talks over a nuclear deal that could see more than a million barrels come online

“It couldn’t come at a better time given how tight the market is, not to mention politically for President Biden ahead of the midterms. Voters may not take too kindly to the prices at the pump,” said Oanda senior market analyst, Craig Erlam. 

“The cost-of-living crisis is painful for many households and businesses and triple-digit oil just piles on the misery. If a deal can be struck, it may still be avoided and afford the rest of OPEC time to hit its quotas. US$100 looked inevitable but this could change that.”


ASX Sectors to watch

#1 Iron ore 

Iron ore prices continued to inch higher overnight, up 0.4% to US$149.95 a tonne. 

Market sources told Fastmarkets that “production and sintering restrictions were heard to be imposed on mills located in Shandong and Tangshan from Tuesday evening onwards.” 

The restrictions are expected to last until Friday, 11 February. 

Looking more towards the medium-term, market participants said that China’s real estate sector has been the main driver buoying iron ore prices. It is believed that the “Chinese government might introduce stimulus to support the real estate sector.” 

BHP (ASX: BHP) and Rio Tinto (ASX: RIO) is expected to open slightly higher on Wednesday after their US-listed counterparts rose 1% and 1.9% respectively.

#2 Travel

It looks like the travel re-rate is upon us. 

Local names like Flight Centre (ASX: FLT), Webjet (ASX: WEB) and Qantas (ASX: QAN) are up a respective 17%, 15% and 11% in the last three trading sessions. 

US travel names rallied across the board including airlines, travel booking systems and cruise liners.

The US Global Jets ETF is running into the 200-day moving average, which could see some degree of resistance/selling pressure.

JETS ETF 2022-02-09
Source: TradingView

Nevertheless, there's a lot of momentum behind these stocks, especially if earnings season can validate the recent run.

#3 Aluminium 

Aluminium prices rallied over US$3,200 a tonne amid concerns over falling inventories and tight supply.

Aluminium price 2022-02-09
Aluminium prices, TradingEconomics

Aluminium stockpiles in LME-registered warehouses have fallen to the lowest level since 2007 at 767,700 tonnes, down from almost 2 million tonnes last March, according to Reuters. 

#4 Copper 

The Copper Miners ETF is taking shape after the recent market correction. Investors should keep an eye out if the ETF can break above the $40 level.

COPX ETF2022-02-09
Source: TradingView

Copper prices remain range bound between lows of US$4.1/lb and highs of US$4.7/lb. Prices currently sit at the mid-point, trading at US$4.47/lb.

There isn't too much action towards the med-large cap end of town. Names like Oz Minerals (ASX: OZL) and Sandfire (ASX: SFR) are mostly trading sideways.

There has been no shortage of big winners for copper explorers including:


Today's events

ASX corporate actions occurring today:

  • Ex-dividend: AFI, EZL, FSI, RMD

  • Dividends paid: CNI, NBI, TGA

  • Issued shares: 14D, ADO, ARV, AVR, BBC, BNZ, BXB, CAY, CL1, CLI, CMM, DRX, ESS, FGR, FIJ, HXG, IVO, JRV, KLL, LCK, MAY, MOT, MXT, NAB, NMR, OPY, PAB, PIC, PSI, RMC, RML, RTG, SPQ, THR, TLX, TSO, WAM, XRO

Other things of interest 

  • Westpac Consumer Confidence for February will be released at 10:30 am AEDT

 

Written By

Kerry Sun

Finance Writer & Social Media

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

Get the latest news and media direct to your inbox

Sign up FREE