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

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.

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 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.”

#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.

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 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. 

• South 32 (ASX: S32) briefly hit all-time highs on Tuesday

• Alumina (ASX: AWC) lags behind, around 17% away from October highs

#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.

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:

• Solis Minerals (ASX: SLM) surged 80% on Tuesday after its drilling program discovered "widespread copper sulphides"

• WA1 Resources (ASX: WA1) rallied 25% on its ASX debut

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