Morning wrap: US stocks rally on upbeat earnings, ASX set to rise

ASX Futures (SPI 200) imply the ASX will open 22 points higher, up 0.31%. 

US stocks rallied for a third straight session, bolstered by robust company earnings.

Key points

• Despite stocks rallying for a third-straight session, the market isn't out of the woods just yet

• US trading veteran Mark Minervini tweeted this morning "if you look at some past precedent bottoms like 1998, 2011, 2015 and 2018, you will notice they all staged snap back rallies before ... more time consolidating, or they rallied and went on to make a lower low."

• It’s been a positive quarterly earnings season on Wall Street so far, with 78.5% of S&P 500 companies beating bottom-line expectations, according to FactSet 

• Google parent company Alphabet rose 7% in after-hours trading after reporting revenues of US$75.33bn vs. US$72.17bn expected, according to Refinitiv

• Oil and gas giant ExxonMobil reported its biggest profit in seven years with revenues surging 80% year-on-year. The company’s stock closed 6.4% higher

• On the economic front, the US Labor Department reported a 150,000 increase in job openings to 10.9 million in December. Economists polled by The Wall Street Journal had forecast 10.5 million vacancies

ASX investors should expect a positive open on Wednesday. Sectors that might support the local sharemarket include energy, materials and tech.

▲ Energy

Oil prices edged slightly lower overnight, ahead of the all-important OPEC+ meeting on output. OPEC+ is expected to stick to its plans of increasing output by 400,000 barrels per day in February. However, many group members have struggled to hit their production quotas. 

“Fears of an OPEC+ surprise has many energy traders locked in profits,” said OANDA senior market analyst Ed Moya. 

“WTI crude seems poised to resume its bullish trend as long as the Saudis don’t pull a surprise at the OPEC+ meeting and make a push for a larger increase over output. The Saudis are seeing US drillers are beginning to invest in new wells and that could trigger some market share fears.”

▲ Materials 

There was a broad-based increase in commodity prices overnight including copper, aluminium, nickel and gold. Iron ore prices remain unchanged. 

Investors should expect relatively stable iron ore prices until the end of China’s week-long Lunar New Year holiday on Tuesday, 8 February. 

Encouragingly, the US-listed counterparts of BHP (ASX: BHP) and Rio Tinto (ASX: RIO) rose 2.2% and 3.9% overnight. 

▲ Banks

Major US banks experienced a broad-based rally, with names like JPMorgan, Citi and Wells Fargo up between 1.7% and 3.4%.

Most ETFs closed slightly higher overnight, indicative of a positive session for local sectors.

These ETFs are mostly rebounding from last month's selloff. The bounce off oversold levels is neither bullish or bearish, we have to wait and see if the trend can continue, or if the ETFs will go on to make lower lows.

#1 Nickel

Nickel prices broke out to 11-year highs in early January and prices have held up relatively well.

Nickel prices, TradingEconomics

By comparison, the market’s broad-based selloff has dragged local nickel stocks much lower. Notable names include

• Nickel Mines (ASX: NIC) 

• Blackstone Minerals (ASX: BSX)

• Mincor Resources (ASX: MCR) 

• Panoramic Resources (ASX: PAN) 

#2 Travel 

In Tuesday's morning wrap, we pointed out that the Global Jets ETF has managed to bounce off the $19 level on three separate occasions in the last two months.

US Global Jets ETF, TradingView

The ETF has continued to rally off of recent lows, which could point to more relief buying for local airlines and travel names.

#3 Iron ore 

Shares in the world's largest iron ore producer, Vale, rallied 6.6% overnight. The US-listed counterparts of BHP and Rio Tinto also closed at least 2.2% higher.

This could see some strength come back into local iron ore and steel names including:

• Fortescue Metals (ASX: FMG)

• Champion Iron (ASX: CIA)

• BlueScope Steel (ASX: BSL)

ASX corporate actions occurring today:

• Ex-dividend: DJW, NIC

• Dividends paid: TWR

• Issued shares: AFL, ALA, ANL, AS2, ATC, BEM, CAM, CAV, CGN, CWX, DRE, FGX, FZO, GW1, HCH, HYD, IVR, JAT, KAT, KRM, LNU, MGF, NAC, NSC, NVX, OKR, PNN, RF1, RMI, RXL, SCP, SGLLV, SKF, SPT, SYA, TNR, TPD

Other things of interest 

• ABS building approvals due at 11:30 am AEDT 

• ABS international trade in goods and services due at 11:30 am AEDT