Morning Wrap: US stocks retreat, Alibaba to split US$220bn empire into six units, ASX to fall

A rather uneventful session on Wall Street overnight, Alibaba plans to split its empire into six main units that will individually raise funds and explore initial public offerings, Australian retail sales show still-solid demand for food related industries but a pullback in discretionary spend and Australia's monthly CPI indicator is due at 11:30 am AEDT.

Let's dive in.

S&P 500 SESSION CHART

A choppy yet uneventful day (Source: TradingView) 

MARKETS

• S&P 500 closes lower but above session lows of -0.65%

• Uneventful day where the market is waiting for more meaningful catalysts as the banking sector begins to stabilise

STOCKS

• Alibaba (+14.3%) announced plans to split into six business groups (CNBC)

• Occidental Petroleum (+4.3%) shares rallied after Warren Buffett’s Berkshire Hathaway bought another 3.7m shares for US$216, raising its ownership to 23.6%

• Apple (-0.4%) rolls out new BNPL service "Apple Pay Later" (CNBC)

• Lucid (-7.3%) plans to lay off 18% of workforce (Business Insider)

BANKING CRISIS

• Treasury officials pledge to protect deposits if necessary (Bloomberg)

ECONOMY

• Australian retail sales growth cool as rate hikes crimp spending (Bloomberg)

• South Korea retail sales up 7.9% in February and return to pre-Covid levels (Business)

• NY Fed survey shows sharp drop in short-term home price expectations (NY Fed)

Deeper Dive

S&P 500: Analyst thoughts and weightings

A few interesting comments from some pretty big names:

• JPMorgan's Kolanovic: “Our view remains that Q1 will likely mark the high point for equities this year ... commercial real estate stresses appear to be compounding, amplified by banking shocks ... Several geopolitical crises are building ... Bond yields whipsawed ... by very poor liquidity conditions.”

• JPMorgan: “Why are equities holding up so well? ... The weightings of mega cap tech names have helped prop up the S&P 500 and the banking crisis has triggered a rotation” into tech.

• Morgan Stanley's Mike Wilson: “Given events of past few weeks, guidance looking more and more unrealistic, and equity markets are at greater risk of pricing in much lower estimates ahead of any hard data changes ... bond market pricing recession, S&P 500 will soon enough."

• Goldman Sachs: “Our baseline expectation is that reduced credit availability will prove to be a headwind ... not a hurricane that pushes the economy into recession. ... we have moved our subjective probability that the economy enters a recession in the next 12 months back up to 35%.”

Broker Research: A pinch of salt

Twitter is one of my favourite sources for market insights and entertainment. I came across this interesting snippet about broker notes.

Source: @JKoozi1

Here are some of my personal thoughts about broker notes:

• Not all research notes are made equal or have the same impact. For example, Macquarie posted a bullish graphite note on Monday which initiated coverage of Syrah with a Buy rating, sending the stock 4.7% higher. Though most broker notes tend to see very little impact on share prices

• With that in mind, you kind of need to research the research and understand whether or not that specific broker/note can impact the market

• The analysis and insights are interesting and as the above snippet says, they're smarter, well researched and have more resources/sources to pull from

• However, the ratings and share price targets is often the questionable part

• In a bear market, ratings and share price targets tend to try to be positive and progressively shift lower with the market, which kind of defeats the purpose of it being a price target

Sectors to Watch

Not a whole lot happened overnight. The banking crisis is starting to stabilise (for now) and it's a relatively quiet week on the economic data front. Australia's monthly inflation indicator will likely be a major catalyst for the local market and consensus expects CPI to ease from 7.4% year-on-year in January to 7.1% in February.

In terms of sectors to watch:

• Lithium: Today is the day after the big Liontown takeover catalyst. Do we see more short covering or perhaps a little pullback? It will be interesting to see what kind of implications this takeover has for the sector.

• BNPL: Apple launched Apple Pay Later in the US on Tuesday. Affirm, the largest US-listed BNPL company, fell 7.3% while Block eased 1.0%.

• Energy: Oil prices rose 1.0% overnight after a massive 5% rally the day before. Energy was the best performing sector on the S&P 500, up 1.45%. Do we see some more strength for local oil and gas names?

ASX corporate actions occurring today:

• Trading ex-div: Emeco Holdings (EHL) – $0.013, Civmec (CVL) – $0.02 

• Dividends paid: Fortescue Metals (FMG) – $0.75, Sequoia Financial (SEQ) – $0.007, Worley (WOR) – $0.25, Universal Store (UNI) – $0.14, Northern Star (NST) – $0.11, Aurizon (AZJ) – $0.07, Santos (STO) – $0.224, ASX (ASX) – $1.16

• Listing: Leeuwin Metals (LM1)  

Economic calendar (AEDT):

• 11:30 am: Australia Monthly CPI Indicator

• 5:00 pm: Germany GFK Consumer Confidence