Morning Wrap: US stocks sink on debt ceiling concerns, Netflix surprises, ASX to open flat

Here we go again. The US Treasury has begun special measures once again to prevent the world’s largest economy from defaulting on its debt. So will the year kick off with yet another debt ceiling squabble? Meanwhile, the US earnings season rolls on with Netflix recording a huge beat in new paid subscribers. And you won’t believe how much Twitter lost in advertising revenues since Elon Musk took over in October. 

Let's go.

MARKETS

• The Dow Jones is now down year-to-date after today’s losses.

• The US 10-year yield decreased another 13 basis points to 3.4%, indicating even more buying into safe havens.

• The US Dollar Index fell 0.3% to 102.06

• Gold and oil were up more than 1% in New York trade.

US EARNINGS

Netflix shares soared in the after hours following a huge beat in net subscriber additions. The street was looking for 4.5 million extra customers, and Netflix delivered in excess of seven million. While the $7.85 billion revenue figure was in line with estimates, the number of extra customers is what traders were eyeing the closest. Looking forward, the company plans to reinstate share buybacks this calendar year.

In contrast, Nordstrom shares fell sharply after missing big time on its earnings guidance. The street was looking for a range between $2.30 and $2.60, but the company said it was only looking at earnings per share between $1.50 and $1.70. (Nordstrom won't report its actual earnings until March.)

Norwegian Cruise Line shares sunk more than 6% after the cruise ship operator said that it will report a net loss for the fourth quarter and full year of 2022, as well as the first quarter of 2023.

Shares in Alcoa fell 4.6% on Thursday after the company’s adjusted EBITDA missed Wall Street estimates. It also expects total alumina shipments to decline year over year in 2023.

WORLD NEWS

• Futures and options flows betting on Fed stopping short of 5%, in spite of recent Fedspeak (Bloomberg)

• Treasury says it has begun taking extraordinary measures after hitting borrowing limit (FT)

• Here’s what Twitter lost in advertising revenue in the final months of 2022 (Reuters)

• ACCC carpets gas producers as Santos posts record revenues (AFR)

ECONOMY

US weekly jobless claims came in at 190,000 - an indication that the labour market is still very tight stateside even with plenty of headlines around the positions major companies will have to cut. 

The Philly Fed Manufacturing Index, which has been known to be a leading indicator for recessions and activity during depressed periods, came in negative but better than expected.

CHART OF THE DAY

Today’s chart comes from Jurrien Timmer at Fidelity. It shows the forward P/E for the S&P 500, along with three estimates of the market’s intrinsic value. These include the 2-year nominal yield and the 10-year real yield (nominal plus inflation). At a forward P/E of 17.55x (as of last Friday), the market is trading above its fair value. Conclusion? The market’s still expensive - and probably has not really priced in a recession.

Source: Jurrien Timmer, Fidelity International

Reported by Chris Conway at Livewire Markets.

Well, so much for the bulls stalling yesterday. Instead they powered to an almost nine-month high, and posted the 10th winning session out of the last 12. The ASX 200 added 42 points (+0.6%) to settle at 7435.

It has been a remarkable move from the early January low, with the index rallying 500+ points, pretty much in a straight line. We know that we can get contrived moves in the late December/early January period amid low volumes, but this has still been impressive. Furthermore, there was every chance that the rally would stall at 7400.

There was the circuit breaker day when there were no leads from the US (MLK holiday), and there have since been bearish leads in the morning. But the bulls have smiled and kept on coming. With 7400 now cleared with some conviction, there is a pretty clear pathway – technically speaking – up to 7600. Can the bulls keep running?

ASX 200: 7400 cleared by the bulls

US equities were lower overnight, despite stocks finishing off worst levels.

S&P 500: Sharp fade into the close overnight

SECTORS TO WATCH

• In the US overnight, machinery, building products, credit cards, specialty retail, multis, among the weaker spots. FANMAGs mixed. Tobacco, refiners, managed care, pharma, and China tech names better.

• Oil prices were stronger on expectations of increased demand from China. The upcoming EU ban on Russian oil could also tighten the oil market. WTI added 1.1%, to US$80.33 per barrel.

• Gold stocks should fare well today after bullion snapped a two-session losing streak, powering to the highest levels seen since April by adding 1.6%, to US$1923.90 an ounce. The futures price has kicked on as well, trading up to US$1937 through the morning.

• BHP and RIO were both up 1.8% in the US overnight.

ASX corporate actions occurring today:

• Trading ex-div: None

• Dividends paid: Charter Hall Social Infrastructure REIT (CQE) $0.043; Centuria Capital Group (C2FHA) $1.827322

• Listings: High-Tech Metals – 23 January @ 1:30 pm

Economic calendar:

• UK – Retail sales @ 6 pm

• CAD – Core retail/ retail sales @ 12:30 am

• US – Existing home sales @ 2 am, Fed

Thanks for your company over the last two weeks. Kerry is back on Monday. We'll also be debuting a new-look markets wrap for Market Index and Livewire Markets soon. Enjoy the weekend.