Market Wraps

Morning Wrap: US stocks tumble, Fed's Jackson Hole speech in focus, ASX set to fall

Mon 22 Aug 22, 8:33am (AEDT)

ASX Futures (SPI 200) imply the ASX 200 will open 29 points lower, down -0.41%.

Wall Street retreats as traders refocus on the Fed, an August cycle peak is quite common, Fed’s Barkin says the Central Bank “will do what it takes” to curb inflation and meme stocks begin to crash.

Let’s dive in.

Overnight Summary

Mon 22 Aug 22, 8:33am (AEDT)

Name Value Chg %
Major Indices
S&P 500 4,228 -1.29%
Dow Jones 33,707 -0.86%
NASDAQ Comp 12,705 -2.01%
Russell 2000 1,957 -2.17%
Country Indices
Canada 20,111 -0.76%
China 3,258 -0.59%
Germany 13,545 -1.12%
Hong Kong 19,773 +0.05%
India 59,646 -1.08%
Japan 28,930 -0.04%
United Kingdom 7,550 +0.11%
Name Value Chg %
Commodities (USD)
Gold 1,760.10 -0.16%
Iron Ore 105.64 -
Copper 3.67 +0.14%
WTI Oil 89.57 -1.32%
Currency
AUD/USD 0.6871 +0.05%
Cryptocurrency
Bitcoin (AUD) 31,020 +0.01%
Ethereum (AUD) 2,312 -0.02%
Miscellaneous
US 10 Yr T-bond 2.989 +3.78%
VIX 21 +5.32%

MARKETS

From a seasonality perspective, an August peak is quite normal. Almanac Trader makes a few interesting points about the recent cycle:

  • This impressive comeback rally pushed through technical resistance at the June highs. But our indicators and cycles analysis suggest another leg down that culminates in a lower low or retest of the lows at some point in the weak seasonal period Aug-Oct ahead of the midterms.

  • Last week’s inflation numbers were certainly encouraging. But we'd like to see further confirmation before moving into the bullish camp. We're bullish for Q4 and 2023 but remain vigilant about the potential for another leg down that either tests the June lows or makes a new low.

S&P 500 seasonality
Source: Almanac Trader

Another interesting chart from Nautilus Research. You can massage the data to fit your liking. Pick your bias.

SPX bulls and bears
Source: Nautilus Research
  • 2 out of 11 US sectors higher

  • Defensives including Healthcare, Staples and Utilities were relative outperformers

  • Growth-heavy sectors including Tech and Discretionary underperformed

  • 76% of US stocks declined

  • 49% of US stocks trade below their 200-day moving average (46% last Friday, 44% a week ago)

STOCKS

  • Footlocker (+20%) shares surged after it appointed the former Ulta Beauty CEO as its new chief executive officer. The company also posted a better-than-feared drop in comparable sales for the second quarter

  • General Motors (+2.5%) said it will reinstate a quarterly dividend for shareholders that has been on pause since the initial pandemic. The announced dividend of 9 cents per share is around -76% lower than its last dividend in April 2020

  • Coinbase (-11.3%) shares mirrored a sudden -10.2% selloff in Bitcoin last Friday

  • Bed Bath & Beyond (-40.5%) shares plummeted after activist investor Ryan Cohen sold his entire position, estimated to be around ~7m shares. Between 27 July and 17 August, the stock rallied as much as 560% 

EARNINGS

To my surprise, there are still a few interesting US companies reporting results this week.

  • Mon: Zoom

  • Tue: JD

  • Wed: Nvidia, Salesforce, Snowflake, Autodesk

  • Thu: Dollar tree, Peloton, VMware, Affirm, Dell, Workday, GAP

  • Fri: Sinopec, Pinduoduo

ECONOMY

  • UK retail sales rose 0.3% month-on-month in July from -0.2% in June

    • Economists expected a -0.2% drop

    • "Retailers told us that sales were boosted by a range of offers and promotions," said ONS statistician Darren Morgan, Reuters reported

    • Online and mail order volumes jumped 4.8%, the biggest monthly jump since December

  • Canada retail sales rose 1.1% month-on-month in June from 2.3% in May

    • Economists expected a 0.3% gain

  • Federal Reserve Bank of Richmond President Tom Barkin speech highlights: 

    • “We’re committed to returning inflation to our 2% target and we’ll do what it takes to get there.”

    • “The Fed must curb inflation even if this causes a recession.”

    • “I’ve convinced myself that not getting inflation under control is inconsistent with a thriving economy.”

COMMODITIES

  • Iron ore futures fell -0.5% and down -5.1% last week to US$104 a tonne. Starting to see a few bearish headlines from Chinese steel agencies

    • Shanghai Metals Market: “Stainless steel prices fell due to weak demand and power rationing”  

    • Fastmarkets: “Bearish outlook for China domestic rebar demand as scorching weather halts construction projects”

  • Oil prices are trying to stabilise with WTI trading just shy of US$90 and Brent hovering US$95 a barrel. They’ve recovered around half the losses they suffered last week. Iran nuclear talks are still in play, which could see a large amount of oil come back into global markets

  • Gold continues to sell off as the US Dollar Index extends its winning streak to six days. The momentum behind the dollar and yields continues to make it difficult for the non-yield bearing gold to act as a safe haven 

US Sectors

Mon 22 Aug 22, 8:33am (AEDT)

Sector Chg %
Health Care +0.27%
Energy +0.02%
Utilities -0.05%
Consumer Staples -0.35%
Real Estate -0.96%
Industrials -1.27%
Materials -1.81%
Communication Services -1.83%
Information Technology -1.83%
Financials -2.02%
Consumer Discretionary -2.10%

Industry ETFs

Mon 22 Aug 22, 8:33am (AEDT)

Description Last Chg %
Commodities
Nickel 28.7385 +1.68%
Aluminum 50.7359 -0.67%
Gold 163.92 -0.73%
Copper Miners 31.38 -2.39%
Steel 56.28 -2.61%
Silver 18.04 -2.72%
Lithium & Battery Tech 79.64 -3.75%
Strategic Metals 100.4 -4.22%
Uranium 20.51 -4.29%
Industrials
Aerospace & Defense 108.23 -1.35%
Global Jets 18.72 -3.31%
Healthcare
Biotechnology 128.92 -0.99%
Cannabis 18.49 -5.57%
Description Last Chg %
Cryptocurrency
Bitcoin 14.39 -9.10%
Renewables
Solar 87.67 -3.25%
CleanTech 17.195 -4.25%
Hydrogen 15.5 -5.29%
Technology
Cybersecurity 28.48 -2.49%
Semiconductor 418.19 -2.70%
Video Games/eSports 51.01 -2.80%
Electric Vehicles 25.36 -2.92%
Robotics & AI 23.05 -3.17%
Cloud Computing 18.89 -3.18%
FinTech 25.82 -3.37%
Sports Betting/Gaming 16.89 -3.85%
E-commerce 19.05 -4.30%

ASX Morning Brief

Last Friday's Evening Wrap talked about a decline in risk appetite, evidenced by weakness across names like the ARK Innovation ETF, Betashares Australian Tech ETF and Bitcoin.

Bitcoin and ARK slumped right on cue, down -10.2% and -5.9% respectively last Friday. It seems like the pendulum is beginning to swing after an extraordinary bounce back. This risk-off attitude coincides with a spike in natural gas prices, US Treasury yields beginning to bounce back and the VIX inching higher from the 20s.

All eyes will be on the Fed Chair Jerome Powell's Jackson Hole Economic Symposium speech on Friday, August 26. Will he also reiterate the need of tightening at all costs and push back the market's view of a dovish pivot?

Most of the ETFs we watch underperformed US benchmarks, notably:

  • Hydrogen -5.3%

  • eCommerce -4.3%

  • Uranium -4.3%

  • Rare Earth/Strategic Metals -4.2%

  • FinTech -3.4%

  • Jets -3.3%

These ETFs are now pulling into key moving averages like the 20 and 50-day. Will they be able to stabilise around these levels or is a revisit to June/July lows on the cards?

The underperformance of these ETFs and weaker SPI futures could see some negative flow for local growth-heavy sectors.

Key Events

Stocks going ex-dividend:

  • Mon: AZJ, MFG, SDF, STO, VCX

  • Tue: ACL, DHG, IPH, QAL

  • Wed: PGH, SGF, TLS, BWF

  • Thu: AGG, BBN, BFG, CDA, DDR, HT1, JBH, PMC, REA, RKN, VG1

  • Fri: ARG, GUD, NCM 

ASX corporate actions occurring today:

  • Dividends paid: HDN

  • Listing: None

  • Issued shares: ART, AUN, AVL, BHP, BXB, CAI, CXO, DBF, DEV, EBO, ELT, FGX, GTI, IPX, LTR, MCY, MEK, MGH, MNY, MP1, MTH, MZZ, NAB, NBI, NZS, PAR, PIC, RAS, RFX, RRR, SER, SKO, SMX, SNX, STK, SWF, TEE, VG1, VG8, X2M, ZMM

Written By

Kerry Sun

Content Strategist

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.

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