Morning wrap: US tech rout deepens, Amazon beats earnings, ASX to fall

ASX Futures (SPI 200) imply the ASX will open 78 points lower, down -1.1%

Disappointing earnings from Facebook-parent Meta Platforms drove a sharp U-turn for Wall Street. 

A bearish sentiment returned as all three major indices closed at least -1% lower, led by technology stocks.

Key points

• Meta plunged -26% overnight, wiping more than US$200bn off the company’s valuation. This marks the largest single-day decline in market value on record

• Meta’s earnings were impacted by increasing competition, notably from TikTok, privacy-related changes impacting digital-ad revenues and lower advertising spend from customers 

• Strong earnings from tech giants like Microsoft, Apple and Alphabet helped drive investors back into tech earlier this week. The magnitude of Meta’s selloff and weak outlook has flipped sentiment back to bearish

• Amazon released its quarterly earnings after market close. The stock is currently up 17% in after-hours. Amazon's earnings were in-line with expectations and plans to hike the price of its Prime membership from $119 to $139

• On the economic front, the Bank of England raised interest rates from 0.25% to 0.5% in-line with consensus expectations. The central bank said the hike was to curb rising inflation amid tight labour market conditions 

• A measure of US business activity at service sector companies such as restaurants and retailers fell sharply in January to 11-month lows of 59.9%. Surging omicron infections and labour shortages have been a negative drag on both big and small businesses

Most US sectors sold off as major indices snapped a four-day winning streak.

Just as things were looking increasingly bearish, Amazon's upbeat quarterly earnings could be the market's saving grace.

▼ Communication services 

Meta Platforms falls under the communications sector, driving an outsized decline for the sector. 

▼ Consumer discretionary

While most investors consider Amazon a tech play, it technically falls under the consumer discretionary sector. 

Amazon fell -7.5% overnight but is up more than 17% in after-hours.

▼ Tech

Social media stocks followed Meta lower overnight, with Snapchat and Twitter sliding -23% and -5.7% respectively. 

Spotify tanked -16% to all-time lows after the company showed a slowdown in premium subscriber growth. 

Block fell another -11.5% to a fresh 18-month low. The stock is now down -63% since its Afterpay (ASX: APT) takeover announcement on 2 August 2021. 

#1 Tech

The S&P/ASX 200 Info Tech Index plunged -5.9% on Thursday in response to Meta's disappointing earnings.

The selloff for ASX technology stocks could continue after Block shares declined -10.9% overnight. This means local Block CDIs (ASX: SQ2) will have nowhere to go but down at market open.

Most US tech stocks are trading higher in after-hours thanks to Amazon's upbeat earnings. This could be a saving grace for the local tech sector.

A possible outcome is that ASX tech stocks bounce of morning lows. Are Amazon earnings enough to keep the bears at bay?

#2 BNPL

BNPL is deserving of its own section after US payment stocks continued to decline. 

PayPal fell another -6.5% after a -25% crash on Thursday.

Affirm closed -6.3% and around 15% away from all-time lows. 

Local BNPL stocks could continue to struggle as their US-peers fail to bounce.

#3 Lithium 

The Rare Earth/Strategic Metals ETF declined -5% overnight, snapping back below its 200-day moving average.

The ETF needs to bounce and reclaim the 200-day to stay out of trouble.

Rare Earth/Strategic Metals ETF slices through its 200-day, TradingView

ASX corporate actions occurring today:

• Ex-dividend: BLD

• Dividends paid: AVN, DXC, DXI, PRT, SHV

• Issued shares: AJX, ARF, AYT, AZL, BMO, CAV, CF1, CRR, ENX, KCC, KRM, LKO, LRK, LRT, MFF, MRR, MXR, NAB, NWF, PEK, PNM, RPM, SLH, SLZ

Other things of interest:

• US unemployment rate will be released on Saturday, 12:30 am AEDT

  • The unemployment rate is expected to stay unchanged at 3.9% 

• US non-farm payrolls will be released on Saturday, 12:30 am AEDT