Morning wrap: US tech stocks plunge, ASX set to fall

ASX Futures (SPI 200) imply the ASX will open 38 points lower, down -0.5%.

US markets faded into the close, defensive sectors such as industrials and consumer staples held up better than most while technology stocks plummeted.

Overnight summary

The US market experienced a broad-based selloff after yesterday’s inflation report showed that the cost of living had accelerated to near 40-year highs. 

The December consumer price index in the US, a key inflation measure, rose 7% year-over-year.

To tackle stubbornly high inflation, the US Federal Reserve is widely expected to begin hiking interest rates as soon as March this year.

Investors fled fast growing, richly valued technology stocks, which can struggle amid a rising interest rate environment.

The Nasdaq Composite (tech) faced heavy selling pressure, flirting with its 200-day moving average.

The last time the index traded around the 200-day was in March 2020.

Could the trend be coming to an end?

Nasdaq Composite, Daily Chart, TradingView

The local technology, consumer discretionary and healthcare sectors are at risk following the weak US session.

Defensive sectors including utilities, consumer staples and industrials could hold up better than most.  

▲ Industrials 

US airlines rallied overnight amid a positive earnings update from Delta Airlines.

Delta said it expects to deliver a first quarter loss in 2022 because of the omicron variant, but still expects to turn a profit in the full year. The company's stock close 2.1% higher.

Elsewhere, Boeing rallied 3.1% after Bloomberg reported that the company’s 737 Max could resume service in China this month.

▼ Technology 

The tech sector is looking increasingly bearish with every rally met with an even greater selloff. 

Overnight, mega cap tech stocks including Tesla, Microsoft, Alphabet, Amazon and Meta Platforms all fell more than -2%.  

▼ Consumer discretionary 

The -6.5% decline from Tesla weighed the US consumer discretionary sector.

Sub sectors such as retailing fell -1.6%, while consumer services and consumer durables held up relatively well, down just -0.3% and -0.4% respectively.

ASX Sectors to watch

#1 Uranium

The Uranium ETF fell heavily overnight but did not breach any major price levels or moving averages. The ETF closed just above its 200-day moving average.

Uranium ETF, Daily Chart, TradingView

Nevertheless, the sharp selloff could spark weakness across local names including:

• Paladin Energy (ASX: PDN)

• Boss Energy (ASX: BOE)

#2 FinTech 

The FinTech ETF closed at fresh 15-month lows as investors flee from expensive technology shares. 

Local tech heavyweight Afterpay (ASX: APT) will tumble following a -5.9% decline from its soon-to-be parent company, Block. 

Other notable names at risk include: 

• Zip Co (ASX: Z1P) 

• EML Payments (ASX: EML)

• Tyro Payments (ASX: TYR) 

#3 Cloud 

The Cloud ETF was another tech-related industry subject to a harsh selloff, hitting a similar 14-month low. 

This could drive negative flow for local names including: 

• Xero (ASX: XRO) 

• \WiseTech Global (ASX: WTC)

• Altium (ASX: ALU) 

#4 Airlines and travel 

US airlines rallied across the board in response to the better-than-expected earnings from Delta Airlines. 

Delta expects omicron to delay the rebound in travel over the next two months. The company expects to make losses in January and February, and a return to profitability in March.

American Airlines rallied 4.5% and United Airlines rose 3.5%. Cruise line operator Carnival Corporation closed 2.6% higher. Travel booking platform Expedia was up 2.1%. 

One of few major losers in this space was Airbnb, sliding -2.1%, unable to escape the broader tech-driven selloff. 

This could be good news for local airlines including: 

• Qantas Airways (ASX: QAN) 

• Air New Zealand (ASX: AIZ)

• Regional Express (ASX: REX)

Travel management companies could also benefit, although the overnight weakness in growth stocks could dampen their performance. Names include: 

• Flight Centre (ASX: FLT) 

• Corporate Travel (ASX: CTD) 

• Webjet (ASX: WEB) 

Today’s events 

ASX corporate actions occurring today:

• Ex-dividend: None today 

• Dividends paid: None today

• IPOs: None today

• Issued shares: BIS, CEL, EFE, EMT, EPM, GFN, HAV, HMI, MAT, MFF, NVU, PEB, RHY, UWL, WAM, WOR, XTC

Other things of interest

• December Imports and Exports: China will release trade data at 2:00 pm AEDT