Morning wrap: US tech stocks rally, Elon takes a 9% stake in Twitter, ASX set to rise

ASX Futures (SPI 200) imply the ASX 200 will open 50 points higher, up 0.66%.

Major US indices extended gains, Elon Musk buys a 9% stake in Twitter, Europe warns of more sanctions against Russia for war crimes, China in a covid crisis as cases surge and green metal stocks are breaking out. 

Let’s dive in.

Stocks

• A tech-led rally drove all three major US indices higher

• Only 4 out of 11 sectors were green, that being consumer discretionary, communication services, information technology and energy

  • Tesla is classified as a consumer discretionary stock

  • Alphabet is classified as a communication services stock

• Europe is preparing more sanctions against Russia following the release of disturbing images over the weekend. There is increasing pressure for Germany to enforce a total ban on Russian energy imports

• Elon bought a US$3bn stake in Twitter, which was viewed as the catalyst behind last night’s tech rally. Twitter shares finished the session 27% higher on almost 10 times its usual volume

• 55% of US stocks advanced

• 58% of US stocks trade below their 200-day moving average (58% on Monday, 59% a week ago)

• Starbucks shares fell -3.7% after suspending its stock-repurchase program. Howard Schultz announced his return to the company as CEO

  • Schultz served as CEO between 1986 to 2000, and again from 2008 to 2017

• Logitech shares rose 7.1% after being upgraded to a buy from neutral by Goldman Sachs. The company’s stock is down almost -50% from last June

• US-listed China stocks continued to rally after China proposed revising confidentiality rules regarding audit oversight. JD.com rallied 7% and Alibaba rose 6.6%

Economy

• The US 2-year Treasury yield continues to trade above the 10-year, making investors, economists and analysts question what's next for the economy

  • The median lag between an inverted yield curve and a recession is typically one-and-a-half years

Commodities

• Iron ore was mostly unchanged as Chinese market participants were absent due to the Tomb Sweeping Festival holiday, according to Fastmarkets

• Oil is stabilising around the US$100 mark. The International Energy Agency intends to release strategic petroleum reserves to ease the supply-tight market. The details of the release are still pending

• Gold is holding around US$1,930 despite the increasingly risk-on attitude. The war in Ukraine, recession risks and inflation appears to be providing plenty of support for the yellow metal

#1 Tech

Elon you've done it again.

Twitter shares rallied 27% after Musk purchased a 9.2% 'passive stake' in the company. Investors viewed this move as a major endorsement and speculating whether the move could lead to a buyout or major changes to the social media platform.

"Technology is primarily up because of Musk buying shares of Twitter,” Kent Engelke, Chief Economic Strategist at Capital Securities, told MarketWatch.

The Global X Cloud, FinTech and eCommerce ETFs all rose at least 2%.

Local Block (ASX: SQ2) shares will be in for a strong open after its US-listed counterpart rallied 8.7%.

#2 Lithium

The VanEck Rare Earth/Strategic Metals ETF hit a fresh all-time high overnight, now up almost 35% since mid-March.

The ETF is mainly comprised of China and Australian-listed lithium and rare earth stocks.

Lynas Rare Earths (ASX: LYC), Pilbara Minerals (ASX: PLS), Allkem (ASX: AKE) and AVZ Minerals (ASX: AVZ) currently account for approximately 26% of the ETF's net assets.

Rare Earths ETF stages a V-shape bounce to all-time highs (Source: TradingView, Annotations by Market Index)

Recent developments for the green metals space include:

• President Joe Biden authorising the use of the Defence Production Act to bolster financial support for domestic production

• US and Australian ministers and executives meet to discuss a framework for investing in Aussie miners and projects

The ETF breaking out is another vote of confidence for the hot sector.

See a full list of ASX lithium stocks here.

#3 Hydrogen

We mentioned the Global X Hydrogen ETF two weeks ago, and how the ETF had started to bottom out and make higher highs.

After a few more sessions of sideways action, the ETF broke above its recent trading range to a 4-month high.

Hydrogen ETF breaks out of recent base (Source: TradingView, Annotations by Market Index)

A few ASX-listed hydrogen names rallied on Monday, including:

• Hazer Group (ASX: HZR) +15.5%

• QEM (ASX: QEM) +7.7%

• Pure Hydrogen (ASX: PH2) +4.1%

See a full list of ASX-listed hydrogen stocks here.

ASX corporate actions occurring today:

• Ex-dividend: CAM, PIC

• Dividends paid: HLS, SSR

• Listing: None today

• Issued shares: ADX, AGE, AS2, BCN, BSX, CLZ

Things of interest (AEDT): 

• RBA Interest Rate Decision at 3:30 pm