Market Wrap

Morning Wrap: Wall St bounces from bear market territory, Labor comes into power, ASX to fall

Mon 23 May 22, 8:33am (AEST)

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ASX Futures (SPI 200) imply the ASX will open 15 points lower, down -0.21%.

The Dow Jones and S&P 500 eked out a small gain after a volatile session, China continues to slash interest rates to reduce mortgage costs, US Treasury yields ease as investors return to bonds and Albo secures a majority Labor government.  

Let’s dive in.

Overnight summary

Mon 23 May 22, 8:33am (AEST)

Name Value Chg %
Major Indices
S&P 500 3,901 +0.01%
Dow Jones 31,262 +0.03%
NASDAQ Comp 11,355 -0.30%
Russell 2000 1,773 -0.17%
Country Indices
Canada 20,198 +0.08%
China 3,147 +1.60%
Germany 13,982 +0.72%
Hong Kong 20,717 +2.96%
India 54,326 +2.91%
Japan 26,739 +1.27%
United Kingdom 7,390 +1.19%
Name Value Chg %
Commodities (USD)
Gold 1,849.80 +0.42%
Iron Ore 133.66 -
Copper 4.312 +0.85%
WTI Oil 112.70 +0.44%
Currency
AUD/USD 0.7054 +0.15%
Cryptocurrency
Bitcoin (AUD) 42,714 +2.12%
Ethereum (AUD) 2,872 +2.25%
Miscellaneous
US 10 Yr T-bond 2.787 -2.38%
VIX 29 +0.27%

Stocks

  • The Dow Jones and S&P 500 both rallied in the last hour of trade, bouncing off session lows of more than -2%

  • All three major US indices booked another week of losses, now suffering through 7 straight weekly declines

  • The Nasdaq selloff has now exceeded the pandemic selloff, but still about 20% above pre-pandemic highs

  • Last Friday was the final day of trading before stock and ETF options expire, a potential factor driving outsized volatility during the session 

  • 6 out of 11 US sectors were green

  • Defensive sectors including healthcare, real estate, utilities and staples outperformed

  • Financials, materials, industrial and consumer discretionary were red

  • 49% of US stocks declined 

  • 74% of US stocks trade below their 200-day moving average (74% last Friday, 74% a week ago)

  • Foot Locker (+4.1%) reported better-than-expected quarterly earnings. The athletic footwear and apparel retailer expects to achieve the upper end of its revenue and earnings guidance for the full year 

  • John Deere (-14.1%) stock slumped despite a second quarter earnings beat and profit forecast boost driven by farm equipment demand

  • Ross Stores (-22.5%) is another retailer delivering disappointing quarterly results and downgraded its outlook, blaming higher inflation, rising freight and wage costs 

Economy

  • Labor will form the next parliament of Australia after winning the 2022 federal election

    • We’ll take a closer look at their policies throughout the day, so watch this space

  • China cut its rate on five-year loans to 4.45% from 4.6%, hoping to inspire some activity within its declining property sector

  • US existing home sales declined -2.4% in April, falling to the lowest pace since June 2020

    • Home buyers have faced surging mortgage rates and a shortage of homes for sale (1.03m homes for sale in April, down -10.4% from a year ago, representing 2.2 months of supply)

  • UK consumer confidence hit -40 in May, the lowest level since 1974

    • Economists warned that such a low reading was consistent with the UK economy falling into recession

    • Consumer confidence has closely tracked UK GDP growth for more than five decades

  • UK retail sales rose 1.4% month-on-month in April after a -1.2% drop in March

    • Economists polled by Reuters were expecting a -0.2% fall

    • The bigger picture remains grim, as retail sales in the three months to April fell -0.3% and down -4.9% compared to last year 

Commodities

  • Iron ore futures surged 2.5% to US$134.4/t

    • Seaborne iron ore prices jumped on Friday with a good number of physical transactions at higher prices amid China cutting prime loan rates and Shanghai reopening

  • Oil choppy around US$110 last week as various forces cancel each other out

    • Weak economic and corporate earnings data, rising US oil rig count

    • Russian oil embargo by the EU, disappointing OPEC+ data, Chinese reopening progress 

  • Gold is on a 4-day win streak as bond yields and the US dollar begin to decline after a massive run

 

US Sectors

Monday, 23 May 2022

Sector Chg %
Communication Services -0.22%
Consumer Discretionary -1.53%
Consumer Staples +0.27%
Energy +0.43%
Financials -0.12%
Health Care +1.26%
Sector Chg %
Industrials -1.07%
Information Technology +0.14%
Materials -0.22%
Real Estate +1.19%
Utilities +0.27%

Industry ETFs

Monday, 23 May 2022

Description Last Chg %
Commodities
Aluminum 61.3204 -0.20%
Copper Miners 38.23 -0.13%
Gold 171.91 +0.07%
Lithium & Battery Tech 71.39 +0.01%
Nickel 37.7132 +0.44%
Strategic Metals 97.6 -0.19%
Steel 57.84 +0.95%
Silver 20.27 -0.99%
Uranium 20.74 +0.63%
Industrials
Aerospace & Defense 97.17 -0.93%
Global Jets 19.52 -1.38%
Healthcare
Biotechnology 115.03 +0.50%
Cannabis 3.75 -2.13%
Description Last Chg %
Cryptocurrency
Bitcoin 18.62 -2.31%
Renewables
CleanTech 13.9 +0.22%
Hydrogen 13.6 -0.37%
Solar 66.72 +0.70%
Technology
Cloud Computing 17.19 -0.12%
Cybersecurity 24.84 +2.94%
E-commerce 17.16 -0.58%
Electric Vehicles 23.39 -0.81%
FinTech 24.04 +0.37%
Robotics & AI 22.8 -0.96%
Semiconductor 397.16 -0.05%
Sports Betting/Gaming 16.16 +1.61%
Video Games/eSports 50.64 -0.53%

ASX Sectors to watch

Pretty uneventful overnight session with most ETFs +/-1%.

  • Winners: Steel, Uranium, Biotechnology, FinTech

  • Losers: Jets, Silver, Hydrogen, Rare Earth/Strategic Metals

#1 Labor's policies

Investors will likely tune into or even position for Labor's plan for Australia.

The ones most relevant for ASX-listed companies include:

  • Aged care

    • Focuses on five areas including more carers, pay rise for aged care workers, better food for residents and on-site nurses 24/7

  • Child care

    • Generous subsidies across the board including raising the maximum subsidy rate to 90% for the first child in care

  • Climate change

    • $1bn in investment through loans, equity and guarantees for resources and mining science

    • $15bn National Reconstruction Fund

    • Upgrading electricity grid, installing community batteries, tax breaks for EVs

  • Farming

    • New Pacific Australia Labour Mobility scheme to relieve labour shortages

  • Defence

    • Defence spending to remain above the target of 2% of GDP

#2 Tech

The US tech sector underperformed last Friday, with notable decliners including:

  • Tesla -6.4%

  • Block -4.3%

  • Affirm -3.5%

  • Nvidia -2.5%

  • Zoom -1.3%

 

Today's events

ASX corporate actions occurring today:

  • Ex-dividend: None

  • Dividends paid: None

  • Listing: None

  • Issued shares: 5GG, AGE, BSL, DUN, ECF, EMR, GCX, GTI, HCW, HDN, HLX, IOD, KFE, LPD, MFG, MGT, NBI, PRU, PTX, QPM, RAG, RF1, SRN, TMZ, TRJ

 

Written By

Kerry Sun

Finance Writer & Social Media

Kerry holds a Bachelor of Commerce from Monash University and was Vice President of the University Network for Investing and Trading (UNIT). He is an avid swing trader, and drawn to breakouts and technical set ups. Outside of writing and trading, Kerry is a huge UFC fan, loves poker and bouldering.

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