Market Wraps

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

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

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 (AEDT)

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

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

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

Industry ETFs

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

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

ASX Morning Brief

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%

 

Key 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

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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