Market Wraps

Morning Wrap: Wall St rally at a crossroad, Macquarie upgrades lithium stocks, ASX set to fall

Tue 23 Aug 22, 8:38am (AEST)

ASX Futures (SPI 200) imply the ASX 200 will open 43 points lower, down -0.62%.

The pullback is gathering momentum, European natural gas prices go vertical, China plans to offer $29bn in special loans to troubled developers and the Fed is expected to stay hawkish. 

Let’s dive in.

Overnight Summary

Tue 23 Aug 22, 8:38am (AEST)

Name Value Chg %
Major Indices
S&P 500 4,138 -2.14%
Dow Jones 33,064 -1.91%
NASDAQ Comp 12,382 -2.55%
Russell 2000 1,916 -2.13%
Country Indices
Canada 19,975 -0.68%
China 3,278 +0.61%
Germany 13,231 -2.32%
Hong Kong 19,657 -0.59%
India 58,774 -1.46%
Japan 28,795 -0.47%
United Kingdom 7,534 -0.22%
Name Value Chg %
Commodities (USD)
Gold 1,749.10 +0.04%
Iron Ore 105.52 -
Copper 3.652 0.00%
WTI Oil 90.23 0.00%
AUD/USD 0.6878 +0.03%
Bitcoin (AUD) 30,765 -1.38%
Ethereum (AUD) 2,294 -1.32%
US 10 Yr T-bond 3.037 +1.61%
VIX 24 +15.53%


Surprise, surprise. We have a pullback on our hands.

"Back on trend: After reaching moderately oversold levels in June, the stock market is now back to “neutral” from a trend-deviation perspective," said Jurrien Timmer, Director of Global Macro at Fidelity.

"The S&P 500 has retraced 53% of its decline, and this is as far as bear market rallies go. That means that if the market continues to climb, technically speaking there will be no historical basis for concluding that this is not a new cyclical bull market," he added.

Bear market rallies
Source: Fidelity

"Lots of intraday selling over the last two trading days. The S&P 500 down 75 bps from open to close on Friday, down 95 bps since today's open. No buyers in sight yet. Although the S&P 500 has just now moved out of overbought territory and back to neutral. Still 4.3% above its 50-DMA," noted Bespoke Invest.

The market is now pulling into a crossroad.

The good: V-shaped rebound gives us some breathing room for a pullback as short-term moving averages are still upward sloping and longer-term moving averages are now flat.

The bad: Sell offs in the last two days had no bounces and US benchmarks all closed towards session lows. Momentum is building (but in the wrong direction for bulls).

We're now approaching a crucial inflection point where the market needs to stabilise. Still, the headlines coming out of Europe and China's abysmal growth paints a rather gloomy macro picture.

  • All 11 US sectors declined

  • Energy outperformed benchmarks, down just -0.25%

  • Defensives including Staples, Utilities and Health Care were relative outperformers

  • Growth-heavy sectors including Tech and Discretionary underperformed

  • 75% of US stocks declined

  • 54% of US stocks trade below their 200-day moving average (49% on Monday, 52% a week ago)


  • Tesla (-2.3%) plans to hike the price of its Full Self-Driving Option by 25% in September. Prices will jump from US$15,000 to US$20,000

  • Ford (-5%) shares tanked after a Georgia jury returned a US$1.7bn verdict against Ford involving a pickup truck crash that claimed two lives in 2014. Ford also announced that it plans to cut around 3,000 jobs in the US and Canada

  • Netflix (-6.1%) shares were downgraded by CFRA, one of the world’s largest independent research firms. Analysts said the stock is likely to underperform the S&P 500 after surging 40% from mid-July lows 

  • Bed Bath & Beyond (-16.2%) and other meme stocks continue to deflate

  • AMC (-41.95%) shares plummeted after the issuance of ‘APE units’- a tool for the company to raise additional cash in the future. Also weighing on AMC was its rival Cineworld considering filing for bankruptcy

    • The APE units were distributed among investors as a dividend but it’s more like a stock split. Adjusted for APE’s price, AMC shares fell around -5.5%


S&P 500 earnings rose 6.7% in the second quarter of 2022 but -3.7% ex-energy, according to Factset. Year-to-date, S&P 500 earnings are up 8.9% but only 2.4% ex-energy. 

Earnings we’re watching this week: 

  • Tue: JD

  • Wed: Nvidia, Salesforce, Snowflake, Autodesk

  • Thu: Dollar tree, Peloton, VMware, Affirm, Dell, Workday, GAP

  • Fri: Sinopec, Pinduoduo


  • Citi forecasts UK CPI to peak at 18.6% in January

    • More than nine times the Bank of England’s target, Reuters reported

    • “The question now is what policy may do to offset the impact of both inflation and the real economy,” said Citi analysts 


  • Iron ore futures rose 0.5% to US$104.85 a tonne

    • China plans to offer 200 billion yuan (US$29bn) in special loans to troubled developers to ensure stalled housing projects are delivered to buyers, Bloomberg reported

    • Imported iron ore prices in China’s portside and seaborne markets experienced steady falls during the week of August 15-19. Though more steelmakers resumed production, their ore buying was slow and market sentiment turned negative, according to Mysteel 

  • Oil prices closed slightly higher after a brief -3.5% intraday dip

    • “The crude demand outlook is taking a big hit from elevated risk that Europe’s recession will be severe and as several Chinese companies are following the government’s advice to conserve energy,” said OANDA senior market analyst, Ed Moya

  • European natural gas futures up 13.2% to 276.8 euros

    • Russia completely shut off Nord Stream gas flows to Europe. The pipeline is expected to be closed for three days of maintenance on August 31, but raises concerns that the link won't return to service as planned after the works

    • Prices are up 44.9% in August alone

  • Gold is on a six day losing streak as the US Dollar powers ahead. The Fed’s interest rate narrative is beginning to pivot from ‘aggressively raise rates and then cut’ to ‘aggressively raise rates and then they stay high’

US Sectors

Tue 23 Aug 22, 8:38am (AEST)

Sector Chg %
Energy -0.25%
Consumer Staples -1.11%
Utilities -1.38%
Health Care -1.38%
Materials -1.59%
Industrials -1.95%
Real Estate -2.10%
Financials -2.19%
Communication Services -2.67%
Information Technology -2.78%
Consumer Discretionary -2.84%

Industry ETFs

Tue 23 Aug 22, 8:38am (AEST)

Description Last Chg %
Nickel 29.22 +1.68%
Lithium & Battery Tech 76.65 +1.50%
Aluminum 50.175 +0.40%
Strategic Metals 96.16 +0.37%
Silver 17.55 -0.28%
Uranium 19.63 -0.51%
Gold 162.72 -0.66%
Copper Miners 30.63 -1.31%
Steel 54.81 -1.79%
Aerospace & Defense 106.77 -2.17%
Global Jets 18.1 -2.71%
Biotechnology 127.65 -1.60%
Cannabis 17.46 -4.35%
Description Last Chg %
Bitcoin 13.08 -1.15%
Solar 84.82 -1.76%
CleanTech 16.465 -2.22%
Hydrogen 14.68 -2.25%
Cybersecurity 27.77 -1.58%
E-commerce 18.23 -1.92%
Video Games/eSports 49.58 -2.20%
FinTech 24.95 -2.73%
Electric Vehicles 24.62 -3.05%
Cloud Computing 18.29 -3.06%
Robotics & AI 22.32 -3.18%
Sports Betting/Gaming 16.24 -3.57%
Semiconductor 406.9 -3.76%

ASX Morning Brief

Will do some more index-y talk in the Evening Wrap. Just a few sectors for now.

#1 Tech

Risk-sectors headlined the losses on Wall Street.

The Global X FinTech and Cloud ETF fell -2.7% and 3.06% respectively.

It wouldn't be surprising to see the weakness follow through for local tech names.

#2 Iron Ore

Iron ore miners could be something of interest after China continues to step up efforts to stabilise its rapidly shrinking property sector.

Bloomberg said the 200bn yuan (US$29bn) stimmy would make it the largest financial commitment yet from Beijing to contain the property crisis.

US-listed BHP (ASX: BHP) and Rio Tinto (ASX: RIO) managed to hold up amid the broad-based selloff, up 1% and 0.17% respectively.

JP Morgan's Marko Kolanvic on China: "We expected a strong H2 recovery to lift not only Asia and EMs, but provide support for the global cycle. That has not happened yet (and recent geopolitical developments have further detracted from it), but we think it will happen soon and the recent softening of economic data should increase a sense of urgency to provide stronger and broader set of stimulative measures in China."

#3 Lithium

On Monday, Pilbara Minerals (ASX: PLS) rallied 7% from session lows to close 3.9% higher. Most other large cap lithium stocks were also green.

I thought this was in the lead up to Pilbara Minerals' FY22 earnings on Tuesday and perhaps a preference for large cap producers.

Instead, it was a Macquarie research note. In summary:

  • "We have upgraded our lithium price outlook to reflect the current tight lithium market and buoyant spot lithium prices."

  • "The stronger lithium price outlook drives material upgrades to our earnings forecasts for MIN, IGO, PLS, AKE and LTR."

  • "PLS and IGO are out preferred AU producers, while MIN remains one of our preferred stocks in the broader resources sector."

I will take a closer look at the 12-page research note later today (I think the Citi one from earlier this year was around 40 pages).

The VanEck Rare Earth/Strategic Metals ETF closed 0.37% higher but down from session highs of 1.77%. Will the bullish note be able to see some more strength across lithium names or they be overpowered by the broader weakness?

Key Events

Stocks going ex-dividend:

  • Tue: ACL, DHG, IPH, QAL

  • Wed: PGH, SGF, TLS, BWF


  • Fri: ARG, GUD, NCM, LLC

  • Mon: CGF, CRN, PNI, VG8

ASX corporate actions occurring today:

  • Dividends paid: DXC, DXI, TCL

  • Listing: None


Other things of interest (AEST): 

  • Australia Manufacturing and Services PMI (August) at 9:00 am

  • German Manufacturing and Services PMI (August) at 5:30 pm

  • UK Manufacturing and Services PMI (August) at 6:30 pm

  • US Manufacturing and Services PMI (August) at 11:45 pm

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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