Morning Wrap: Wall St reverses steep losses, US rates set to peak at 4.5%, ASX to rise

Major US indices bounced from session lows, 16 central bank meetings set to take place in a 24-hour window and lithium prices rally to fresh all-time highs.

Let's dive in.

MARKETS

• Major US benchmarks bounced from session lows including:

  • S&P 500 -0.90%

  • Dow -0.85%

  • Nasdaq -0.97%

• 9 out of 11 US sector higher

• Real Estate and Healthcare were the only red sectors

• A mix of defensive and growth sectors outperformed

• Materials, Discretionary and Industrials headlined gains

• 56% of US stocks advanced

• 63% of US stocks trade below their 200-day moving average (64% on Monday, 54% a week ago)

STOCKS

• Wix (+15.7%) shares rallied after activist investor Starboard Value revealed a 9% stake in the US$4bn web development company

• Ralph Lauren (+2.9%) announced long-term growth targets and backed its FY23 revenue growth forecasts of high single digits

• Adobe (-1.2%) was downgraded by Wells Fargo. The bank said the planned acquisition of Figma is a good product fit but the US$20bn price leaves little room for error 

• Coinbase (-5.5%) shares slumped in-line with further weakness in cryptocurrency prices  

QUICK BITES

• US Fed Funds Futures: Now pricing in a terminal rate of 4.5% to 4.75% during the first half of 2023

Source: CME Group

• One of the wildest years: The only years with higher volatility in stocks at this point than 2022 (178) days include

  • 1930s (Great Depression, World War II)

  • 2000 (Dot-Com Crash)

  • 2009 (Global Financial Crisis)

  • 2020 (Covid Crash)

Source: Charlie Bilello, Compound Capital

• The Fed isn't taking any risks: Year-on-year growth in the US Apartment Rent Index is already falling but it can lag 4-7 months before its recognised in the CPI's Owner Equivalent Rent, which comprises a third of CPI weightings . The Fed knows this, but can't risk not tightening enough

Source: US Bureau of Labour Statistics

• Rips and dips come together: The market's best and worst days tend to be close together, meaning it can be incredibly hard to time bottoms and tops

Source: Bloomberg

• Central bank party: Within a 24-hour period this week, there will be 16 central bank decisions including the US, UK, Japan, Switzerland, Norway and Taiwan. Cumulatively, we could see over 500 bps in rate hikes across the globe this week

WORLD NEWS 

• Investors see US oil between $80 and $100 a barrel next year (Reuters)

• Lithium resumes insane gains to add pressure on Automakers (Bloomberg)

• Iran ready to slash oil prices to counter Russia’s growing sales to China (Straight Times)

• Cathie Wood is a big buyer of discounted Nvidia shares (Bloomberg)

• Uber CEO says it will phase out gas powered cars by 2030 (CBS) 

ECONOMY

• US Atlanta Fed GDPNow model estimates 0.5% real GDP growth in the third quarter on 15 September

  • Estimates have declined from almost 3% in late August and 1.3% on 9 September

  • The next GDPNow update will be on Wednesday, 21 September

COMMODITIES

• Iron ore futures fell -0.4% to US$98.65 a tonne on Monday

• Oil prices inched higher, reversing a steep -3% decline in early trade

  • “Crude prices were under pressure as fears of an aggressive central bank tightening are driving concerns for a quickly weakening global economy and as the UAE plans to increase oil output,” said Oanda senior market analyst, Ed Moya

• Gold also experienced a sharp reversal, closing at US$1,675 from session lows of US$1,659

What a wild session. Whether the market continues to rip higher or dip lower, we know that volatility will remain high. Especially heading into the Fed rate hike on Thursday.

SPI futures are pointing towards a rather strong open, up 0.81%. It's worth noting that sectors including Materials, Discretionary and Financials rose more than 1% in the US. Let's see if the market can hold onto the strong lead that Wall Street has passed down to us.

XJO chart (Source: TradingView, Annotations by Market Index)

Lithium: The VanEck Rare Earth/Strategic Metals ETF bounced 2.47% overnight off this key $92 area. Lithium carbonate prices jumped to a fresh all-time high last Friday of 500,500 yuan a tonne in China, according to Asian Metal Inc. Separately, fresh concerns over the supply and price outlook prompted Chinese authorities to haul in lithium miners, refiners and other industry groups for a meeting last week, according to China's Ministry of Industry and Information Technology.

Large cap lithium stocks including  Pilbara Minerals (ASX: PLS), Allkem (ASX: AKE) and Mineral Resources (ASX: MIN) were all green on Monday. Whereas things were a little more mixed towards the smaller end of town.

VanEck Rare Earths/Strategic Metals ETF (Source: TradingView, Annotations by Market Index)

Airlines: US Global Jets ETF rallied 2.3% overnight which could see some positive flow for local airlines and travel names

Stocks going ex-dividend:

• Tue: BGP, EZL, HNG, VEU, VSL

• Wed: ABC, AHX, ALX, CAJ, CCV, COG, CUP, KPG, LAU, LYL, MAH, NWH, SHJ

• Thu: KPG

• Fri: BFL, LFS, VLS

• Mon: IMD

ASX corporate actions occurring today:

• Dividends paid: BLX, CRN, DBI, GNG, MEA, SSG, YAL

• Listing: None

• Issued shares: AGY, APE, BKL, CAE, CAR, CEL, CPO, CWY, EGG, EMV, ESS, EYE, FGX, GBZ, GFN, HNG, HTG, ICI, IOD, IPH, JHX, KZA, LRS, LYC, MAU, MFG, MMI, MXO, NAB, NBI, NHE, NWM, NXT, OEC, PNI, PPC, PPH, RHY, RNU, SCL, SNZ, SOP, TIE, VBS, VG1, VG8, WCG, WOW

Other things of interest (AEST):

• China Lending Rates at 11:15 am

• RBA Meeting Minutes at 11:30 am

• Canada August Inflation Rate at 10:30 pm

• US Housing Starts at 10:30 pm