Market Wrap

Morning wrap: Wall St slides as Amazon results disappoint, Fed to kick off 'QT', ASX set to fall

Mon 02 May 22, 8:24am (AEST)

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ASX Futures (SPI 200) imply the ASX will open 94 points lower, down -1.3%.

Wall Street re-enters correction territory after all three major benchmarks booked sharp losses last Friday, Amazon shares plunged after missing earnings expectations, Warren Buffet said the stock market has turned into a “gambling parlor” and the Fed is expected to kick off quantitative tightening in early May.

Let’s dive in.

Overnight summary

Sun 01 May 22, 10:24pm (AEST)

Name Value Chg %
Major Indices
S&P 500 4,132 -3.63%
Dow Jones 32,977 -2.77%
NASDAQ Comp 12,335 -4.17%
Russell 2000 1,864 -2.81%
Country Indices
Canada 20,762 -1.70%
China 3,047 +2.41%
Germany 14,098 +0.84%
Hong Kong 21,089 +4.01%
India 57,061 -0.80%
Japan 26,848 +1.75%
United Kingdom 7,545 +0.47%
Name Value Chg %
Commodities (USD)
Gold 1,900.00 -0.61%
Iron Ore 144.90 -
Copper 4.38 -0.34%
WTI Oil 104.06 -0.60%
Currency
AUD/USD 0.7069 +0.29%
Cryptocurrency
Bitcoin (AUD) 54,452 +0.05%
Ethereum (AUD) 3,985 +0.53%
Miscellaneous
US 10 Yr T-bond 2.887 +0.84%
VIX 33 +11.37%

Stocks

  • Wall Street did not stand a chance after tech earnings fell short of expectations and a record quarterly gain for the Fed’s closely watched employment cost index

  • The S&P 500 is down -13% in the first 82 trading days of 2022, the 3rd worst start to a year in history

  • The Fed is expected to begin culling assets from its massive US$9tn balance sheet in early May at nearly twice the pace it did in its previous ‘quantitative tightening’ exercise in 2017-19

    • The Fed's balance sheet has more than doubled since March 2020. What happens to the markets when Fed money runs dry?

  • All 11 US sectors declined

  • Materials, energy, healthcare and industrials fared slightly better declines

  • Discretionary, real estate and tech underperformed

  • 76% of US stocks declined

  • 70% of US stocks trade below their 200-day moving average (67% last Friday, 66% a week ago)

  • Amazon (-14%) after the company reported weaker-than-expected Q1 result, with growth rates at their slowest since the dot-com bust in 2001. A massive -US$7.6bn loss was booked on the company’s investment in EV maker Rivian

  • Mastercard (-4.1%) beat top and bottom-line estimates amid a resurgence in travel driving increased transaction volumes 

  • Apple (-3.6%) shares struggled to capitalise on a better-than-expected Q1 result with 9% year-on-year growth and planned US$90bn share buyback

  • Exxon Mobil (-2.2%) missed earnings estimates after a US$3.4bn charge relating to its planned exit from Russia’s Sakhalin-1 project. Management said that overall earnings increased modestly as strong margin improvement and underlying growth was offset by weather and timing impacts

  • Southwest Airlines (-0.4%) beat earnings expectations as a rebound in travel demand continues to help revive airlines

Economy

  • Last Thursday, US GDP unexpected declined -1.4% in the March quarter, well below consensus expectations of a 1.1% expansion

  • US core inflation rose 5.2% for the 12-months to March compared to 5.3% in February, marking the first month-on-month decline in more than a year

  • US initial jobless claims fell by 5,000 to 180,000, in-line with estimates and showing that there are no signs the US market is slowing down on the jobs/hiring front 

  • US employment cost index accelerated in the March quarter to 1.4% from 1.0% in the December quarter

  • US consumer sentiment in April was 65.2, the highest reading in the past three months and first increase this year 

Commodities

  • Iron ore prices fell back below US$150

  • Oil prices tried to rally as the EU was close to announcing a phased embargo on Russian energy imports

  • Gold is trying to reclaim the US$1,900 level as panic begins to set in 

 

US Sectors

Sun 01 May 22, 10:24pm (AEST)

Sector Chg %
Communication Services -3.57%
Consumer Discretionary -5.92%
Consumer Staples -2.66%
Energy -2.47%
Financials -3.41%
Health Care -2.48%
Sector Chg %
Industrials -2.62%
Information Technology -4.14%
Materials -1.97%
Real Estate -4.90%
Utilities -3.01%

Industry ETFs

Sun 01 May 22, 10:24pm (AEST)

Description Last Chg %
Commodities
Aluminum 64.0249 -1.31%
Copper Miners 40.5 -1.14%
Gold 176.93 -0.01%
Lithium & Battery Tech 65.08 +0.58%
Nickel 43.65 -4.35%
Strategic Metals 95.38 -0.08%
Steel 63.76 -2.34%
Silver 21.42 -1.77%
Uranium 23.71 -2.19%
Industrials
Aerospace & Defense 105.87 -2.84%
Global Jets 21.96 -2.28%
Healthcare
Biotechnology 119.05 -2.02%
Cannabis 4.07 -0.74%
Description Last Chg %
Cryptocurrency
Bitcoin 24.94 -4.41%
Renewables
CleanTech 13.97 +1.36%
Hydrogen 15.5 -0.52%
Solar 64.75 -0.80%
Technology
Cloud Computing 20.02 -3.30%
Cybersecurity 30 -2.93%
E-commerce 19.8 -1.57%
Electric Vehicles 24.5 -1.51%
FinTech 27.86 -4.16%
Robotics & AI 24.35 -2.05%
Semiconductor 418.67 -4.27%
Sports Betting/Gaming 17.47 -1.43%
Video Games/eSports 50.2 -0.46%

ASX Sectors to watch

Its widely expected everything gets smashed on Monday. The ASX could surprise given its heavy weighting towards banks and miners.

The US-listed counterparts of BHP (ASX: BHP) and Rio Tinto (ASX: RIO) fell a respective -1.7% and -0.6% last Friday.

Interestingly, a few ETFs were also unscathed, including:

  • Global X Copper Miners ETF -1.1%

  • Global X Hydrogen ETF -0.5%

  • VanEck Rare Earth/Strategic Metals ETF -0.1%

The Rare Earths ETF is an awkward one as most of its holdings are Australian and Chinese listed lithium players - meaning most of these stocks have yet to react to the US market's sharp selloff.

#1 Tech

Tech was obliterated last Friday.

Amazon earnings dominated sentiment, which pushed beaten up tech names to a new floor. The Nasdaq declined -4.2% - its worst April since 2000.

It goes without saying investors should expect a lot of weakness for local names. Especially considering the weakness from US peers like:

  • Etsy -8.5%

  • Affirm -8%

  • Intel -6.9%

  • Block -4.9%

  • PayPal -4.5%

#2 Energy

Oil briefly rallied as the US market opened last Friday.

OPEC+ is due to meet on Thursday, 5 May to discuss output. Its widely expected that the petroleum organisation won't bow to international pressure and stick to its gradual output policy.

"Oil seems like it is once again heading higher as the supply outlook won’t be increasing significantly anytime soon as US rig counts edge higher and after earnings from oil giants don’t suggest investments in new wells will lag and overall output will likely be flat," said Oanda senior market analyst, Ed Moya.

"The fundamentals are mostly flashing green for oil and if China shows any progress in easing lockdowns, crude prices could rally another 5%."

Today's events

ASX corporate actions occurring today:

  • Ex-dividend: NBI

  • Dividends paid: HVN

  • Listing: APS, SLS, SRR

  • Issued shares: AFP, AGE, AND, APS, AVL, BAS, BCK, BXB, CAV, CDO, CGO, CNU, CVW, CXL, DGO, FBU, GLV, HCH, HMI, IMA, JDO, KRM, LOM, MRL, MRR, NBI, NZM, PDI, PGF, PHL, PIC, RFR, RNU, SGM, SLS, SPT, STM, SYA, TMZ, UWL, XRO

 

Written By

Kerry Sun

Finance Writer & Social Media

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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