Morning Wrap: Wall St soars, Apple shares rally on strong iPhone pre-orders, ASX set to rise

US stocks rallied for a fourth consecutive session led by growth-heavy sectors and resources, Apple's iPhone 14 Pro Max has topped its previous model in terms of pre-order sales and silver prices jump as stockpiles hit all-time lows.

Let’s dive in.

MARKETS

Wall Street seems to be rallying on the expectations of a cooler-than-expected CPI print. We'll find out soon enough.

JP Morgan: "... With the [S&P 500] index closing above 4,000 in consecutive sessions we have likely triggered some call-to-action re-leveraging levels, based on the 50 and 100-day moving average and 3-month momentum. The next level of upside momentum triggers is ~4,200 to 4,275."

Wells Fargo on Inflation: "We expect Tuesday's report to show consumers received further relief on the inflation front in August. Specifically, we look for prices to have declined -0.2% last month which would be the largest monthly drop since the Spring of 2020."

S&P 500's breadth thrust: A month ago, Jonathan Harrier posted a study on a breadth thrust of when the percentage of S&P 500 stocks above their 50-day moving averages spike from less than 10% to more than 90% within two months. Its been one month since the event on 12 August and the S&P 500 finished -4.0% lower.

Source: Jonathan Harrier

• All 11 US sectors advanced

• Energy led as oil prices continued to bounce

• Growth-heavy sectors including Tech and Discretionary also led to the upside

• Defensives including Staples, Industrials and Healthcare underperformed

• 68% of US stocks advanced

• 54% of US stocks trade below their 200-day moving average (57% on Monday, 65% a week ago)

STOCKS

• Carvana (+15.5%) shares was upgraded to Overweight from Neutral by Piper Sandler

  • “... Yes, we are aware that used vehicle prices are falling. We know that rising interest rates are a risk, and we know that bankruptcy is a real possibility. But … realistic scenarios suggest that Carvana is grossly undervalued,” said Piper

• Gilead Sciences (+4.2%) settled a patent case over its HIV therapies 

• Apple (+3.9%) shares rallied on reports on strong pre-order data for its iPhone Pro Max

• Oracle (+1.5%) posted earnings and quarterly guidance that was slightly below analyst expectations

  • The company’s cloud services and license support segment generated US$8.4bn in revenue, up 14% compared to a year ago 

WORLD NEWS 

• Europe’s newest nuclear reactor eases Finland’s power problems (Bloomberg)

• BoFA says the Ethereum Blockchain’s upgrade may lead to greater institutional adoption of ether (Coindesk)

• Soybean futures soar the most in a year after US crop report signals ‘shockingly’ tight supplies (Bloomberg)

• Apple shares rally most since May on strong iPhone pre-order data (Bloomberg)

• Ukraine makes more gains, pushes back to border in places (AP news)

ECONOMY

• China’s Premier Li Keqiang stresses policy implementation to stabilise economy

  • “China will promote the recovery of consumption as the main pulling force and make greater efforts to boost effective investment,” Premier Li said on state radio

  • "To expedite construction of key projects and boost quota on policy financing tools according to local needs."

  • "To continue to introduce phased policies to stabilise economy and use them as much as as quickly as possible."

COMMODITIES

• Iron ore futures rose 0.1% to US$102.25 a tonne

  • Prices were mostly unchanged as China celebrated the Mid-autumn festival which runs from 10-12 September

• Oil prices rallied for a third straight session as it recovers from a recent Chinese lockdown and demand destruction-related selloff

• Gold continues to slowly recover as the US dollar falls for a fourth consecutive session

The markets seems to be rallying without a care in the world. To be fair, there is mounting evidence that inflation has topped given the broad-based declines across commodity prices, shipping costs, gasoline prices and used car prices.

The question is, will the inflation print be enough to justify the rather outsized four day rally?

Risk appetite still strong: Barometers for risk appetite like the Nasdaq, Bitcoin and Ark ETF all reclaimed their 50-day moving averages in the overnight session. Its wild how the narrative went from "are we going to revisit June lows again" to "are we going to revisit August highs again". Overall, good news for local risk sectors like Tech and Discretionary.

Still, the Fed is widely expected to hike rates by 75 bps in September and rates are expected to be around 3.75% to 4.25% by February 2023. Global financial conditions are tightening and growth is slowing. Treasury yields also continue to grind higher in the background. A rather problematic set of problems for risk assets.

Nickel back in the conversation: I haven't been taking nickel very seriously after the whole short-squeeze event that sent prices to over US$100,000 a tonne. The Bloomberg Nickel Subindex tracks futures contracts on nickel. Its started to stabilise and push 3-month highs.

Bloomberg Nickel Subindex (Source: TradingView, Annotations by Market Index)

Silver prices rocket: Silver prices jumped 5% to US$19.8/oz overnight. LME quotes "relentless hemorrhaging of one of the world's largest stockpiles of silver is now well and truly underway." Adding that "For the last 9 months, the stockpile of silver, held in the LMBA vaults in London, has been consistently falling each and every month, and has now reached an all-time low." The problem for investors is that a) no one really cares about silver and b) its a pretty niche sector.

Silver (Source: TradingView, Annotations by Market Index)

Renewables fatigue (again): A few notable 'green' ETFs like Invesco Solar (+0.47%), VanEck Rare Earth/Strategic Metals (-0.25%) and Global X Uranium (-0.71%) were all relative underperformers of the broader market.

Monday's Wrap talked about how the Uranium ETF was starting to show signs of fatigue following its recent re-rate. That fatigue translated to broad-based weakness among local uranium stocks yesterday. Large cap names like Paladin Energy (ASX: PDN) and Boss Energy (ASX: BOE) held up relatively well, down -0.5% and -0.35% respectively. Whereas a few mid caps fell between 2-7%.

These ETFs continue to stall and struggle for upside amid a rather risk-on market. So it may indicate more time and consolidation is needed.

Stocks going ex-dividend:

• Tue: FOS, GRR, IGL, ING, NWS, OCL, PSI, TPG

• Wed: BRG, CAF, CGC, LOV, MCY, MGH, NZM, PPM

• Thu: 29M, ABA, BST, CTE, DDH, DTL, EGH, EPY, EQT, FBU, IGO, PGF, PWH, REG, RMS, S32, SPK, SVW, WQG

• Fri: AHC, ARA, CAR, CAU, PPC, SNL

• Mon: IPG, QUB, SSM

ASX corporate actions occurring today:

• Dividends paid: DHG, EBG, GUD, PCG, SRG

• Listing: None

• Issued shares: AGY, AKO, ALK, BBX, BC8, BCI, BOT, CAR, CI1, CSL, DEG, EEG, EIQ, EML, GRL, HZN, JLG, KGD, LER, LRK, M2M, MFG, MHJ, MXO, NAB, NZM, OKU, OSM, PFT, PLS, PNN, PPC, PYG, RHY, SGM, STX, TRY

Other things of interest (AEST): 

• Australia September Consumer Confidence Index at 10:30 pm

• UK July Unemployment Rate at 4:00 pm

• German September ZEW Economic Sentiment Index at 7:00 pm

• US August Inflation Rate at 10:30 pm