Market Wraps

Morning Wrap: Wall St steadies after worst selloff since June 2020, ASX set to rise

Thu 15 Sep 22, 8:31am (AEST)

ASX Futures (SPI 200) imply the ASX 200 will open 9 points higher, up 0.13%.

US stocks rebound as investors remain confident that the Fed will need to pivot, UK inflation comes in cooler-than-expected, Cathie Wood goes on a stock buying spree and Biden officials consider buying oil to refill reserves.

Let's dive in.

Overnight Summary

Thu 15 Sep 22, 8:31am (AEST)

Name Value Chg %
Major Indices
S&P 500 3,946 +0.34%
Dow Jones 31,135 +0.10%
NASDAQ Comp 11,720 +0.74%
Russell 2000 1,838 +0.38%
Country Indices
Canada 19,726 +0.41%
China 3,238 -0.80%
Germany 13,028 -1.22%
Hong Kong 18,847 -2.48%
India 60,347 -0.37%
Japan 27,819 -2.78%
United Kingdom 7,277 -1.47%
Name Value Chg %
Commodities (USD)
Gold 1,707.50 -0.09%
Iron Ore 100.43 -
Copper 3.517 -0.09%
WTI Oil 88.92 +0.50%
Currency
AUD/USD 0.6750 +0.05%
Cryptocurrency
Bitcoin (AUD) 29,948 -0.27%
Ethereum (AUD) 2,401 +1.24%
Miscellaneous
US 10 Yr T-bond 3.412 -0.29%
VIX 26 -4.07%

MARKETS

  • 6 out of 11 US sectors higher

  • Energy led to the upside as China plans to ease lockdowns

  • Growth-heavy sectors including Discretionary and Tech also outperformed

  • Mostly defensive sectors were red including Real Estate, Industrials and Staples

  • 49% of US stocks advanced

  • 61% of US stocks trade below their 200-day moving average (62% on Wednesday, 62% a week ago)

STOCKS

  • Moderna (+6.2%) CEO said the company is open to supplying covid vaccines to China, according to Reuters

  • Starbucks (+5.5%) raised its long-term annual EPS, revenue growth and same store sales forecasts. The company outlined growth initiatives including expanding its loyalty program, new coffee-making equipment and investing in automation  

  • Johnson & Johnson (+2.1%) announced a US$5bn share repurchase program

    • “With our strong cash flow and lowest level of net debt in five years, we have the ability to invest in innovation, grow our dividend, execute strategic acquisitions,” said CEO Joaquin Duato 

  • Nucor (-11.3%) cut its third quarter EPS outlook amid considerable lower steel mill earnings

    • “We expect the steel mills segment earnings to be considerably lower in the third quarter of 2022 as compared to the second quarter of 2022, due to metal margin contraction and reduced shipping volumes particularly at our sheet and plate mills,” Nucor said in a statement 

QUICK BITES

Trying a new little section. You'd usually see these things right below the 'MARKETS' sub head.

  • Investors still aren't selling. A panic bottom, or rather, massive outflows has historically been needed to set a market low

S&P 500 outflows
Source: Bank of America
  • Bank of America on rates: "Incoming data during the inter-meeting period suggest price pressures remain firm and the labour market is out of balance ... We look for a 75 bp rate hike in September. We think the median member will want the funds rate above 4.0% by early next year ... Updated Fed forecasts are likely to show a higher terminal rate, less growth and higher unemployment."

  • Since 1950, the S&P 500 has fallen more than 4% 55 times. 49 of those times happened below the 200-day moving average, according to Ryan Detrick, Chief Market Strategist at Carson Group. "The truth is most volatility happens beneath the 200-day," he says

WORLD NEWS 

  • UK inflation set to peak around 11% after energy price support (ING)

  • Biden officials weigh buying oil at around US$80 to refill reserves (Bloomberg)

  • Cathie Wood goes on biggest dip-buying spree since February (Bloomberg)

  • Commodity prices rally ahead of a possible US rail strike (Bloomberg)

  • US 2 and 30-year curve reaches most inverted level this century (Bloomberg)

ECONOMY

  • UK inflation fell to 9.9% year-on-year in August from 10.1% in July

    • Below consensus expectations of another jump to 10.6%

    • “The introduction of a government cap on household energy prices means that we should now be fairly close to the peak in these headline figures.” said ING

    • “We think it could be more-or-less back to the Bank of England’s 2% target by the end of next year, crazy as that currently seems.”

  • US producer price index fell -0.1% month-on-month in August from -0.4% in July

    • Beat consensus expectations of a 0.1% rise

    • Year-on-year, wholesale inflation rose 8.7% from 9.8% in July

  • US core producer price index rose 0.4% month-on-month in August from 0.3% in July

    • Hotter-than-expected as forecasts expected 0.3%

    • Year-on-year, core wholesale inflation rose 7.3%

A few notes on US producer price index:

  • Manufacturing materials component of PPI fell -1.7% in August, the largest monthly decline since April 2020 

  • Core PPI “overstated by a technicality ... underlying trends improving rapidly ... a reminder that the CPI numbers are not the only inflation data worth watching; the message from this report is that disinflation is underway. It has much further to go,” said Ian Shepherdson, Chief Economist at Pantheon Macroeconomics 

  • “Margins already are falling in ... hardware, apparel, and appliance retailing. ... In short, the PPI data are consistent with our view that margin re-compression will be the biggest single factor pushing down inflation faster than markets and the Fed expect,” he added

COMMODITIES

  • Iron ore futures fell -1.6% on Wednesday to US$101.8 a tonne

  • Oil prices edge higher as China plans to lift the citywide Chengdu lockdowns on Thursday. Separately, the US is considering filling its Strategic Petroleum Reserves instead of continuing to tap into them

  • Gold extended its selloff to below US$1,700. A higher interest rate outlook for the Fed is weighing on the non-interest bearing yellow metal

US Sectors

Thu 15 Sep 22, 8:31am (AEST)

Sector Chg %
Energy +2.85%
Consumer Discretionary +1.30%
Utilities +0.81%
Information Technology +0.44%
Communication Services +0.37%
Health Care +0.01%
Consumer Staples -0.11%
Industrials -0.18%
Financials -0.25%
Materials -1.23%
Real Estate -1.39%

Industry ETFs

Thu 15 Sep 22, 8:31am (AEST)

Description Last Chg %
Commodities
Uranium 22.85 +1.84%
Lithium & Battery Tech 75.62 +1.32%
Nickel 31.8968 +1.00%
Silver 17.83 +0.95%
Strategic Metals 99.34 +0.35%
Gold 158.54 -0.38%
Copper Miners 30.75 -0.52%
Aluminum 48.42 -0.62%
Steel 53.18 -4.21%
Industrials
Global Jets 17.41 +1.67%
Aerospace & Defense 98.98 +1.58%
Healthcare
Biotechnology 122.84 +0.88%
Cannabis 16.37 -0.61%
Description Last Chg %
Cryptocurrency
Bitcoin 12.49 -1.68%
Renewables
Solar 86.66 +1.95%
CleanTech 16.4413 +1.45%
Hydrogen 14.04 -0.21%
Technology
Cloud Computing 17.22 +1.16%
Semiconductor 353.98 +1.14%
E-commerce 17.52 +1.03%
Sports Betting/Gaming 15.04 +0.93%
FinTech 23.69 +0.84%
Electric Vehicles 23.35 +0.64%
Video Games/eSports 45.19 +0.46%
Robotics & AI 20.07 -0.10%
Cybersecurity 26.55 -0.38%

ASX Morning Brief

The bloodbath on Wednesday was rather grim for the ASX 200 but the resources sector held up relatively well, notably names from oil, lithium and coal.

There isn't too much to watch on Thursday. US markets bounced a little bit. More time is needed to see if the S&P 500 can hold above Wednesday's lows and the trendline.

S&P 500 chart
S&P 500 chart (Source: TradingView, Annotations by Market Index)

Solar completely unphased: Invesco Solar ETF has recouped all of Wednesday's losses. Its formed quite the base since the US Inflation Reduction Act news on 28 July. Unfortunately for ASX investors, there aren't too many solar-related plays.

Invesco Solar ETF
Invesco Solar ETF chart (Source: TradingView, Annotations by Market Index)

Uranium holding above the 200-day: Has managed to hold the key area. I might take a closer look at uranium stocks later today. Something along the lines of:

  • We've seen a massive outperformance from names like Paladin Energy (ASX: PDN), Boss Energy (ASX: BOE) and Deep Yellow (ASX: DYL)

  • There's also plenty of laggards in the space (in terms of share price performance). Is it because their projects are fundamentally weaker?

  • Lotus Resources (ASX: LOT) is one example that's lagged. Their project has an NPV range of US$160-280m that assumes a uranium sale price of US$75/lb (currently US$52). The company's market cap is currently $315m. They better expand mine life like their life depends on it

Global X Uranium ETF

Key Events

Stocks going ex-dividend:

  • 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

  • Tue: None 

  • Wed: ABC, COG

ASX corporate actions occurring today:

  • Dividends paid: ACL, AEF, ANN, AWC, AX1, CAA, DMP, HT1, PAI, PBP, PIA, PMC, PTM, QRI, REA, SDG

  • Listing: None

  • Issued shares: 29M, BAS, BET, CHR, DUB, EQT, FZO, IKE, IPX, IVZ, KIN, KKO, KNB, MAG, MCL, MFG, PAR

Other things of interest (AEST): 

  • Australia August unemployment rate at 11:30 am

  • US August retail sales at 10:30 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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