Market Wrap

Morning Wrap: Wall Street bounces, headlined by energy and growth stocks, ASX to rise

Wed 22 Jun 22, 8:31am (AEST)

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ASX Futures (SPI 200) imply the ASX 200 will open 48 points higher, up 0.74%.

It was a turnaround Tuesday for Wall Street as stocks bounced back from the worst week since 2020. Elon Musk clarified his layoff plans, Kelloggs is splitting up its businesses, US home sales continue to dip and a rare earths explorer will make its ASX debut at 12:00 pm. 

Let’s dive in.

Overnight summary

Wed 22 Jun 22, 8:31am (AEST)

Name Value Chg %
Major Indices
S&P 500 3,765 +2.45%
Dow Jones 30,530 +2.15%
NASDAQ Comp 11,069 +2.51%
Russell 2000 1,694 +1.70%
Country Indices
Canada 19,257 +0.38%
China 3,307 -0.26%
Germany 13,292 +0.20%
Hong Kong 21,560 +1.87%
India 52,532 +1.81%
Japan 26,246 +1.84%
United Kingdom 7,152 +0.42%
Name Value Chg %
Commodities (USD)
Gold 1,834.80 -0.22%
Iron Ore 133.47 -
Copper 4.026 -0.33%
WTI Oil 110.65 0.00%
Currency
AUD/USD 0.6968 +0.10%
Cryptocurrency
Bitcoin (AUD) 29,947 +1.86%
Ethereum (AUD) 1,618 +1.86%
Miscellaneous
US 10 Yr T-bond 3.307 +2.10%
VIX 30 -2.71%

Markets

It was a ‘turnaround’ if you’re an optimist and ‘bear market rally’ if you’re a realist. Major US indices posted broad-based gains of more than 2% overnight, but the losses this month remain steep. The Dow Jones, S&P 500 and Nasdaq have given back 7-10% so far in June.

The million dollar question is whether or not these rallies are sustainable. The reality is - nobody knows. Recession risks remain elevated, inflation refuses to come down and central banks are gearing up for more aggressive interest rate hikes.

  • All 11 US sectors were green

  • Energy sector led gains after a -5.6% drop last Friday

  • Discretionary, Staples, Health Care and Tech sectors outperformed

  • Materials, Industrials, Real Estate and Utilities underperformed benchmarks 

  • 71% of US stocks advanced

  • 77% of US stocks trade below their 200-day moving averages (77% a week ago)

Stocks

  • Tesla (+9.4%) rallied after CEO Elon Musk said he plans to layoff 3.5% of the workforce (down from the proposed 10% a month ago). The planned job cuts was labelled “not super material” 

  • Exxon Mobil (+6.2%) after Credit Suisse upgraded the stock to Outperform. The investment bank said the oil and gas company is positioned to capitalise on high oil prices and said the stock can rise another 45% from current levels

  • Alphabet (+4.1%) after AdAge reported that the Google parent company is in talks with Netflix about an advertising partnership 

  • Kellogg (+1.95%) announced plans to split into three separate public companies - snacking, cereal and plant-based businesses 

  • Lennar (+1.6%) beat second quarter earnings expectations. However, the homebuilder flagged uncertainty for the housing market heading into the third quarter, saying its guidance was closer to “guessing” rather than “guiding” 

Economy

  • US existing-home sales fell -3.4% year-on-year in May to an annual rate of 5.41m

  • US President Joe Biden is considering pausing the federal gasoline tax

    • “I hope to have a decision based on the data — I’m looking for by the end of the week,” said Biden

    • This could save US consumers as much as 18 cents a gallon

  • Former US Treasury Secretary Larry Summers said unemployment needs to surge to curb inflation - Nice one Larry

    • Summers said a one-year spike to 10% could help ease consumer prices 

Commodities

  • Iron ore prices edged higher following a significant drop on Monday. There was an uptick in trading activity for cargoes with late July and early August laycans, sources told Fastmarkets 

  • Oil is stabilising around the US$110 level as supply remains tight in the short-term and rising expectations of tougher sanctions on Russia

  • Gold is in wait-and-see mode as investors wait to see just how aggressive central banks will be with their interest rate hikes  

 

US Sectors

Wednesday, 22 June 2022

Sector Chg %
Communication Services +1.62%
Consumer Discretionary +2.82%
Consumer Staples +2.69%
Energy +5.14%
Financials +2.02%
Health Care +2.64%
Sector Chg %
Industrials +1.78%
Information Technology +2.54%
Materials +1.47%
Real Estate +1.88%
Utilities +1.92%

Industry ETFs

Wednesday, 22 June 2022

Description Last Chg %
Commodities
Aluminum 53.985 +1.07%
Copper Miners 34.53 +0.72%
Gold 171.27 -0.37%
Lithium & Battery Tech 72.35 +2.10%
Nickel 33.66 +1.57%
Strategic Metals 90.36 -2.32%
Steel 52.61 +0.21%
Silver 19.98 0.00%
Uranium 18.86 +2.70%
Industrials
Aerospace & Defense 93.99 +2.73%
Global Jets 16.59 +0.78%
Healthcare
Biotechnology 109.56 +2.11%
Cannabis 16.7 +4.43%
Description Last Chg %
Cryptocurrency
Bitcoin 12.72 +1.81%
Renewables
CleanTech 13.65 +3.59%
Hydrogen 12.31 +3.74%
Solar 70.13 +1.88%
Technology
Cloud Computing 16.14 +1.36%
Cybersecurity 24.39 +1.89%
E-commerce 16.68 +1.68%
Electric Vehicles 21.67 +2.95%
FinTech 21.41 +1.77%
Robotics & AI 20.72 +1.16%
Semiconductor 354.04 +2.62%
Sports Betting/Gaming 14.43 +2.49%
Video Games/eSports 47.45 +2.91%

ASX Sectors to watch

With Wall Street closed on Monday for the Juneteenth National Independence Day, the local sharemarket took the lead. Sectors like tech, uranium, lithium and energy bounced higher on Tuesday and the respective US sectors followed suit overnight.

It seems like the ASX has the first-mover advantage (or we're walking in blind) due to the US national holiday. This also makes me feel like overnight moves aren't necessarily giving us much of an edge.

Nevertheless, several green sectors headlined gains overnight, including:

  • Hydrogen +3.7%

  • Clean tech +3.6%

  • Uranium +2.7%

Other sectors to watch include:

#1 Tech

The Nasdaq and tech stocks outperformed overnight, notable winners include:

  • Coinbase +12.2%

  • Tesla +9.4%

  • Affirm +5%

  • Nvidia +4.3%

  • Alphabet +4.1%

The Global X FinTech, Cloud and eCommerce ETFs rose just under 2%.

The risk-on attitude could support a 3-day win streak for the S&P/ASX 200 Info Tech Index.

#2 Lithium

Most of the ETFs we track closed higher overnight, making the Rare Earth/Strategic Metals ETF the odd one out, down -2.3%.

The drop was primarily due to one of its top holdings - China Northern Rare Earth Group - falling an outsized -8.3%. The reason behind the dip is not yet clear.

Lynas (ASX: LYC) rose 4.3% on Tuesday, so I'm going to assume the issue is company specific as opposed to being sector wide. Perhaps watch how Lynas opens for any further hints.

Today's events

ASX corporate actions occurring today:

  • Ex-dividend: FPH, VEU

  • Dividends paid:  None

  • Listing: OD6

  • Issued shares: 4DS, AON, BEX, BID, BIO, CXM, EBO, EMR, GRL, HAV, ICI, IMR, LKO, MAY, MEG, MLS, MRL, NAB, NBI, NTM, PNN, PRU, PV1, QFE, RF1, RFR, SRN

Other things of interest (AEST): 

  • UK Inflation Rate (May) at 4:00 pm

  • Canada Inflation Rate (May) at 10:30 pm

  • US Fed Chair Powell Testimony at 11:30 pm 

 

Written By

Kerry Sun

Finance Writer & Social Media

Kerry holds a Bachelor of Commerce from Monash University and was Vice President of the University Network for Investing and Trading (UNIT). He is an avid swing trader, and drawn to breakouts and technical set ups. Outside of writing and trading, Kerry is a huge UFC fan, loves poker and bouldering.

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