Morning wrap: Wall Street extends gains, oil struggles, ASX set to rise

ASX Futures (SPI 200) imply the ASX will open 31 points higher, up 0.42%.

US stocks continue to rally after a brief reset on Tuesday, Fed members reiterated a more aggressive stance on interest rates, Russia intensified its attacks across Ukraine, fertiliser prices boom as other commodities ease.

Let’s dive in.

Stocks

• Another broad-based rally across Wall Street where 10 out of 11 sectors closed in positive territory

• As of Friday, the S&P 500 posted four consecutive gains of at least 1%, an occurrence that has only happened four times in the past 85 years

  • Each time, the S&P 500 advanced a median of 17.0% six months later and 27.5% a year later (note: limited sample size) 

• 63% of US stocks advanced

• 59% of US stocks trade below their 200-day moving average (60% yesterday, 66% a week ago)

  • This indicates that breath is coming back into the market as stocks rebound back above longer-term moving averages. Slowly but surely, the trend is starting to turn positive

• Consumer discretionary, financials and tech sectors outperformed the market

• Energy was the only sector to finish red

• Alibaba +11% after boosting its share-buyback program to as much as US$25bn

• Nike +2.24% after reporting stronger-than-expected quarterly earnings. Revenue was slightly higher compared to a year ago and margins increased as the business continued to progress selling direct to consumers

Economy

• On Tuesday, Fed Chair Jerome Powell said that the central bank could deliver hikes of 50 bps in future meetings, spooking equity markets

• Overnight, St Louis Fed President James Bullard reaffirmed this view, saying “I think faster is better” in an interview with Bloomberg

• Bullard said that 50 bp hikes should definitely be used as the Fed begins to move rates higher. He believes that pushing interest rates to around 3% “would help turn inflation around”

• Goldman Sachs now forecasts a 50 bp hike in both May and June, followed by 25 bp hikes at the remaining meetings in 2022

Source: Goldman Sachs Global Investment Research

Commodities 

• Iron ore prices eased slightly as investors monitored activities at China’s steelmaking hub Tangshan in light of recent covid outbreaks and lockdowns

  • Market participants chose to remain on the sidelines in response to a cloudy demand outlook for downstream steelmakers, according to Fastmarkets 

• Oil struggled to sustain its Tuesday rally where prices hit highs of US$119 a barrel. Eyes on the potential EU ban on Russian imports, the severity of Chinese lockdowns and prospects of Saudi to raise output 

• Gold prices continue to chop as safe-haven demand remains muted amid buoyant equity and crypto markets 

#1 Tech

Tech stocks headlined overnight gains as investors continue to support beaten up growth names.

Notable overnight winners include: 

• Tesla +7.9%

• Block +5.2%

• Etsy +4.2%

• Affirm +3.7%

• PayPal +2.8%

The Global X FinTech, Cloud and eCommerce ETFs all rallied at least 2.3%.

This means local Block (ASX: SQ2) shares will have a strong open, which could see positive flows extend to the broader BNPL and tech sector.

#2 Lithium

The VanEck Rare Earth/Strategic Metals ETF is up 17.6% in the last five trading sessions. 

VanEck Rare Earths/Strategic Metals ETF (Source: TradingView)

There's plenty of local lithium and rare earth names breaking out to near-term highs if not all-time highs.

The ETFs bullish momentum, positive SPI futures and easing volatility (VIX below 20) could see another encouraging session for the local sector.

See a full list of ASX lithium stocks here.

#3 Hydrogen

The Global X Hydrogen ETF is making a comeback after a -50% correction between last November and late January.

The ETF is close to year-to-date highs and trying to break above the 100-day moving average.

Global X Hydrogen ETF (Source: TradingView)

ASX-listed hydrogen stocks sit more towards the speculative end of town, with notable names including:

• Hazer (ASX: HZR)

• Lion Energy (ASX: LIO)

• Pure Hydrogen (ASX: PH2)

It will be interesting to see if local names can shake off the recent bearish price action and make a comeback.

#4 Travel 

Major ASX travel and airline stocks were relatively flat on Tuesday despite the broader market rallying 0.86%.

This might've been in response to a fatal Boeing 737 crash in China, which plunged 20,000 feet in just over a minute with 132 people on board.

Most US airlines closed around 2% higher overnight, which could see some positive flow return for local travel and airline stocks.

#5 Energy

Oil prices struggled to sustain a rally, rallying from US$119 to US$114 overnight.

"Crude supply shortage concerns were somewhat alleviated after reports that China is buying Russian crude at a big discount. It looks like two key economies, China and India are still buying Russian oil and that will likely put a halt to the recent rebound in prices," said Oanda senior market analyst, Ed Moya.

"If Europe decides they will move forward with a Russian oil ban, oil prices will skyrocket. Russian Deputy PM Novak noted that the course of action of a ban could send oil to more than US$300 a barrel."

ASX corporate actions occurring today:

• Ex-dividend: BGP, FSF, MYR, SEK, SNL, VRT

• Dividends paid: ASX, DBI, EGH, HT1, LGL, MAD, MEA, NZM, PTL, SDF, SGM, SHL, SIQ, SNZ, TPC, WPL

• Listing: PIM

• Issued shares: ABA, ABP, AHC, AZL, BCN, BRK, CGF, CHK, CNU, COB, DVP, EM2, EMR, FBU, GL1, HAS, HHI, HSN, IMA, LRK, MAY, MGF, NAB, PHO, PIC, PNR, PRU, QFE, QVE, SEG, SGM, SIS, SLC