Morning wrap: Wall Street posts best day of 2022, ASX set for soft start

ASX Futures (SPI 200) imply the ASX will open 16 points lower, down -0.2%. 

US stocks rallied strongly last Friday, notably in the last hour of trade. The rebound was led by technology stocks, on the back of better-than-expected earnings from Apple, Mastercard and Visa.

Key points

• The S&P 500 (large cap) and Dow Jones (blue chip) both avoided a four-week losing streak, rebounding back above their 200-day moving averages 

• The Nasdaq (tech) narrowly avoided a fifth straight week of declines 

• The rebound does not mean the market is out of the woods just yet. Major indices need more than just a single-session bounce to escape correction territory. Only time will tell if this is the start of a comeback

• Apple rocketed 7% after reporting its largest ever quarterly revenue result. The tech giant delivered 11% sales growth despite global supply chain challenges. Revenue came in at US$123.9bn vs. US$118.7bn estimates, according to Refinitiv 

• On the economic front, the US reported a -0.6% decline in December personal spending. This is at a time where consumer sentiment is at 10-year lows amid inflation and covid concerns 

• China’s official manufacturing PMI came in a 50.1 in January vs. 50.3 a month ago. Manufacturing activity was weighed by the nation’s ‘zero tolerance’ approach to covid. Any reading below 50 represents a contraction

All sectors except energy closed in positive territory.

▲ Tech

Mega cap tech stocks including Alphabet, Facebook-parent Meta, Microsoft and Amazon all rallied more than 2.8%.

Apple, Visa and Mastercard delivered better-than-expected earnings, further supporting the tech-led rally.

▲ Materials 

The US-listed counterparts of BHP (ASX: BHP) and Rio Tinto (ASX: RIO) fell -2.5% and -2.6% respectively last Friday. 

However, iron ore prices have continued to march higher, up 6.6% to US$147.9 a tonne. 

“A sharp rise in demand has been anticipated for after the week-long holiday in China when steelmakers are likely to resume production and need to replenish iron ore inventories,” a Shanghai-based analyst told Fastmarkets.

▼ Energy

Oil prices diverged in performance. The international benchmark, Brent Crude gained 0.9% to US$90.67 a barrel while the US benchmark, West Texas Intermediate eased -0.02% to US$87.24 a barrel.  

“The supply side continues to support a tight market as OPEC+ is expected to stick to their plan of increasing output by 400,000 bpd in March, even though their compliance last month only hit 60% of plan,” said OANDA senior market analyst, Ed Moya. 

“Now that $90 oil is here, it won’t take much to get prices to $100 and that will just intensify the global energy crisis.  News of an Omicron subvariant have not rattled markets as boosters appear to still be getting the job done.”

#1 BNPL 

US-listed BNPL rival Affirm rallied 17.1% last Friday, on no news. The outsized move was likely influenced by the better-than-expected earnings from Visa and Mastercard.  Before today’s rebound, Affirm shares had declined -70% between November highs and last Thursday’s lows. 

Visa’s quarterly revenue topped US$7bn for the first time, supported by a strong rebound in travel spending and continued growth in eCommerce. The company said that it's seeing a “massive shift in adoption of debit and credit”.

This could see some positive flow for beaten up local BNPL stocks that have also declined more than -50% from all-time highs.

#2 Tech 

BNPL was deserving of its own section, though, the tech-led rally on Wall Street could drive a rebound for local tech stocks.

The FinTech and Cloud ETFs both rallied more than 3.5% last Friday, bouncing off of 16-month lows. While encouraging, tech stocks need to continue rebounding or at the very least, consolidate around recent lows. 

#3 Copper

Copper prices fell -2.6% to US$4.31/t, potentially influenced by China's weak manufacturing figures.

Local copper miners like Oz Minerals (ASX: OZL) and Sandfire Resources (ASX: SFR) have experienced a sharp -10% correction after rallying to all-time highs two weeks ago.

#4 Iron Ore

As mentioned earlier, iron ore prices have rallied back up to 4-month highs of US$147.9 a tonne.

Beyond the big three iron ore majors, other notable iron ore players include:

• Fenix Resources (ASX: FEX)

• Mount Gibson Iron (ASX: MGX)

• Champion Iron (ASX: CIA)

ASX corporate actions occurring today:

• Ex-dividend: CBC, MOT, MXT, PGG 

• Dividends paid: KPG, PL8, RF1, RFF, SCP, SEC

• IPOs: CMO, FXG

• Issued shares: ANP, AVL, CCR, CMO, CXM, CXO, EMH, EUR, FXG, LCK, LCL, NAB, NZK, PHO, RAD, RLT, RNT, SEQ, SKF, SYA, TYR, WAM