Morning wrap: Wall Street rallies as Fed raises interest rates, ASX set to surge

ASX Futures (SPI 200) imply the ASX will open 106 points higher, up 1.47%.

Wall Street rallied for a second day, the Federal Reserve pulled the trigger on interest rate hikes and expects another six this year, oil prices continue to fall and Asian markets surge after the Chinese government pledged to keep markets stable. 

Let’s dive in.

Stocks

• The Fed raised interest rates by 25 bps to 0.50%

• “The median projection for the appropriate level of the federal funds rate is 1.9 percent at the end of this year, a full percentage point higher than projected in December,” said Fed chair Jerome Powell 

• The Fed’s 2022 forecast for inflation was increased from 2.6% to 4.3%, noting that the Ukraine war will likely pressure prices and weigh on economic activity

• Sectors including consumer discretionary, tech and financials rose more than 2.9%

• Energy and utilities were the only two sectors in red

• 78% of US stocks advanced, indicating a broad-based rally

• 63% of US stocks trade below their 200-day moving average (67% yesterday, 65% a week ago) 

• Starbucks shares rose 5.2% after announcing the return of company founder Howard Schultz as CEO on an interim basis

• Chinese stocks surged after the Financial Stability and Development Committee of the State Council pledged to stabilise financial markets, support overseas share listings and boost economic growth in the first quarter

  • Hong Kong’s Hang Seng Index was down about -20% year-to-date on Tuesday. It rallied 9% on Wednesday

Economy

• US retail spending rose 0.3% in February compared to economist expectations of a 0.4% increase

  • Consumers brought fewer staple and discretionary goods after taking into account high inflation

  • US retail spending rose 3.8% in January

• Canada’s annual inflation rate was 5.7% in February, the highest since 1991

Commodities 

• Iron ore jumped after China promised to roll out more measures to boost the economy

• Oil continued to lose ground as negotiations progress between Ukraine and Russia

• Gold is trying to stabilise around US$1,920 as the relief buying favors risk assets

#1 Tech

US tech stocks advanced for a second consecutive day with plenty of names rallying double digit percentage points.

The relief buying for the Nasdaq is encouraging, but the index is not out of the woods yet. More positive sessions are needed to prove that this isn't another short-lived rally.

• Nasdaq chart still downward sloping and -14% year-to-date

• All key moving averages are downward sloping 

• 100-day moving average close to crossing below the 200-day

• Bounces in late-Jan and late-Feb were all short-lived

Notable overnight winners include: 

• Affirm +17.7%

• Block +12.6%

• Zoom +8% 

• PayPal +7.4%

• Meta Platforms +6%

The S&P/ASX 200 Info Tech Index rallied 3.3% yesterday. The encouraging overnight session could see more positive flow for local names.

#2 Lithium

The VanEck Rare Earth/Strategic Metals ETF bounced right on cue after revisiting a previous support area.

Rare Earth/Strategic Metals ETF bounces off previous support zone (Source: TradingView)

The Rare Earths/Strategic Metals ETF invests in miners with exposure to green metals such as lithium, nickel, cobalt and more. The ETF's two largest holdings are Pilbara Minerals (ASX: PLS) and Lynas (ASX: LYC).

The risk-on attitude on Wall Street and surging ASX SPI futures could point to a positive session for local lithium as well as green metal stocks.

See a full list of ASX lithium stocks here.

#3 Travel

The US Global Jets ETF is up 11% in the last two days. 

On Wednesday, several US airlines upgraded their earnings expectations for the rest of the year.

The upbeat outlook is helping airlines and travel stocks make up for lost time. The Jets ETF declined almost -30% between 16 Feb and 7 March.

#4 Oil

Oil prices continued to ease as negotiations between Ukraine and Russia progress.

"Of course, the fall in oil prices is being helped lower by lockdowns in China and reports of a new nuclear deal being almost agreed which will go some way towards easing the imbalance in the markets," said Oanda senior market analyst, Ed Moya.

"Whether that’s premature or not, we’ll soon see, especially with disruptions already being reported in recent weeks."

ASX corporate actions occurring today:

• Ex-dividend: BOL, CRN, CUP, DDH, EMB, FBU, GNE, MEZ, PWH

• Dividends paid: AEF, APA, ASH, AWC, AX1, BRG, CPU, DMP, MLD, PCG, RMD, SDG, TAH, TIP

• Listing: None 

• Issued shares: ACB, ACR, ANO, CNU, CTP, DEG, EBO, ELO, FBU, HCH, HGH, HYD, IHL, INR, IRD, JAT, MME, MTM, NAB, NAG, NCM, OCL, PDN, PEK, PIA, PME, PNC, PRL, QRI, RMC, RXM, SEQ, SMR, SZL, TD1, TOP, ZEO

Other things of interest (all AEDT): 

• Australia Unemployment Rate (Feb) at 11:30 am

• UK Interest Rate Decision at 11:00 pm

  • The Bank of England is expected to hike rates by 25 bps to 0.75%

• US Building Permits and Housing Starts (Feb) at 11:30 pm