Morning wrap: Wall Street rallies as earnings season heats up, oil tumbles, ASX set to rise
ASX Futures (SPI 200) imply the ASX will open 47 points higher, up 0.62%.
Mentioned
ASX Futures (SPI 200) imply the ASX will open 47 points higher, up 0.62%.
A tech-led rally bolstered major US indices as investors digest another set of corporate earnings, Netflix loses subscribers for the first time in a decade, the IMF downgrades its outlook for global growth and oil prices snap a four-day rally.
Let’s dive in.
Stocks
Major US indices snapped a two-day losing streak amid a busy week for March quarter earnings reports and a pullback in energy prices
Last week, several US banks delivered somewhat disappointing first quarter results
10 out of 11 US sectors were green
Discretionary, real estate, tech and industrials outperformed
Energy was the only red sector amid a sharp pullback in oil prices
71% of US stocks advanced, indicating a broad-based rally
61% of US stocks trade below their 200-day moving average (63% on Tuesday, 64% a week ago)
Netflix shares plunged -25% in after hours after subscriber numbers fell for the first time in a decade. The streaming platform lost -200,000 subscribers in the March quarter
Johnson & Johnson rose 3% even after lowering its full-year sales guidance to US$94.8bn to US$95.8bn, around US$1bn lower than its previous guidance. J&J flagged rising costs due to supply constraints and inflation pressures
IBM rose 2.4% after beating both top and bottom line consensus expectations, and raised its full-year guidance. The technology services company also flagged the “escalating cost of talent acquisition”
US earnings to watch out for tomorrow: Procter & Gamble, Nasdaq, United Airlines, Tesla
Economy
St Louis Fed President James Bullard has indicated the possibility of 75 bps rate hikes. Though, he acknowledges that this is not the base case yet
The International Monetary Fund said the Russia-Ukraine war will take a massive toll on global economic growth this year, downgrading global growth expectations to 3.6%
The institution does not expect a recession or stagflation in the US or Europe
US housing starts rose 0.3% on-the-month in March despite high inflation and surging mortgage rates
Commodities
Iron ore prices slipped, in-line with the broad-based pullback in commodity prices
Oil prices fell as lower economic growth forecasts and a slowdown in the Chinese economy sink in
Gold prices pull back sharply as profit taking kicks in
ASX Morning Brief
#1 Tech
Tech stocks led a broad-based rally on Wall Street, even after Netflix's -25% plunge in after hours.
The Global X FinTech, Cloud and eCommerce ETFs all rose at least 2%, with notable winners including:
Block +5.2%
Affirm +5.2%
Zoom +5.1%
Etsy +4.4%
Amazon +3.5%
Strong gains from US BNPL names would bode well with local players like Zip (ASX: Z1P). The ASX-listed Block (ASX: SQ2) is expected to have a strong open after a rally from its US-listed counterpart.
#2 Travel
The US Global Jets ETF closed above its 200-day moving average for the first time since early February.
Source: TradingView, Annotations by Market Index
The ETF is comprised mostly of US airlines. It also has some small exposure to international airlines, including Qantas (ASX: QAN).
Delta Airlines was a major catalyst for the ETF's recent upbeat performance. Last Thursday, Delta reported a smaller-than-expected quarterly loss and said it expects to turn a profit in the June quarter.
The airline expects capacity to reach around 84% of 2019 levels and mitigating inflationary pressures by raising airfares.
The continued strength in US airlines and travel stocks could point to more positive flow for local names.
#3 Lithium
Nothing too major in terms of overnight lithium news and ETF movement.
The VanEck Rare Earths/Strategic Metals ETF is trying to stabilise after a sharp pullback.
Source: TradingView, Annotations by Market Index
Investors might want to note a diverging performance across local lithium names.
The big established players like Allkem (ASX: AKE) and Pilbara Minerals (ASX: PLS) are somewhat stalling in share price performance relative to the 'new leaders' in the sector.
Names like Core Lithium (ASX: CXO) and Lake Resources (ASX: LKE) re names that have taken short breathers before continuing to rally into all-time highs. Other notable names that could be a 'new leader' in the lithium space include:
#4 Energy
Oil prices fell sharply after a strong four-day rally.
"There remain plenty of upside risks to the oil price, even at these levels, which makes today’s large declines all the more interesting. Protests in Libya have knocked out around half a million barrels per day of output which contributed to Monday’s rally," said Oanda senior market analyst, Craig Erlam.
"As was evidenced by reports of OPEC+ compliance hitting 157% in March, up from 132% in February. In other words, OPEC+ produced 1.45 million barrels per day less than it promised as part of the deal to gradually return output to pre-pandemic levels."
Despite the upside risks to oil, the overnight pullback could send some negative flow to local energy stocks.
Key Events
ASX corporate actions occurring today:
Ex-dividend: SOL
Dividends paid: AHX, APE, VAS,
Listing: None today
Issued shares: 14D, ADX, AGE, AGY, AJQ, AR1, AT1, ATC, AVL, AYA, BNR, BPM, BSA, BXB, CNU, CU6, CXM, CZN, DUB, ELO, ELT, EMR, FBU, FCT, FZO, GSM, HCH, HYD, IXR, JAT, JRL, K2F, LCL, LIS, LIT, LRS, MFF, MIN, MIO, MLS, MNY, NBI, NZM, OKR, PAB, PAC, PHO, PIC, PVW, QRI, QVE, SGH, SIX, SYA, TD1, TEM, WAR, WAT, WAX, WMA, WMI, WQG
Things of interest (AEST):
Canada Inflation Rate (March) at 11:30 pm
