Morning wrap: Wall Street slides on rising yields, ASX set to sink

ASX Futures (SPI 200) imply the ASX will open 66 points lower, down -0.9%.

The local sharemarket could be in for a painful session following a tech-led selloff on Wall Street.

The Nasdaq (tech) closed below its 200-day moving average for the first time since 9 March 2020.

Breaching the 200-day moving average could flag the end of its bullish trend. 

The US 2-year Treasury yield broke above the 1% level for the first time since February 2020. The 2-year is often used as a gauge of where the Fed wants to set short-term interest rates. 

US 2-year Treasury yield, daily chart, TradingView

Benchmark US 10-year yields pushed higher to 1.87%, on par with levels not seen since January 2020.

▲ Energy

Energy stocks rallied against the tide as oil prices cracked 7-year highs of more than US$85 a barrel. 

Crude oil, daily chart, TradingView

OPEC held its monthly meeting on Tuesday, with the group forecasting oil demand to hit 100m barrels a day in the third quarter, surpassing pre-covid levels this year. 

The Group reiterated that the “impact of the Omicron variant is projected to be mild and short-lived”. However, flagged “uncertainties remain regarding new variants and renewed mobility restrictions, amid an otherwise steady global economic recovery”. 

▼ Technology 

Tech valuations continue to falter amid the surge in US Treasury yields. The same yields are used to value future earnings in today's dollars.

The higher the yield, the less future earnings are worth today. 

Mega caps including Meta Platforms, Amazon, Apple, Alphabet and Tesla all tumbled between -1.2% and -3.5%. 

Elsewhere, Microsoft announced its plans to buy video game company Activision Blizzard in an all-cash transaction valued at US$68.7bn. Activision Blizzard shares closed 26% higher. 

▼ Financials 

Goldman Sachs shares slipped -7% after the bank missed fourth quarter earnings expectations. The bank said quarterly profits fell 13% on the year to US$3.94bn, weighed by a 23% jump in operating expenses. 

This likely drove broad-based weakness across the banking sector, with names including JP Morgan and Bank of America down -4.3% and -3.5% respectively.

#1 Hydrogen 

The Hydrogen ETF closed at all-time lows for a third straight session. The ETF is now down -28% from its first day of listing (14 July 2021) and down -40.7% from all-time highs. 

This could pressure local hydrogen stocks, notably Hazer (ASX: HZR).

#2 Uranium 

The Uranium ETF closed below its 200-day moving average, while shorter moving averages like the 100 and 20 began to turn negative, suggestive of a weakening trend. 

Global X Uranium ETF, daily chart, TradingView

With the ETF beginning to roll over, it could drive negative flow to local names including:

• Paladin Energy (ASX: PDN)

• Boss Energy (ASX: BOE)

#3 FinTech and cloud

The FinTech ETF closed at fresh 17-month lows. 

The local BNPL sector is most at risk after Affirm shares fell -6.7% and Block closed -2.3% lower. 

Likewise, the Cloud ETF closed at fresh 14-month lows. This could flag weakness for local names such as: 

• Xero (ASX: XRO) 

• WiseTech Global (ASX: WTC)

• NextDC (ASX: NXT)

#4 Rare earths, strategic metals and lithium 

The Rare Earth/Strategic Metals ETF staged a slight pullback and remains 11% away from all-time highs.

Many ASX lithium stocks have greatly outperformed the ETF and set new all-time highs almost on a daily basis. This could put them at risk if the ETF experiences a sharp correction.

#5 Aluminium 

Aluminium spot prices continue to trade higher with tight supply as the main concern.

Prices cracked US$3,000 a tonne for the first time since October last year. Stockpiles in LME approved warehouses are down more than 50% since March 2021.

Aluminium spot prices, TradingEconomics

Higher spot prices could continue to drive tailwinds for local aluminium stocks including:

• South 32 (ASX: S32)

• Alumina (ASX: AWC)

ASX corporate actions occurring today:

• Ex-dividend: AIQ, KPG, PL8, SEC

• Dividends paid: none today

• IPOs: NC1

• Issued shares: 360, ACF, AGY, AJQ, APT, ATC, AVA, BDG, CDT, E33, EAI, EBO, FCT, FIN, FPH, GLN, GOR, HE8, HPG, JAL, KNM, LOT

Other things of interest 

• Westpac Consumer Confidence: January consumer confidence figures will be released at 10:30 AM AEDT