Morning wrap: Wall Street wobbles as tech stocks falter, ASX set to rise

ASX Futures (SPI 200) imply the ASX will open 27 points higher, up 0.36%. 

A tech-led selloff drove most US indices lower, investors digest expectations of a more aggressive Federal Reserve, the US Senate passed a bill banning Russian oil and gas imports, Tesla teases as a potential expansion into lithium production and Prime Minister Scott Morrison confirms a May 21 Federal Election.

Let’s dive in.

Stocks

• A tech-led selloff drove the S&P 500 and Nasdaq lower last Friday

• The Dow Jones managed to outperform thanks to gains from names like Home Depot and Goldman Sach

  • The Dow Jones is an index of the 30 of the largest blue-chip stocks in the US market. The Index is price-weighted as opposed to being market-cap weighted 

• Surging bond yields have come back to bite richly-valued tech stocks

  • The Nasdaq managed to bounce from oversold levels in the second-half of March, up 17% from trough to peak

  • Since mid-March, the US 10-year Treasury Yield has added 32% from 2.05% to 2.71%

  • Tech stocks are now coming back to reality, where the topic of surging yields will likely weigh on valuations

• 7 out of 11 US sectors advanced

• Industrials, consumer discretionary and tech stocks underperformed

• 54% of US stocks declined

• 63% of US stocks trade below their 200-day moving average (63% last Friday, 58% a week ago)

• Tesla shares fell -3% after Elon Musk said he was committed to 2023 deliveries of the Cybertruck pickup. Last Friday, Tesla successfully hosted a ‘Cyber Rodeo’ party, celebrating the grand opening of the Gigafactory in Texas 

Economy

• The Canadian economy added 72,500 jobs in March, slightly below economists’ expectations

  • The unemployment rate dropped to 5.3%, the lowest reading since the mid 1970s

• US weekly jobless claims fell to 166,000, well below the Dow Jones estimate of 200,000 and the lowest reading since 1968

  • To add some perspective, the total number of those receiving benefits was 18.4m a year ago

• Several Fed members will speak at various events and forums this week. Any more hawkish surprises from the Fed could weigh on markets

Commodities

• Iron ore prices continue to ease as a bearish sentiment dominated the Chinese market, according to Fastmarket 

• Oil prices are trying to stabilise around the mid US$90s as China’s lockdown continues to weigh on demand prospects. The International Energy Agency said they will add 240m barrels of oil to global supply given the Russia-Ukraine situation

• Gold prices advanced amid concerns that the Fed still has more room to tighten monetary policy conditions

Nothing too exciting happened on Wall Street last Friday. It was encouraging to see a majority of US sectors in green despite a very mixed session.

The outperformance of US energy, financials and healthcare sectors could help the local sharemarket on Monday. Chinese lockdowns and a slightly weaker iron ore price could weigh on miners.

#1 Tech

US tech stocks bore the brunt of the selling amid a familiar rotation towards more value and cyclical stocks.

Notable overnight losers include:

• Nvidia -4.5%

• Etsy -3.6%

• Tesla -3%

• Affirm -2.9%

• Block -2.2%

The Global X FinTech, Cloud and eCommerce ETFs all fell between -1% and -1.5%.

The S&P/ASX 200 Info Tech Index is down -6.4% in the last three sessions. The re-emergence of the rotation away from tech stocks could flag another challenging session for the local tech sector.

#2 Uranium

Interesting developments for the uranium sector last Friday and over the weekend include:

• Biden signed an Executive Order banning imports from Russia's energy sector, including uranium

• Senator Joe Manchin introduced a Bipartisan bill to increase US uranium enrichment capability through a "Nuclear Fuel Security Program"

• Uranium spot prices were trading at US$63.5/lb, largely unchanged compared to last Thursday

The Global X Uranium ETF closed 0.9% higher, well-above session lows of -0.9%.

This could see another encouraging session for local uranium names. Though, the risk-off attitude towards tech and growth sectors could be a potential speed bump for the otherwise bullish uranium sector.

See a full-list of ASX uranium stocks here.

#3 Energy

The best performing sector on Wall Street last Friday was energy. Though, oil prices are still trying to stabilise amid China's intense lockdowns and strategic oil reserve releases.

Source: TradingView

"The oil market is still tight, but if China’s lockdowns have no end in sight, crude prices could still weaken by another 3-5%," warned Oanda senior market analyst, Ed Moya.

"WTI crude should find decent support from the mid-$90s, but if the dollar further extends its gains, that could keep most commodities vulnerable. Supply shortage concerns appear to be easing, but we are still early in the peak summer driving/travel season."

#4 Gold

Gold is close to US$1,950 after trading in a very tight range for the past 2 weeks.

Source: TradingView

"Too many risks to the outlook are emerging and some investors are loading up on safe-havens,' said Moya.

"Gold should start to attract some long-term bets but will struggle if Treasury yields continue to soar. The US$1,970 level should provide short-term resistance for bullion."

A firmer gold price should drive some positive flow for local names.

#5 Coal

Europe signed a ban on Russian coal imports over the weekend. In addition to President Biden's Executive Order banning imports from the Russian energy sector, which includes coal.

Coal prices are poised to benefit as the supply-tight narrative continues to gather momentum.

See a full list of ASX-listed coal stocks here.

ASX corporate actions occurring today:

• Ex-dividend: BKW, LSX

• Dividends paid: ABC, NBI, SND

• Listing: None today

• Issued shares: 92E, AAU, AGE, AGY, AR1

Things of interest (AEST):

• China Inflation Rate (Mar) at 12:30 pm

• UK GDP Growth (Feb) at 5:00 pm