Morning Wrap: S&P 500 higher as tech stocks jump, ASX set to rise
ASX 200 futures are trading 12 points higher, up 0.16% as of 8:20 am AEDT.
The Nasdaq outperformed the S&P 500 amid a broad-based rally for tech names, S&P 500 Q4 earnings are so far down -5.0%, inflation expectations hit their lowest levels since April 2021 and why the ASX 200 appears deceptively strong.
Let's dive in.
- Sell-side strategists are pushing back against the early 2023 strength, saying that the market is not pricing in earnings, recession and geopolitical risks
- Depressed positioning for bearish first half consensus still a tailwind, with long-only funds buying big tech plus retail coming back in
- Debt ceiling deadlock feeding into speculation about early QT exit
- Fed prospects of soft landing gains more traction (Bloomberg)
- Heavily shorted stocks and 2022's big decliners outperform market in early 2023 (Yahoo)
- Blended earnings growth rate for Q4 S&P 500 EPS is currently down -5.0% compared to -3.2% expected, according to FactSet
- Of the 29% of S&P 500 companies that have reported for Q4, 69% have beaten consensus EPS expectations, below the one-year average of 75% and five-year average of 77%.
- American Express (+10.6%): Q4 earnings were light amid weaker discount results and higher provision; guidance was ahead of analyst expectations
- Intel (-6.4%): Q4 earnings and current quarter guidance both missed expectations amid an even more pronounced than expected inventory correction and softening demand trends
- Hasbro (-8.1%): Q4 revenue was well-below analyst expectations with a big shortfall in Consumer Products business due to a challenging holiday environment
- Visa and Mastercard see a stronger January, supporting the theme of a resilient consumer
- Tesla talked up strong demand and auto
- LVMH and Las Vegas Sands talk up a faster China reopening
- Microsoft flagged cloud optimization headwinds
- Texas Instruments notes a pickup in order pushouts/cancellations amid deterioration in most of its end markets
- Disinflation narrative remains intact as US core personal consumption expenditure inflation comes in-line with expectations
- Michigan consumer sentiment 1-year inflation expectations are at their lowest since Apr 2021
- ECB commentary remains hawkish with expectations of 75 bp of rate hikes in the first half
Economic data increasingly points towards a manufacturing recession (Bloomberg)
WHAT’S ON TODAYASX corporate actions occurring today:
Economic calendar (AEDT):
- Trading ex-div: Perpetual Credit Income Trust (PCI) – $0.06, Gryphon Capital Income Trust (GCI) – $0.013, Djerriwarrh Investments (DJW) – $0.072
- Dividends paid: Metcash (MTS) – $0.115
- Listing: None
- 8:00 pm: Germany GDP growth
- 9:00 pm: Eurozone economic sentiment
Perhaps its time to shift focus away from the index and look at a) individual stocks and b) major US benchmarks.
On that note, the S&P 500 continues to grind higher, pushing above the key downward trendline and 200-day moving average. Can it rally past 4,100 or does it need a bit more chop?
Sectors to watch
Uranium: The Global X Uranium ETF is starting to find its groove above the 200-day moving average, up another 1.8% overnight. The chart below shows a) the ETF has been rather choppy in the last 12-16 months and b) its rallying into a key trendline. Will 2023 be the year for uranium or another frustratingly back-n-forth year?
A powerful breadth thrust: In contrast, global markets have experienced a powerful breadth thrust whereby the percentage of stocks trading above their 200-day moving average has spiked from 0% to 90% in less than two months. Historical breadth thrusts have coincided with the beginning of major sustained rallies for global markets including 2009, 2012, 2016, 2019 and 2020.
Easing financial conditions: Goldman Sachs' Financial Condition Index has eased significantly over the past three months. "In the last 20 years, the only two periods of time where conditions loosened further were toward the end of the 2008-09 recession & mid-2020," noted Liz Young, Head of Investment Strategy at SoFi. Though, the Fed is due to hike rates by another 25 bps later this week. Will Powell re-tighten financial conditions and crush the idea of rate cuts?
Today's Morning Wrap was written by Kerry Sun.
Welcome to Livewire, Australia’s most trusted source of investment insights and analysis.
To continue reading this wire and get unlimited access to Livewire, join for free now and become a more informed and confident investor.
1 contributor mentioned
Livewire and Market Index's pre-opening bell news and analysis wrap. Available weekday mornings and written by Chris Conway, Kerry Sun, and Hans Lee.
Please sign in to comment on this wire.