Nasdaq up almost 10% in 2023, US-listed BNPL stocks extend gains, ASX to rise

Major US benchmarks continue to climb ahead of a busy earnings week, investors continue to rotate into growth and tech names, US earnings season has so far been softer-than-expected and is the BNPL rebound set to continue?

Let's dive in.

MARKETS

• The S&P 500 struggled to hold session highs of 1.68% – there may be some technical factors in play as it hovers around closely watched 200-day moving average
• Bullish factors bolstering the market include: Slowdown in the pace of Fed tightening, disinflation momentum, a faster China reopening and a rise in soft-landing expectations
• Growth and tech continue to outperform, with names such as Tesla, Netflix, Meta and Apple up between 2-6%
• Cost-cutting and layoff announcements seem to be generating further buying interest in these growth names
• Q4 earnings season appears to be fairly lackluster, with S&P 500 earnings expected to fall -4.6%, according to FactSet
• Only 67% of results have surpassed consensus expectations, below the five-year average of 77%, according to FactSet
• 60% of stocks advanced overnight
• 35% trade below their 200-day moving average 

STOCKS

Qualcomm (+6.3%) was among several semiconductor companies that received an upgrade from Barclays. The investment bank expects to see a recovery in PC sales in the second half of 2023.

Salesforce (+3.0%) shares rallied after activist investor Elliot Management built a multi-billion dollar stake in the company.

Apple NASDAQ: AAPL (+2.1%) continues to rally on expectations that a China reopening will help recover iPhone sales. Morgan Stanley said the stock is a top pick and views the reopening as having ‘important implications’ for both demand and supply.

Spotify NASDAQ: SPOT (+2.0%) plans to lay off 6% of its global workforce of about 600 employees.

“To offer some perspective on why we are making this decision, in 2022, the growth of Spotify’s OPEX outpaced our revenue growth by 2 times.” - CEO Daniel Ek 

ECONOMY

Eurozone consumer confidence improved to -20.9 in January from -22.2 last December. It’s also the highest since February 2022 on hopes of lower energy prices.

European Central Bank President Lagarde continued her hawkish rhetoric, highlights include:

• "We have made it clear that ECB interest rates will still have to rise significantly at a steady pace to reach levels that are sufficiently restrictive, and stay at those levels for as long as necessary."

• "In other words, we will stay the course to ensure the timely return of inflation to our target."

QUICK BITES

Tech strength: The Nasdaq is up around 9.6% year-to-date. So what happens when the Nasdaq is up in each of the first three weeks of the year?

Falling recession odds: The likelihood of a recession is falling for the first time in over a year. Still, the Leading Economic Index (LEI) is in its 10th consecutive month of decline, which would be a record without a recession. Has the LEI got it wrong this time or is GDP contraction still on the horizon?

Major US benchmarks are showing some signs of a 'change of character' as the S&P 500 flirts around the 200-day moving average.

We're also seeing an improved strength among individual stocks, with 66% of S&P 500 rallying back above their 200-day moving averages, up from 50% earlier this year.

As for the ASX 200, it continues to grind higher and believe it or not, around 2.3% away from all-time highs. The market continues to defy the idea of a pullback. But the question remains, in the event of one, will we see buying support or do things fall apart like previous rallies?

Sectors to watch

BNPL: Monday was a crazy day for BNPL names, with Zip and Sezzle up 22.8% and 38.9% respectively. Overnight, US-listed BNPL names like Affirm and Block continued to rally, up 7-8%. Does this mark another day of soaring optimism for the beleaguered sector?

Tech: By extension of the above, we also saw the Nasdaq continue to grind higher, up around 2%. It closed towards session highs unlike the S&P 500. Our ETF list shows several sub-sectors such as Semis, Bitcoin, Cloud, eCommerce and FinTech up more than 2%. Some local heavyweights like Wisetech, Xero, Block and Altium could see some positive flow.

Lithium: The VanEck Rare Earths/Strategic Metals ETF rallied through the 200-day moving average. Do we continue to see a recovery in the lithium space? Its also worth pondering on whether or not a recovery will be even across all names. For example, will established producers like Pilbara Minerals and Allkem lead while explorers lag?

Did you enjoy the Morning Wrap?

My name is Kerry and I'm a Content Editor with Market Index and Livewire and the Morning Wrap is one of my passions. We'll be working to bring this wrap to both Market Index and Livewire readers in 2023. If you have any feedback or suggestions please let me know via the comments below.