S&P 500 extends pullback, ASX 200 performance on rate hike days

ASX 200 futures are trading 1 point higher, up 0.01% as of 8:20 am AEDT.

The S&P 500 fall for a second-straight session, US hedge funds are aggressively covering their short positions, Goldman Sachs cuts its recession odds, Australian retail trading volumes posts largest non-pandemic fall in 12 years and how does the ASX 200 perform on interest rate decision days?

Let's dive in.

MARKETS

• Risk off start to the week amid a bounce in bond yields, dollar strength, overbought conditions and heightened geopolitical risks
• Strong US jobs data flips Fed rate path risk to the upside says BoFA
• US jobs data reflects a goldilocks moment, with strong payrolls growth alongside improving economic growth and disinflation says JPMorgan
• Hedge funds covering short positions at faster pace than 2021 meme stock frenzy (FT)
• Binance temporarily suspends US dollar withdrawals (Axios)

STOCKS

• Dell cuts over 6,000 jobs due to plunging PC sales (Bloomberg)
• Tesla raises price of Model Y in US in response to strong demand (CNBC)

EARNINGS

Key stats about US fourth quarter earnings, according to FactSet:

• 50% of the S&P 500 has now handed down results.
• Of these, 70% of S&P 500 companies have reported a positive EPS surprise and 61% of S&P 500 companies have reported a positive revenue surprise
• Blended earnings decline for the S&P 500 at the moment is -5.3%. If this holds, it will mark the first time the index has reported a year-over-year decline in earnings since Q3 2020
• For Q1 2023, 37 S&P 500 companies have issued negative EPS guidance and 6 S&P 500 companies have issued positive EPS guidance

Big tech has failed to impress, notably:

• Netflix, and Google have all announced layoffs while Microsoft’s disappointing revenue forecast fell flat with investors
• Meta also reported a disappointing result but Zuckerberg also used that as a chance to initiate a $40 billion share buyback. Cue 23% pop
• Bigger takeaway is the re-rate in earnings estimates from the sell-side

ECONOMY

• German factory orders improve in December (Bloomberg)
• Fed's Daly sees rates at 5.1% due to sticky inflation and strong jobs (Reuters)
• ECB 's Holzmann says risk of over-tightening policy dwarfed by risk of doing too little (Bloomberg)
• BoE's Mann says next move likely to be another 25bp hike (Bloomberg)
• Goldman Sachs cuts recession odds on labor-market strength, improvement in business surveys (Bloomberg)

DEEPER DIVE

Data Insights: ASX 200 on rate hike days

The RBA interest rate decision is at 2:30 pm AEDT for a widely expected 25 bp hike. In Monday's Evening Wrap, I looked at how the ASX 200 performed on rate hike days in 2022.

Key Events

ASX corporate actions occurring today:

• Trading ex-div: None
• Dividends paid: Perpetual (PPT) – $0.35, Advanced Share Registry (ASW) – $0.005, New Energy Solar (NEW) – $0.135
• Listing: None

Economic calendar (AEDT):

• 11:30 am: Australia Balance of Trade
• 2:30 pm: RBA Interest Rate Decision

Today's Morning Wrap was written by Kerry Sun and Hans Lee.