S&P 500 soars on Powell's declining inflation remarks, ASX to rise

February 08, 2023 08:48

Livewire Markets

ASX 200 futures are trading 34 points higher, up 0.45% as of 8:15 am AEDT.

The S&P 500 snaps a two-day losing streak after Powell said he expects 2023 to be a "year of significant declines in inflation", megacap tech stocks rally between 2-5% and oil prices jump almost 4% on China optimism.

Let's dive in.

S&P 500 Session Chart

S&P 500 nosedives and bounces after Powell’s speech, which offered nothing new (Source: TradingView)

MARKETS

Choppy but higher overnight session after Powell’s speech offered minimal pushback after Friday’s stronger-than-expected jobs report
Hedge funds caught in bigger squeeze than 2021 meme stock frenzy (Reuters)
Oil up on China outlook and supply concerns amid Turkey earthquake (Reuters)
Copper deficit set to hit global markets throughout 2023 (CNBC)

STOCKS

Bed Bath & Beyond plans to raise US$1bn to avoid bankruptcy (Reuters)
Microsoft hosts ChatGPT event (CNBC)
Baidu rallies after revealing ChatGPT-style product (CNBC)
Zoom rallies on plans to cut 1,300 jobs or 15% of its workforce (Bloomberg)

EARNINGS

BP (+8.3%): Softer than expected but record annual profit of US$27.7bn, increased quarterly dividend payout by 10% and spending a further US$2.75bn buying back its own shares

“We need continuing near-term investment into today’s energy system – which depends on oil and gas – to meet today’s demands and to make sure the transition is an orderly one.” – CEO Bernard Looney.

Hertz (+7.5%): Posted a net income of US$116m in the December quarter compared to a US$710m loss a year ago.

Pinterest (-6.4%): Revenue miss but EPS beat, declared a US$500m buyback program and now searching for a new CFO after resignation

ECONOMY

Wholesale egg prices down more than 50% since December (CNBC)
German industrial output falls more than expected in December (Reuters)
Citi says markets underestimating peak Fed rate, may reach 6.0% (Bloomberg)
Fed's Bostic says strong jobs report may see higher rates (Bloomberg)
BoE Chief Economist Pill ready to do more on inflation if necessary (Reuters)
RBA raises cash rate by 25 bps to 3.35%, hints at more hikes (Bloomberg)
Goldman Sachs sees lower risk of US recession due to strong jobs market and improved business sentiment (Bloomberg)

These are all US-listed ETFs. Last year, I wrote an explainer for our ETF table. You can check it out here.

DEEPER DIVE

Powell Rundown: Nothing New

Some key quotes from Powell's speech:

2023 is the year: "We expect 2023 to be a year of significant declines in inflation."
On goods: "We're seeing disinflation in the goods sector. We expect to see it in the housing services sector."
As for the other 56% of the core basket: "We're not seeing disinflation there yet and that's going to take some time ... we're going to need to be patient."
Data-driven: "We're going to react to the data so if we continue to get, for example, strong labour market reports or higher inflation reports, it may well be the case that we have to do more and raise rates more than what has been priced in."

Sectors to watch

Tech: The Nasdaq surged more than 2% after Powell's speech. This could see some positive flow for local tech names like Wisetech (ASX: WTC), Xero (ASX: XRO) and NextDC (ASX: NXT), after a two-day pullback.

ASX 200 Info Tech Index (Source: TradingView)

Oil: WTI up almost 4.0% overnight. Do we get to see a strong reaction from Woodside (ASX: WDS)?

Coal: Most local coal stocks rallied 2-5% on Tuesday after the Australian Energy Market Operator (AEMO) said it expects supply issues to persist in 2023. This triggered a 6.8% rally for Newcastle coal futures.

Uranium: Global X Uranium ETF breaks a three-day losing streak where it fell -7.6%. Can we see local uranium names catch a bid after a similar selloff?

Global X Uranium ETF (Source: TradingView)

Quick bites

Earnings flop: Forward S&P 500 EPS estimates just turned negative for the fifth time since 2000. Then again, it's negative after the Energy sector EPS jumped 154% last year. Note the correlation it has with the S&P 500.

Japanese wages: Real wages in Japan jumped by the biggest margin in almost 26 years.

Key Events

ASX corporate actions occurring today:

Trading ex-div: Resmed Inc (ASX: RMD) – $0.043
Dividends paid: Perpetual (ASX: PPT) – $0.35, New Energy Solar (NEW) – $0.135
Listing: None

Economic calendar (AEDT):

No major economic events during market hours. Overnight we'll see:

1:15 am: Fed Williams speech
2:00 am: Fed Barr speech
5:45 am: Fed Waller speech

This Morning Wrap was written by Kerry Sun.

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