S&P 500 soars on Powell's declining inflation remarks, ASX to rise
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
- 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)
- 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)
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.
Pinterest (-6.4%): Revenue miss but EPS beat, declared a US$500m buyback program and now searching for a new CFO after resignation
- 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)
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.
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?
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.
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.
Daily market news you need to knowBrought to you by Livewire Markets and Market Index, we’ve made every effort to ensure the above information is correct. We hope you find it useful, and welcome your views in the comments section below.
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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.
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