S&P 500 turns positive, Treasury yields extend gains, ASX futures flat

ASX 200 futures are trading trading flat at 8:20 am AEDT.

The S&P 500 bounced from session lows of -0.5% to close positive, the US 10-year Treasury yield rallies amid expectations of a higher Fed funds rate, PayPal tops earnings expectations but payment volumes were weaker-than-expected and all eyes on US inflation data on Wednesday.

Let's dive in.

S&P 500 Session Chart

MARKETS

• S&P 500 fell -1.1% last week, marking its first weekly decline in three weeks
• Peak Fed funds rate jumped to 5.15% from 4.9% a week ago
• Fed rate path repricing turned treasuries into a headwind, with the 10-year yield up 21 bps to 3.74% last week
• 2-and-10 year spread hit ~80 bps, its most inverted point since the early 1980s
• Market is now closest to neutral positioning since the second-half of 2022 after cutting over US$300bn of bearish bets (Bloomberg)
• Bond investors are increasingly accepting Fed's "higher for longer" messaging (FT)
• Investors positioning potential bond rout if Wednesday's CPI print hotter than expected (Bloomberg)

STOCKS

• Tesla closing the profit gap with Toyota (Nikkei)
• Samsung moving towards high-end of market amid declining phone sales (FT)
• Adidas may face "significant adverse impact" of unsold Yeezy inventory (CNBC)

EARNINGS

PayPal (+3.0%): EPS beat analyst expectations but payment volumes and revenues slightly missed, issued a strong guidance and repurchase plan (representing 75% of FCF or US$4bn per year) and CEO Shulman is set to retire.

Expedia Group (-8.6%): Missed earnings and revenue expectations, noted solid lodging demand but faced significant headwinds from Hurricane Ian in October and severe US weather in December, January bookings accelerated in 1H23 and set to outpace pre-Covid levels.

• “... our most profitable year in 2022 … While our Q4 results were negatively impacted by severe weather, demand was otherwise strong and accelerating, and has been markedly stronger since the start of the year." - CEO Peter M Kern

Lyft (-36.4%): Q4 adjusted net loss of -US$271m, revenue and active riders was slightly ahead of expectations but guided towards a weaker 1Q23.

ECONOMY

• University of Michigan year-ahead inflation expectations jumped to 4.2% from 3.9% a month ago, five-year inflation expectations remained at 2.9%
• Canada added 150,000 jobs last month, 10 times what economists expected (CBC)
• Japan wholesale price inflation eases (Reuters)
• Declining excess savings fueling concerns about consumer spending outlook (FT)

Deeper Dive: Charts, Macro & Sectors

Talking Technicals

S&P 500 manages to bounce on the 20-day (red). With CPI data due on Wednesday, will the market remain in 'wait-and-see' mode?

ASX 200 sold off rather heavily last week, down -1.65%. After such a powerful run, watch how the market behaves amid the pullback.

Macro: US CPI on Wednesday

Key Events

ASX corporate actions occurring today:

• Trading ex-div: Bailador Technology (BTI) – $0.035, Dicker Data (DDR) – $0.025
• Dividends paid: Transurban (TCL) – $0.265
• Listing: None

Economic calendar (AEDT):

No major economic announcements for Monday.