Nasdaq Enters Bear Market, March Inflation, AUD, North Star, AMP on Watch: ASX to Crash

Global markets fell into negative territory as energy stocks rallied as oil prices rebounded. US stocks were in meltdown mode, with tech stocks continuing to underperform. Join me for the top three reasons why the sale happened. March CPI figures due today.

Hello. Big dip for big tech. I’m Melissa Darmawan for Finance News. This is your market outlook.

Australia’s stock market is set for a painful day after a sharp sell-off on Wall St.

Nasdaq enters bear market and falls 23% from November 2021 high

US equities were in meltdown mode as tech stocks continued to underperform, which has been the case all year. Several big tech giants are set to report results after the bell, meaning they’ll dictate the course for their stock price the next day.

However, it now appears investors were worried after Netflix’s sell-off following its own disappointing results, prompting big tech names to close in deeply negative territory ahead of their results.

Wall Street is also watching the potential for an economic slowdown from rising Covid-19 cases in China, while Russian officials say not to underestimate the risk of nuclear war in Ukraine.

There are many factors that are moving the stock market with the utmost concern over whether or not the United States will fall into a recession. April, traditionally a strong month, all ahead of what next month means, a time when investors “sell in May and then walk away” in the midst of these major indices, closing at session lows by retesting this March 2022 or May 2021 low.

At the closing bell, the Dow Jones lost 2.4% to 33,240, the S&P 500 fell 2.8% to 4,175 and the Nasdaq plunged nearly 4% to 12,491, closing below 12,500.

Across all S&P 500 sectors, energy was the outlier and best performer, gaining 0.04% as oil prices surged above US$100 a barrel in volatile trading, rebounding after a loss of 5% in the last 2 sessions. The rebound received a boost as China’s central bank pledged to increase support for the economy after a flash test took place across most of the city. The rest of the sectors closed lower, led by Consumer Discretionary, which fell 5%, followed by Information Technology, which fell 3.7%. The losses were of the order of 2 to 3%.

The 10-year Treasury yield fell 9 basis points to 2.74%, gold rose but prices remain near their lowest level since February, as does the greenback as investors seek Security.

Why this massive sale?

First, during the heat of the pandemic and easy monetary stimulus, investors tolerated massive valuations on these big tech stocks. Now the hold on stocks at home and the safety of the Fed’s balance sheet are starting to ease with Netflix signaling a huge warning after their results, which is why tech got a heavy hit today.

Second, traders reflected on the past when the Fed last ended quantitative easing in 2014. Back then, the market had a full year to absorb the fact that central bank support would not was no longer there. The S&P 500 sold off 20% and the central bank did not hit a soft landing, hence a recession.

Third, what we have now is a different story with other global macro pressures including the war in Ukraine and the price of soft and hard commodities reaching all time highs, the tight supply chain and now the second largest economy in the world, China. extend its lockdown with no end date in sight.

All of this is weighing on investors as they scale the wall of worry.

Twitter CEO tells staff the future is uncertain under Musk

We can’t get past what happened with Twitter, with the social media company’s future uncertain once Tesla CEO Elon Musk takes over. CEO Parag Agarwal reportedly told staff at a company town hall meeting last night that things were on hold, after Musk struck a $44bn deal to buy the company and take it private, according to Reuters . Shares of Twitter closed down 3.9%.

Elon Musk secured $25.5 billion to fund the Twitter deal, including $12.5 billion in loans against his own Tesla stock.

Musk is set to join Twitter staff for a short-term Q&A session, while the Twitter CEO has deferred many questions on whether there will be any layoffs or major changes, claiming that Musk should respond to it.

While staff worried about Musk running Twitter, Tesla investors seemed even more concerned. The stock closed down 12.2%, significantly underperforming the broader market.

Dorsey says Musk ‘is the singular solution I trust’

If the deal goes through, Musk would be the CEO of Tesla, Twitter and SpaceX and three other companies, a pretty full plate, however, he’s the richest person in the world and overall a big chunk of his wealth comes from Tesla.

Musk received mixed reviews from some of his peers after the takeover announcement. Jeff Bezos, another of the world’s richest people, suggested that Musk’s leadership could help China gain a foothold and greater influence on Twitter because of Tesla CEOs’ business ties to China. But on the other hand, Jack Dorsey noted that Musk is the “one solution I trust” for running a social media site. Dorsey co-founded Twitter and served as CEO not once, but twice.

Australian dollar stabilizes at 2-month low

Meanwhile, our Australian dollar has stabilized and is near a two-month low. Market participants will await the March inflation report, with consumer prices accelerating to 4.6% for the year, after a 3.5% gain in February.

This would mark the highest rate of inflation since the global financial crisis as soaring food and fuel prices continue to drive up inflation.

If the March figures come in as expected, the RBA may well respond with a rather hefty 0.40% increase at next month’s policy meeting. This could give the Australian dollar a good boost.

The central bank last raised rates in 2010, with economists saying a rate hike is likely after the election. The problem is that as inflation continues to rise, monetary authorities may need to step in and bring it down sooner rather than later.

Our Australian dollar has reaped the rewards of the commodity price surge, but with the scene in China and the drop in the price of iron ore, our Australian dollar is falling in tandem. China’s economic growth should weigh on our dollar as China is our largest trading partner.

Numbers around the world

Across the Atlantic, European markets closed lower. Paris lost 0.5%, Frankfurt fell 1.2% while London’s FTSE gained 0.1%.

On the London Stock Exchange, Rio gained 1.5%, BP added 2.9% and Shell advanced 2.4%.

Asian markets closed on a mixed note. Tokyo’s Nikkei gained 0.4%, Hong Kong’s Hang Seng gained 0.3% while China’s Shanghai Composite lost 1.4%.

The Australian stock market closed 2.1% lower at 7,318 yesterday. Join me here for “Miners Drill Deep as Beijing Blues Crush ASX, Closing 2.1% Lower”

SPI Futures Contracts

Taking all of that into the equation, SPI futures are pointing to a 1.5% decline.

What to pay attention to today

Besides the CPI print and our Australian dollar, production updates are on the cards. champion iron (ASX: CIA)Global coronado (ASX: CRN)Gold Road Resources (ASX:GOR)Iluka Resources (ASX: ILU)North Star (ASX:NST)and Ramélius Resources (ASX: effective value) while Downer EDI (ASX:DOW) has its investor day today.

We have quite a few broker upgrades, starting with Morningstar upgrading their rating for Aristocrat Leisure (ASX: ANY) to a pending purchase, Iluka Resources (ASX: ILU) put on hold by Sell, Mineral Resources (ASX:MIN) to remember to buy, and Washington H. Soul Pattinson (ASX:SOL) buy pending.

Morgan Stanley cut Beach Energy (ASX: BPT) to underweight equally as Canaccord exits EML Payments (ASX:EML) keep buying.

Single Malt (ASX: UMG) received two ratings, one is a hold cut at Morgans while Credit Suisse raised it to outperform from neutral.

A company to watch, the real estate company Dexus (ASX:DXS) is about to reach an agreement with AMP (ASX:AMP) real estate and infrastructure arm, Collimate Capital in a transaction valued at $300 million.

Dividend

There are 2 companies ready to pay eligible shareholders today

360 Capital Group (ASX: TGP)
360 Capital REIT (ASX:TOT)

Merchandise

Iron ore gained 2.4% to US$138.95. Its futures are pointing to a 2.9% gain.

Gold gained $8.10 or 0.4% to US$1,904 an ounce. Silver is down $0.14 or 0.6% at US$23.59 an ounce.

Oil gained $3.16 or 3.2% to US$101.70 a barrel.

Currencies

The Australian dollar at 7.35am weakened from yesterday, buying 71.24 US cents (Tuesday: 71.82 US cents), 56.67 pence sterling, 90.65 yen and 66.95 euro cents .

Source: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics