Market Highlights: S&P 500 just 1pc shy of record highs, and Macquarie bullish on small caps in 2024

ASX to open lower despite a rally in New York
Apple to appeal smartwatch ban in the US
Macquarie is bullish on small caps in 2024

Aussie shares are poised to open the last trading week of the year lower after a four-day long Christmas holiday weekend. At 8am AEDT, the ASX 200 index futures was pointing down by 3 points.

In New York overnight, the S&P 500 rose by +0.42%, the blue chips Dow Jones index was up by +0.43%, and the tech-heavy Nasdaq lifted by +0.54%.

The S&P 500 is now just 1% shy of its January 2022 record high of 4,797 after posting eight consecutive weekly gains.

“The focus will quickly pivot to whether the market will be able to sustain its momentum into the New Year, and that may depend on how long the good vibes surrounding potential Fed rate cuts last,” said Chris Larkin at E*Trade told Bloomberg.

To stocks, Apple fell -0.28% after appealing its US sales ban of smartwatches as the White House refused to veto a government tribunal.

Intel surged +5% on news that the company will be building a US$25 billion new manufacturing facility in Israel, with aUS $3.2 billion help from the Israeli government.

Meanwhile, buyers piled into Treasury bond sales on Tuesday, seeking to lock in higher yields as the market prices in Fed rate hikes in 2024.

Macquarie bullish on small caps in 2024

Macquarie Asset Management(MAM) has released its 2024 market outlook report.

Analysts at MAM believe listed equities may face headwinds in 2024 from the more volatile economic backdrop, while bonds may become a worthwhile alternative again.

However, they also believe that the small cap end of the stock market could be ripe for buying,

“While US large-cap stock valuations look stretched, opportunities may remain in small-caps and listed real assets,” wrote MAM.

The next 12 months price-to-earnings (P/E) ratios for small-cap stocks, says MAM, are at levels typically seen during a recession, while the largest-cap stocks are trading close to their all-time highs.

“This makes the valuation spread (the difference in multiple between the largest and smallest quintile) compelling, in our view,” said MAM.

“In the 2002 and 2008 recessions, small-caps outperformed large-caps as the recession started, and also in the early phase of the recovery, creating an interesting asymmetry.

“The reason back then was similar to today: small-caps priced in recession risks earlier and more significantly.”

Also, MAM says that investors have shied away from China amid the economic uncertainty and real estate market turmoil.

“However, many of the risks are now well flagged and we may be close to the point of “peak pessimism”, making China and emerging markets more broadly a potential opportunity, in our view,” noted MAM.

In other markets …

Gold price rose by +0.7% to US$2,066.69 an ounce.

Oil prices was higher by 2%, with Brent now trading at US$80.78 a barrel.

The benchmark 10-year US Treasury yield was down 1 basis point (bond prices higher) to 3.90%.

Iron ore futures lifted +0.20% to US$135.75 a tonne.

The Aussie dollar climbed by +0.4% to US68.25c.

Meanwhile, Bitcoin was down -2.5% in the last 24 hours to US$42,290.

5 ASX small caps to watch today

Delta Lithium (ASX:DLI)
Delta Lithium reported a maiden Mineral Resource Estimate (MRE) at the Yinnetharra Lithium Project, with a combined Inferred and Indicated Mineral Resource Estimate of: 25.7Mt @ 1.0% Li2O (at a 0.5% Li2O cut off), and 26% of the MRE in higher confidence Indicated category: 6.7Mt @ 1.0% Li2O. The addition of the Yinnetharra MRE takes Delta’s combined Inferred and Indicated Lithium MRE to: 40.4Mt @ 1.1% Li2O (at a 0.5% Li2O).

Opthea (ASX:OPT)
Opthea will receive the remaining US$35m of funding under the Development Funding Agreement (DFA) with Carlyle and its life science franchise Abingworth, as well as a further US$50m financing under an Amended DFA to include a new co-investor. This financing is non-dilutive to shareholders, with no equity issued to Carlyle, Abingworth or the new co-investor. The investments are driven by the potential of sozinibercept (OPT-302) as a treatment for wet AMD patients, which investors believe could provide a multi-billion dollar commercial opportunity.

S2 Resources (ASX:S2R)
Assay results have been received for first two holes and top portion of third hole at Goornong prospect at S2R’s 100% owned Greater Fosterville project. Results include: 1.7 metres at 4.5g/t gold (SFVD0001), 0.5 metres at 5.3g/t gold (SFVD0001), and 2.1 metres at 2.1g/t gold (SFVD0002).

Mamba Exploration (ASX:M24)
A binding agreement was signed by Mamba to acquire up to a 75% interest in the Canary Uranium Project, located in the prolific Athabasca Basin, northern Saskatchewan, Canada. The Canary Project is 11km directly north of IsoEnergy Ltd’s (TSX.V:ISO) Hurricane deposit and 6.5 km northwest of the mineralised Richardson Trend. The Project comprises two contiguous blocks, covering 73km2 with exploration targeting high-grade unconformity-related uranium mineralisation within Athabasca sandstones and underlying basement rocks.

Good Drinks (ASX:GDA)
Good Drinks announced the opening of its flagship hospitality venue in Queensland, “Matso’s Sunshine Coast”. The pub’s renovation focussed on retaining its heritage while showcasing the Matso’s brand. With a menu inspired by local ingredients and a relaxed setting including the front bar, main bar, restaurant, beer garden and pool room, GDA says Matso’s Sunshine Coast is designed to cater to a large variety of customers.

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