Market Highlights: ASX to edge closer to record high ahead of Fed meeting, Big Tech earnings this week

ASX to extend winning streak on Monday as the S&P500 finally retreats
Fed Reserve to meet and announce rate decision later this week
The rest of Magnificent Seven will be reporting their earnings this week

Aussie shares are poised to extend its winning streak to a sixth day. At 8am AEDT, the ASX 200 index futures contract was pointing up by 0.2%, edging closer to its record high.

Overnight, the S&P 500 fell -0.1%, its first loss in six sessions. The blue chips Dow Jones index was up +0.16%, while the tech-heavy Nasdaq tumbled by -0.36%.

Bond yields rose again as investors seemed to have abandoned their bets on interest rate cuts in March, and have instead continued to fully price in a Fed move in May.

The next Fed Reserve meeting will be on Jan 30-31.

To stocks, American Express surged 7% following a strong guidance that topped analyst forecasts. Salesforce rose slightly after announcing that it would cut around 700 workers.

Amongst US stocks to report their earnings this week include: Apple, Alphabet, Amazon, Meta, and Microsoft. Nvidia won’t report until February 21.

To data, the US core Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation measure, declined to 2.9% – lower than the 3% estimate.

Meanwhile, US GDP grew at an annualised rate of 3.3% in the final quarter of the year, down from 4.9% in the previous quarter but well ahead of the 2% economists had expected.

“In my opinion, the significantly strong GDP report for the fourth quarter is unlikely to alter expectations for interest rate cuts by the Federal Reserve this year,” said Rania Gule, market analyst at XS.com

“Whether right or wrong, many traders are focusing on the possibility of a continued decline in inflation despite the growth happening in the United States.”

What to expect from Big Tech earnings this week

As we await earnings reports from the rest of the Magnificent Seven, each of them faces its own set of opportunities and challenges.

“On balance, the Magnificent Seven stocks’ earnings are expected to grow nearly 40% from the same period last year on 12% high revenues,” said analysts at Zacks.

According to LPL Financial, these seven stocks will make up more than 100% of the total earnings growth of the entire S&P 500 index, meaning that the other 493 stocks (S&P 493) “likely lost money across all of last year.”

Earnings aren’t the only fundamental metric on which the Magnificent 7 outperform other stocks.

“Looking at factors like sales growth (Magnificent Seven expected near 11% over the next two years vs. 3% from the S&P 493) and net margins (~20% for the Magnificent Seven vs. ~10% for the S&P 493), there is no comparison,” said the team at Goldman Sachs.

Some other common themes to monitor from their earnings reports are the health of the consumer and the broader economy, as well as the impact of AI and growth of augmented/virtual reality devices.

In other markets …

Gold price fell by -0.1% to US$2,018.38 an ounce.

Oil prices rose by +1%, with Brent now trading at US$83.66 a barrel.

This comes as Bloomberg reported that  Iranian-backed militants killed three US service members and wounded 25 others in a drone attack near the Syrian border.

The benchmark 10-year US Treasury yield climbed 1 basis point (bond prices lower) to 4.14%.

Iron ore futures lifted another +0.1% to US$135.60 a tonne.

The Aussie dollar slipped slightly by -0.1% to US65.79c.

Meanwhile, Bitcoin was down -0.75% in the last 24 hours to US$41,819.

5 ASX small caps to watch today

Electro Optic Systems (ASX:EOS)
EOS has secured a contract to supply Slinger Counter-Drone Systems, valued at approximately $15m, to Diehl Defence in Germany. The contract includes the provision of systems, spares, training and related services. The systems are expected to be delivered in 2024, and will be integrated by Diehl Defence onto a lightweight 4×4 platform, providing a defensive capability to protect critical assets from drone attacks.

Resource Mining Corp (ASX:RMI)
RMC’s wholly owned Finnish subsidiary has been granted the highly prospective Köyhäjoki exploration permit in Finland, valid for four years and renewable to a maximum of 15 years.The Köyhäjoki Permit covers 2,128.8 hectares and comprises the central part of the Kola Lithium Project, where high grade Li-pegmatite boulder trains have recently been identified.

Neurotech (ASX:NTI)
NTI announced Human Research Ethics Committee (HREC) approval and Clinical Trial Notification (CTN) scheme clearance by the TGA to commence a Phase I/II clinical trial investigating the use of NTI164 in paediatric patients with Spastic Diplegia Cerebral Palsy (Spastic CP) – the most common form of CP, representing up to 80% of cases. The Phase I/II trial is proposed to be a single-arm, open-label clinical trial that will recruit up to 14 paediatric patients.

Infini Resources (ASX:I88)
Large radiometric anomaly has been identified at Portland Creek measuring ~3km x 0.6km now referred to as the “Talus Prospect”. Radiometric anomaly coincident with mineralised rock samples showed grading up to 865ppm U3O8. The company is planning field work programs to identify the source of these highly anomalous uranium results, including geological mapping/sampling and soil surveys.

Hexagon Energy Materials (ASX:HXG)
Technical work at the company’s WAH Project remains on-track to support FEED-entry in mid-2024, with the core design basis set, detailed engineering progressing and vendor engagement underway. Confidential commercial discussions are progressing with potential gas suppliers, carbon capture and storage (CCS) providers, infrastructure owners, utility providers and ammonia customers.

At Stockhead we tell it like it is. While Neurotech is a Stockhead advertiser, it did not sponsor this article.

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