ASX 200 to fall, S&P 500 tumbles + Everything you need to know about the Fed decision

ASX 200 futures are trading 84 points lower, down -1.11% as of 8:30 am AEDT.

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S&P 500 SESSION CHART

MARKETS

• S&P 500 finished lower and at worst levels after Fed commentary came in more hawkish than expected and pushed back against March rate hike expectations
• Microsoft and Alphabet both beat earnings expectations but sold off amid high expectations and higher capex
• All Magnificent 7 stocks finished lower for the first time since 2 Jan
• US 10-year yield down 10 bps and settled below the 4.0% level
• Investor Intelligence bulls jump to 57.7% from 52.9% and 48.5% in prior two weeks – The highest since June 2021
• BofA Bull & Bear Indicator jumped to 6.0, the highest since July 2021 on strong inflow to stocks and strong equity market breadth
• Stretched sentiment and positioning indicators continue to be flagged as headwinds against further market upside
• Oil logs first monthly gain since Sep 23 due to Middle East tensions (Bloomberg)

STOCKS

• Delaware judge strikes down Elon Musk's $55bn pay package at Tesla (Bloomberg)
• Weak demand weighs on Samsung' profit, company flags chip recovery in 2024 (Reuters)
• Novo Nordisk shares rally to record high as weight-loss drugs power profits (FT)
• WSJ planning some layoffs, restructuring of its Washington Bureau (Axios)
• PayPal to cut headcount by 9%, or around 2,500 workers (Bloomberg)

EARNINGS

AMD (-2.5%) – Revenue beat and earnings in-line, CEO said "demand for our high-performance data centre product portfolio continues to accelerate, positioning us well to deliver strong annual growth,” but guidance missed expectations.

Microsoft (-2.7%) – Double beat, Q2 revenue up 17.6% year-on-year, Azure growth of 28% year-on-year exceeded the high end of guidance from strength in OpenAI consumption and AI offerings, Q3 revenue guidance was below market expectations from a weaker gaming outlook but core Azure and Office outlook was ‘solid’, according to Bank of America.

Alphabet (-7.5%) – Double beat driven by upside in subscriptions and cloud, search missed high expectations, but year-on-year growth accelerated across all key segments, shares hit by higher capex guidance. 

CENTRAL BANKS

• Fed says more 'confidence' needed on inflation before cuts (Reuters)
• ECB's Lagarde declined to give a timeline for interest-rate cuts but emphasised wage data will be vital in deciding when to cut (Bloomberg)
• BOJ showed more forward-looking discussions on easing exit (Bloomberg)

GEOPOLITICS

• Biden decides on US response to fatal attack on American troops in Jordan but says he is not seeking wider war (Reuters)
• Iran-linked militia Kataib Hezbollah, suspected in fatal attack on US troops, says it is suspending military operations (Reuters)
• Yemen's Houthis threaten more attacks on US and British warships, stoking fears of protracted disruption (Reuters)

CHINA

• China manufacturing stuck in contraction, services expands for first time since October (Bloomberg)
• China's stock market selloff suggests latest market support measures have failed to gain traction (Bloomberg)
• China ramps up efforts to consolidate banking industry as financial stresses rise (Bloomberg)

ECONOMY

• French inflation falls to near two-year lows (FT)
• German inflation falls to 2.9% in January, below analyst expectations (Reuters)
• German unemployment unexpectedly decreased in January, pointing to resilience in the labor market (Bloomberg)
• Australian inflation slows by more than expected, RBA rate cut forecasts brought forward (Bloomberg)
  
  

Fed Hold + Powell's Statement

The Fed maintained rates between 5.25% and 5.5%, in-line with market expectations. Here are some of the key takeaways from the rate decision.

• More data before a cut: "The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%."
• QT continues: "The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously announced plans."
• Solid economic data: "Recent indicators suggest that economic activity has been expanding at a solid pace," notably persistent wage inflation, stronger-than-expected Q4 GDP and strong job gains
• Fitch's thoughts: "There is clearly some pushback here against growing market expectations of imminent rate cuts. The Fed sounds quite cautious about prematurely reaching the conclusion that inflation is moving back to 2% ... We don't see rate cuts until June or July.
  

Powell's press conference kicked off thirty minutes later (and tends to be treated as a separate event to the rate hike). Here are the key takeaways:

• No March cut: "Based on the meeting today, I would tell you that I don't think it's likely the committee will reach a level of confidence by the time of the March meeting to identify March as the time to do that. But that's to be seen."
• But no hikes: "We believe that our policy rate is likely at its peak for this tightening cycle and that if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint, at some point this year."
• Not a soft landing yet: "No, I would not say we have achieved that. We have a ways to go ... We are not declaring victory at this point"

Last Minute Quarterlies

I have a quick flick through any interesting company announcements every morning around 9:30 am via our ASX announcements page. The default page only shows today's announcements.

Yesterday was the last day for quarterly filings (as it was the last day of January) and an avalanche of quarterlies tend to be announced after market close.

Last minute and after market quarterlies generally hope you've called it a day and like my above routine – Forget to check the previous day's announcements. So make sure you check if your holdings (or stocks of interest) released any last minute quarterlies.

Here's an example of an interesting one from Silver Mines (ASX: SVL)

• Cash receipts for the December quarter: ~$16k
• Net cash used in operating activities: ~$810k
• Cash and cash equivalents: $3.4m
• Estimated quarters of funding available: 0.9
• Reiterates future exploration will now be largely discretionary and dependent on available cash. Expects to have sufficient funds over the next two quarters

The bottom line: A lot of these quarterlies tend to be released last minute and after market close for a reason. Particularly for small to mid caps, make sure you check the rate of cash burn, cash at bank and the "estimated quarters of funding available".

KEY EVENTS