December 10, 2023

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Inflation rattles the S&P 500, blue-chip Dow outperforms, ASX 200 futures flat – The Morning Wrap

ASX 200 futures are trading 1 point lower, down -0.01% as of 8:40 am AEDT.

The S&P 500 and Nasdaq both finished lower last Friday while the blue-chip Dow advanced, lithium darling Albemarle misses earnings expectations in parallel with a sharp pullback in spodumene prices, UK retail sales grew in January in an unexpected sign of consumer resilience and China injects a record US$121bn of cash into its financial system.

Let’s dive in.

S&P 500 Session Chart

S&P 500 catches a bid after a weak open. Finishes lower but at session highs (Source: TradingView) 
Source: Market Index


  • US markets remained heavy as the disinflation narrative starts to lose momentum following the largely in-line CPI and hotter-than-expected PPI prints last week
  • Bearish talking points include the repricing of the Fed rate path, Fed policymakers seeing the case for 50 bps hikes, underwhelming US earnings and rising treasury yields
  • Retail investors pouring record amounts into the market while institutions remain bearish (FT)
  • Equity market strength amid substantial rate repricing may not last (Bloomberg)
  • Investors pull money from classic risk plays and back into bonds and cash (Reuters)


  • Apple begins firing contractors amid tech layoffs (NY Post)
  • Bank of America plans to cut investment banking jobs (Bloomberg)


DraftKings (+15.3%): December quarter losses were narrower than expected while revenue beat expectations, the betting app was the number one most downloaded sportsbook app in the US on Super Bowl Sunday, recently launched in Maryland, Kansas and Ohio.

Deere (+7.5%): Earnings and revenue beat, expects FY23 net income to be at least US$8.75bn (up from prior expectations of US$8.0bn), CFO said he expects inflationary pressures to abate and return to what we’ve seen in the past.

DoorDash (-7.6%): Revenue and guidance beat but loss of US$1.65 per share was more than double what was expected, the Board approved a buyback of up to US$750m.

Albemarle (-9.7%): Earnings and revenue missed estimates, EPS surged 754% to US$8.62, FY guidance was reaffirmed including 30-40% growth in lithium volumes and expectations for flat pricing versus the December quarter. This announcement was in parallel with a -6.9% decline in spodumene prices last Friday, according to Fastmarkets.


  • US household debt hit a new high of US$16.9tn but delinquencies on the rise (CNBC)
  • UK retail sales unexpectedly rise in January (Bloomberg)
  • German producer prices slow but still higher than expected (Reuters)
  • China ramps up economic support with biggest ever cash injection (Bloomberg)
  • RBA Governor Lowe reiterates more rate hikes needed (Bloomberg)
  • RBNZ likely to hike rates by 50 bp this week, with 50 bps more by mid-year (Reuters)
Source: Market Index

Deeper Dive

A Defensive Rotation

The Dow is one of few major benchmarks that has held up relatively well in recent weeks, consolidating around the high 33,000 level. Key weightings for the index include Financials (21.3%), Healthcare (20.5%), Industrials (15.2%), Tech (14.9%) and Consumer Discretionary (13.9%).

Is the blue-chip Dow set to outperform amid the recent rise in bond yields, risk-off sentiment and unwinding shorts on tech stocks?

Dow Jones Industrial Average (Source: TradingView)

Oil is off to a terrible start

WTI prices fell -1.9% last Friday, down for a fifth straight session. Goldman notes that “with long-dated WTI oil prices dropping below US$60 a barrel, the market has begun to even question the under-investment thesis.” Though, it reaffirmed its long-term view of US$80 a barrel. It’ll just take longer to get there.

“Inventory levels are still low, spare production capacity is limited and global demand is improving across nearly all of the key commodity markets.”

“We now have oil crossing US$100 a barrel in late 4Q23.”

WTI crude oil (Source: TradingView)

Interesting stuff

Cheap energy stocks: The S&P 500 Energy Sector is trading at its cheapest level on history on a free cash flow yield basis, according to Otavio Costa. Interestingly, if the industry experiences a 30% decline in earnings, it’ll still trade at a price-to-earnings of around 10.

Key Events

ASX corporate actions occurring today:

  • Trading ex-div: Zimplats (ZIM) – $1.314, Ryder Capital (RYD) – $0.03, Ansell (ANN) – $0.291, Vicinity Centre (VCX) – $0.058, Wesfarmers (WES) – $0.88
  • Dividends paid: CVC (CVC) – $0.04
  • Listing: SQX Resources (SQX) at 11:30 am AEDT

Economic calendar (AEDT):

No major economic announcements.