ASX Small Cap Lunch Wrap: Who’s the only green island in a sea of red today?
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It’s wall to wall red at midday on the ASX. A lunchtime bath of sweet claret.
Except for one tiny blimp that is. One sliver of green amid the wasteland.
Say hello to AI chip manufacturer Brainchip (ASX:BRN), who’re working on commercialisation of the Akida chip – which mimics the neural networks of the human brain.
The company is up 8.29%, trading at $1.11 per share – and it’s just one of a fingerfull of stocks in the green today.
By sector, energy is down 3.02%, materials is down 2.79%, financials dropped 2.35%, and information technology is down 4.32%.
Also down are industrials – 2.22%, consumer discretionary – 1.62%, consumer staples -0.66%, and healthcare which dropped 2.97%.
Then you’ve got communication services down 2.06%, utilities -1.96%, and real estate down 3.2%.
Someone who’s never down is ThinkMarkets market analyst Carl Capolingua who says interest rates continue to flabbergast proceedings – but the broader theme is dislocation.
“Markets cannot comprehend the plethora of competing factors bombarding them,” he says.
“So, we’re getting violent and alternating moves on a daily basis.
“There’s Bull markets of course, then there’s Bears… but over the last couple of weeks, it feels to me (as an avid Japanese Candlesticks follower) like a Zebra market!
“As a trend follower, this is kind of my worst case scenario.”
Capolingua said that in choppy markets, trend followers get, well, chopped up.
“As much as there’s still some really nice charts out there on a bottom-up basis, it’s just too hard on the top down,” he added.
“I’ve been saying for months now, investors should have high cash levels, and just keep a little risk money aside to play that bottom-up theme.
“If today finishes all-black, then I’d say: whatever risk money you had in – halve it – you still want a little skin in the game!”
Still chart of the year pic.twitter.com/rkiFbiNt9O
— Con Michalakis (@MichalakisCon) May 5, 2022
The ASX 200 is down a massive 185 points or 2.51% at midday today to 7,179.70.
European stocks are being dragged down by the US stock market – which took its biggest U-turn since the early days of the pandemic, with the Dow Jones Industrial Average posting its largest decline this year (down 1063 points or 3.12%) just 24 hours after its largest gain since 2020.
The reversal wiped out the euphoria that lit up Wall Street, Wednesday in the wake of Federal Reserve Chairman Jerome Powell’s comment that the Fed wasn’t “actively considering” raising interest rates by 0.75 percentage point at a future meeting.
Tesla dropped 8.3% and Amazon.com fell 7.6%. Bank stocks, a key indicator of economic expectations, dropped 2.7%, according to the KBW Nasdaq index of large commercial lenders.
Conditions are so bad, Life360 has pulled the pin on its planned US IPO. That’s life 2022 for you, right there.
The US-based tracking app has scrapped its big day due to a slight “change in market conditions.” Bad luck for a process which started way back in Q4 2021.
Many investors are now questioning how high the Fed might raise rates over the next two years amid soaring inflation and how that might ripple across the economy and corporate profits.
“If they try to do too much and the market comes unglued, then they’ve [Fed] kind of shot themselves in the foot because it will make it difficult to do future rate hikes,” said Jordan Kahn, chief investment officer at ACM Funds.
“That’s the fine line the Fed is trying to walk — to do as much [rate increases] as they think the market can digest without upsetting it too much.”
However, Kahn did say his firm is holding higher cash balances than usual. Within the stock market, he is bullish on the energy and materials sectors, predicting they will continue to benefit from supply-demand imbalances.
Here are the best performing ASX small cap stocks for May 6 [intraday]:
Swipe or scroll to reveal full table. Click headings to sort:
Spearheading the early trade bloodbath is video tech company Atomos (ASX:AMS) which downgraded guidance on the worst possible day.
“Slower than expected sales occurred in the first four months of the 2022 calendar year due to a change in marketing approach and lower promotional activity,” it says.
FY22 revenue is now expected to be $80m – $90m, and EBITDA margin is now expected to be 6% – 8%.