Market Highlights: ASX to track Wall Street's sharp selloff after Powell comments; and 5 small caps to watch

ASX to fall sharply on Thursday after a big selloff on Wall Street
Fed chair Jerome Powell unsettled traders with comments
Expert says inflation could creep back up, which means the Fed won’t rush to cut

The ASX is poised to retreat sharply from its record high on Thursday. At 8am AEDT, the ASX 200 index futures contract was pointing down by -1.05%.

Overnight, the S&P 500 slumped by -1.61%. The blue chips Dow Jones index was down by -0.82%, while the tech-heavy Nasdaq plunged by -2.23%.

This comes as the Fed Reserve held its fed funds rate steady at 5.25%-5.55% overnight.

While this was expected, the language used by Fed chair Jerome Powell at a press conference unsettled traders.

Powell said while the Fed’s interest rate target is “likely at its peak for this tightening cycle”, “we are not declaring victory, we think we still have a way to go.”

“I don’t think it’s likely that the committee will reach a level of confidence by the time of the March meeting,” Powell added.

“If we get very strong inflation data, and it kicks back up then we’ll go slower or later.”

His comments tore through interest rates sensitive stocks, leading to a big selloff in the tech heavy Nasdaq.

Alphabet (Google) fell by -7.50%, while Microsoft dropped -2.7%.

The biggest mover last night was New York Community Bancorp, which sank -38% after the bank reported a surprise loss for the quarter, and cut its dividend payment.

Meanwhile, lithium stocks on the ASX are on watch today after BofA analyst, Michael Widmer, slashed his forecast for spodumene prices – by -63% in 2024 and -34% in 2025 – citing waning demand for electric vehicles.

Resurging inflation complicates Fed’s mission

The Fed Reserve has spent almost two years hauling up interest rates to cool multi-decade high inflation – and it appears to be working with steadily cooling price increases.

But Nigel Green, CEO of deVere Group, warned that geopolitical tensions could push inflation right back up.

He believes that prolonged Red Sea attacks are likely to disrupt the supply chain by delaying the transportation of goods, leading to shortages.

“As demand outpaces supply, prices may rise, contributing to inflation. Industries heavily reliant on just-in-time inventory systems may be particularly vulnerable to such disruptions,” notes Green.

In addition, the uncertainty surrounding global trade can contribute to increased commodity prices, such as oil.

“Higher energy costs can cascade through the supply chain, affecting various industries and adding inflationary pressures. This scenario may echo the oil shocks of the past, leading to broader economic consequences.”

In other markets …

Gold price was steady at US$2,038.35 an ounce.

Oil prices slipped by -2.5%, with Brent now trading at US$80.39 a barrel.

The benchmark 10-year US Treasury yield tumbled by 13 basis points (bond prices higher) to 3.92%.

This comes as the US Treasury Department revealed its funding plan through April that puts more emphasis on relatively short-term debt – the 2yr, 3yr and 5yr bonds.

Iron ore futures tumbled by -2.4% to US$129.60 a tonne.

The Aussie dollar slipped by -0.6% to US6564c.

Meanwhile, Bitcoin was down -3% in the last 24 hours to US$42,340.

5 ASX small caps to watch today

ECS Botanics (ASX:ECS)
ECS has secured a $9 million offtake agreement with UK-based Rokshaw for supply of medicinal cannabis dried flower over three years. The supply will commence this financial year with a minimum order volume of 600kg per annum. ECS has also granted Rokshaw a UK market exclusivity of three strains of GMP medicinal cannabis dried flower.

Battery Age Minerals (ASX:BM8)
BM8 announced the appointment of experienced mining executive Nigel Broomham as the company’s CEO, effective immediately. Broomham, who joined Battery Age as general manager – exploration in February last year, is a geologist with over 14 years’ industry experience, including more than 11 years in the battery metals sector and specifically in lithium.

Hazer Group (ASX:HZR)
The clean technology developer announced the start-up of its Commercial Demonstration Plant and first production of hydrogen and graphite. The company introduced feed gas to the reactor at Hazer process conditions today, and subsequently achieved its first hydrogen and Hazer-produced graphite at the facility. Hazer plans a ramp up of operation to continue through H1 2024, leading to continuous production.

Great Boulder Resources (ASX:GBR)
A small maiden RC drill program at the Saltbush prospect at Side Well has confirmed high-grade gold close to a high-grade intersection in historic RC drilling in the vicinity of old workings. Results include: 9m @ 5.20g/t Au from 15m, including 5m @ 7.42g/t Au from 18m in 23SBRC002, and 3m @ 2.54g/t Au from 36m in 23SBRC003.

Tyranna Resources (ASX:TYX)
Drilling has resumed at Muvero and intersected spodumene-bearing pegmatite. Best intersection to-date was 40m of spodumene-bearing pegmatite in MRC22. Meanwhile 3D modelling and gravimetric survey have defined additional drill-target zones. Assay results of samples from drilling in 2023 are expected in March.