Market Highlights: Earnings weigh on Wall Street; VIX falls below 14, signals 'new bull market'

The ASX will open lower on Friday as earnings weighed on Wall Street
The “fear gauge” CBOE index is at lowest since 2020
Bitcoin spot ETFs to significantly increase BTC demand, says analyst

Local shares are set to open lower on Friday as Wall Street tumbled. At 8am AEST this morning, the ASX 200 index futures was pointing down by -0.1%.

Overnight, the S&P 500 fell by -0.68%, Nasdaq by -2.05%, while blue chips index Dow Jones kept its 9-day winning streak alive and rose by +0.47%.

Tesla dropped -9.5% despite reporting record Q2 revenues after hours yesterday. Investors weren’t pleased when Elon Musk hinted that he would order more price cuts.

Netflix also crashed -8% after a revenue miss was reported yesterday, while chip stock Taiwan Semiconductor (TSM) fell -5% after reporting first profit drop in 4 years on electronics demand slump.

Other companies to have reported results last night include American Airlines, which fell -6% despite besting analysts’ forecasts for Q2.

Johnson & Johnson meanwhile rose +6% as the company beat earnings and hiked its full year guidance.

Elsewhere, data shows that US jobless claims fell from 237,000 to 228,000, while existing home sales weakened. The bond market took notice and sent US yields sharply higher, with the 2-year picking up 10bp, and 10-year by 8bp.

A ‘new bull market’ and the worst is ‘behind us’

The market’s “fear gauge”, the CBOE VIX index, is at lows not seen since the start of the pandemic.

This may suggest that the current rally may well prove to be a new bull market, says Matt Phillips of Axios Markets.

In recent days, the VIX has fallen below 14, a territory last seen in February 2020, just before the COVID pandemic exploded.

“It’s another indication of the optimistic psychology that seems to have the upper hand in markets at the moment,” said Phillips.

The benchmark S&P 500 index is also just 5% from a new record high, the confirmation market mavens look for before christening a new bull market.

“But as we’ve argued before, this rally doesn’t say much about the prospects for corporate profits over the next year.

“Rather, it’s a collective sigh of relief from the financial sector, which now believes the post-pandemic inflation — and the Fed’s rate hikes — are conclusively behind us,” Phillips said.

In other markets …

Gold was down -0.35% to US$1,970.39 an ounce as it continues to come off a two-month high as Fed rate hike bets edge higher.

“Gold is weakening as Treasury yields surge after jobless claims reminded us how strong the labor market remains,” said Oanda analyst, Edward Moya.

Crude oil prices climbed +0.6%, with WTI now trading at US$75.75 a barrel.

“Today’s US data painted a mixed picture for the economy as the labor market still looks tight, while other parts of the economy remain weak,” said Moya.

Iron ore (62% Fe) was up +0.3% to US$112.43 a tonne.

Meanwhile, Bitcoin fell -0.25% in the last 24 hours to US$29,835.

According to a report by NYDIG, Bitcoin spot ETFs like the one proposed by BlackRock could increase BTC demand to the tune of US$30 billion.

NYDIG wrote:

“Bitcoin is about 3.6x more volatile than gold, meaning that on a volatility equivalent basis, investors would require 3.6x less bitcoin than gold on a dollar basis to get as much risk exposure.

“Still, that would result in nearly $30B of incremental demand for a bitcoin ETF.”

5 ASX small caps to watch today

Mach7 Technologies (ASX:M7T)
Mach7 has signed a 5-year subscription licence to provide eUnity to Diagnostic Imaging Associates. The contract is worth $3.7 million in TCV and $0.64 million to Annual Recurring Revenue (ARR). The deal further expands Mach7’s footprint in the outpatient/teleradiology marketplace.

QuickFee (ASX:QFE)
QFE reported record Q4 and full year FY23 transaction volumes (TTV) across all products in the US and Australia. Total group revenue was up 23% on the pcp. June 2023 underlying cash EBITDA was -$55k, demonstrating significant progress on the path to operating profitability.

The Calmer Co (ASX:CCO)
The company formerly called Fiji Kava announced that a new product, Noble Focus, has been launched online today. Noble Focus is a synergistic combination providing calm, focus and memory enhancement utilising the proprietary Noble Kava water extract. Noble Focus is targeting the US$4.6bn Nootropics market which has grown at 17% to US$4.6bn in 2023, and includes executives looking for an edge.

Service Stream (ASX:SSM)
The network services provider announced that it has recently secured two new agreements which together are expected to generate approximately $340 million in revenue over their respective terms. One of the contract is with AGL Energy to perform station maintenance at the Loy Yang Power site in the Latrobe Valley, under a 5-year agreement expected to generate approximately $170m over its term.

Focus Minerals (ASX:FML)
Focus has delivered on its plan to return the Coolgardie Gold Operation into production. Mains power supply from Western Power network is now connected, while all other supporting infrastructure is in order. Meanwhile, Focus’ new 100 room accommodation facility, Varischetti Village, in the Coolgardie townsite is now operational.