Market Highlights: Nasdaq slumps to correction territory, and 5 ASX small caps to watch today

The ASX200 is set to drop sharply on Monday, following a 2pc loss last week
US markets plummeted as Nasdaq enters correction territory
Oil prices fell over 3pc amid weak economic conditions in China

The ASX is set to extend last week’s 2% loss when the market opens on Monday. At 8am AEST, the ASX200 futures contract was pointing sharply lower by 1.5%.

On Friday, concerns that the US might be facing a recession unsettled markets.

The S&P 500 had its worst day since October 2022, down by 1.84%. The blue chips Dow Jones index tumbled by 1.51%, and the tech-heavy Nasdaq crashed another 2.43%.

The Nasdaq has now dropped more than 10% from its peak on July 10, suggesting it might be in a technical correction.

The benchmark 10-year US treasury yield has also been plunging, down a massive 20 basis points on Friday and 40 basis points for the week, as traders rotated to the safer haven of government bonds (bond prices climb when yields fall).

The plunge in both stocks and bond yields have mainly come after a weak US jobs report last week which raised concerns that keeping interest rates high could lead to a deeper economic slowdown.

While the Fed Reserve has pretty much managed to lower inflation, the latest jobs numbers suggest the central bank’s policies might be slowing down the job market too much.

“The Fed almost always waits too long to cut rates,” Matt Maley at Miller Tabak + Co told Bloomberg.

“Then, as investors come to realise that the rate cuts are coming more due to a slowdown in growth — rather than a drop in inflation — the situation on the stock market tends to get ugly.”

The big question now is whether we’re heading straight into a recession, or if the US economy is just experiencing a temporary downturn.

To stocks news, chipmaker Intel crashed by 26% after reporting a loss in Q2, along with plans to slash dividends and cut more than 15,000 jobs or 15% of its massive workforce.

Amazon fell nearly 9% after it gave sales forecasts that were lower than Wall Street expected. In contrast, Apple rose by 1% despite reporting a decline in iPhone sales but beating earnings expectations.

Nvidia also slid 2% as negative sentiment on chip stocks contributed to a broader slide in the tech sector.

In other markets, oil prices fell more than 3%, mirroring the broader market decline.

Weakening economic conditions in China, where crude imports have hit their lowest level in over two years, have contributed to the recent drop in oil prices.

Nasdaq’s correction gives rise to buying opportunities

The Nasdaq’s 10% drop since July 10 shows growing worries about whether top tech companies are too expensive amid the cooling US economy.

Weak job reports and disappointing updates from big names like Amazon and Intel have contributed to the decline.

Even strong performers like Tesla and Alphabet have reported weaker-than-expected results, leading to doubts about the fair value of major tech stocks.

The Nasdaq 100 is now officially in correction territory, which is defined as a decline of at least 10% from its most recent peak.

But savvy investors understand that market sell-offs can create opportunities to acquire high-quality stocks at attractive valuations.

“As fear and uncertainty drive prices lower, astute investors identify undervalued companies with solid fundamentals, positioning themselves for gains as market conditions stabilise,” said Nigel Green, the CEO of deVere Group,

“By focusing on companies with robust fundamentals and long-term growth potential, savvy investors can not only weather the storm, but also position themselves for future success as economic conditions evolve.

“Therefore, this turbulence will be seen by many as a major buying opportunity,” he added.

In other markets …

Gold price traded flattish at US$2,442.80 an ounce.

Oil prices tumbled by 3.5%, with Brent crude now trading at US$76.81 a barrel.

The benchmark 10-year US Treasury yield dropped by a massive 20 basis points (bond prices higher) to 3.79.%.

Over the past week, the 10-year yield is down by 41 basis points.

The Aussie dollar climbed by 0.20% US65.12 cents.

The iron ore price climbed by 0.7% to US$103.35 a tonne.

Bitcoin meanwhile slumped by 2.6% in the past 24 hours to US$58,881, while Ethereum also slipped by over 6% to US$2,732

5 ASX small caps to watch today

Mandrake Resources (ASX:MAN)
Mandrake, in collaboration with top technical groups including Idaho National Laboratories, the National Renewable Energy Laboratory, and the University of Utah, has been awarded $1 million by the US Department of Energy (DOE). This funding will be used to study and estimate the reserves of lithium and other essential minerals in the Paradox Basin, Utah. This grant reflects the US’s push to reduce reliance on foreign lithium supplies by encouraging domestic exploration and production. Mandrake’s successful funding approval highlights the project’s credibility, given the DoE’s strict grant selection process.

Metal Bank (ASX:MBK)
MBK has gained exploration rights for Area 47 in Jordan, a promising site for copper and molybdenum. The company is also applying for rights to Area 65, where nearby drilling has shown high copper levels. MBK plans to evaluate these areas along with its Malaqa Project, aiming for efficient drilling by combining efforts. This move supports their broader strategy in the MENA region and complements its ongoing projects in Saudi Arabia. Metal Bank’s Chair, Inés Scotland, said the new projects align with the company’s goal of exploring copper and critical minerals in the prolific Nubian Shield.

Magnetic Resources (ASX:MAU)
MAU has released a positive economic update for its Lady Julie Gold Project in WA. The project is expected to produce 817,470 ounces of gold over 8 years, averaging 104,000 ounces per year, with low costs and high profit margins. The project’s payback period is 12 months, and it boasts a 135% internal rate of return (IRR) and a total EBITDA of $1.49 billion. Operating costs are projected at $1,377 per ounce, with all-in sustaining costs at $1,386 per ounce. The project’s net present value (NPV) is $925 million. The open pit contains 883,000 ounces of gold, with 84% of the resource classified as Indicated. Development costs are estimated at $111.3 million, including a contingency for plant costs. A Mining Proposal is underway to secure further approvals and advance the project.

eNova Mining (ASX:ENV)
eNova has made notable progress with exploration drilling at its CODA project. The company has completed 6 diamond drill holes and 5 reverse circulation holes, with over 500 samples sent for analysis. The drilling has revealed significant mineralised zones in the Patos formation, which belongs to the Cretaceous Mata Do Corda Group, indicating the potential for valuable rare earth element resources. The drilling program is on track and within budget, and a third diamond drill rig is expected to boost progress starting in mid-August. The drilling campaign is anticipated to wrap up by the end of the third quarter of 2024, with the first assay results expected between late August and early October.

Structural Monitoring Systems (ASX:SMN)
SMN has successfully addressed all technical issues with Boeing’s smart sensor solution for Aft Pressure Bulkhead inspections. Boeing’s Technical Design Review has cleared previous concerns, and SMS is now finalising the compliance report, expected in about 6 weeks. Recent updates include resolved issues with fasteners, inspection frequencies, and sensor coatings. SMS will also demonstrate solutions to the FAA on August 12, and has aligned its test results with Boeing’s data. Draft reports on failure analysis are being circulated, and delegation for regulatory approvals has been confirmed.

At Stockhead we tell it like it is. While Magnetic Resources is a Stockhead advertiser, it did not sponsor this article.