Market Highlights: S&P 500 nears record high, oil stocks on watch after attacks, and 5 small caps to watch

Aussie shares are poised to open higher on Wednesday, in line with gains in New York as the S&P500 edges closer to a record high. At 8am AEDT, the ASX 200 index futures was pointing up by +0.5%.

Overnight, the S&P 500 rose by +0.59%, the blue chips Dow Jones index was up by +0.68%, and the tech-heavy Nasdaq lifted by +0.66%.

US stocks rallied as traders kept receiving mixed messages from Fed Reserve members.

Richmond Fed president Thomas Barkin was the latest member to suggest the US central bank would cut rates if inflation continues to decline, but only if there was evidence it was moving toward the Fed’s 2 per cent target.

To stocks, Nvidia sank 1% after Edgewater Research said it sees “mixed” data points in demand for the company’s AI chips.

Nvidia’s competitor, AMD, rose 1% after Goldman Sachs analyst Toshiya Hari maintained his Buy rating on the stock.

The biggest mover was BNPL stock Affirm, which surged over 15% after the company announced that its BNPL services would be integrated into self-checkout lines at Walmart stores.

Meanwhile, crude prices are on watch after jumping 2% overnight. This comes as more companies joined oil giant BP in pausing all shipments though the Red Sea following attacks by Iran-backed Houthi rebels.

The US government has now stepped in, saying that it will lead an international naval operation to protect ships along the route.

Sizing up the current oil market

Yesterday, a Norwegian commercial vessel was also targeted in the Red Sea in a series of attacks by the Houthis over the past few days.

Leading shipping companies are now considering avoiding the Suez Canal, heightening concerns about supply disruptions and thereby pushing up oil prices.

In response, the US Secretary of Defence announced that Washington would ally with defence ministers in the region to address the Houthi threat to supplies.

“Approximately 15% of global shipping traffic passes through the Suez Canal, the shortest navigational route between Europe and Asia,” said Rania Gule, a market analyst at XS.com.

“I also believe that the increase in supply has mitigated the rise in crude oil, but Russia and Saudi Arabia, both extending oil production cuts into the first quarter of 2024, continue to support oil prices,” Gule said.

“Oil prices may also gain strength as commodities, in general, receive a boost from investors pricing in statements from the Federal Reserve regarding interest rate cuts.

“Lower interest rates imply increased spending, growth, production, and greater demand for essential commodities,” said Gule.

In other markets …

Gold price rose by +0.65% to US$2,040 an ounce.

Oil prices also surged by 2%, with Brent now trading at US$79.40 a barrel.

US 10-year Treasury yield fell 2 basis point to 3.93%.

Iron ore futures traded flat at US$134.65 a tonne.

The Aussie dollar continued to extend its recent gains, changing hands now at US67.62c.

Meanwhile, Bitcoin was down -0.1% in the last 24 hours to US$42,380.

5 ASX small caps to watch today

Alkane Resource (ASX:ALK)
Alkane announced further results from its drilling program at the company’s Northern Molong Porphyry Project in Central New South Wales. The company believes this system has the potential to be a large, tier one gold-copper project. Best results include: 501m grading 0.45g/t AuEq (0.19g/t Au, 0.19% Cu) from 228m, and 342m grading 0.56g/t AuEq (0.22g/t Au, 0.24% Cu) from 26m.

Woomera Mining (ASX:WML)
Woomera has completed seven reverse circulation drill holes for 877m at the Mt Short JV Ravensthorpe. Pegmatites have been intersected in five of the seven holes drilled at the Mt Short JV. Samples have been submitted to the laboratory, with initial assays expected mid-late January 2024. A 1,523-sample auger programme meanwhile has been completed, with assays expected in February 2024.

Metals Australia (ASX:MLS)
Metals Australia announced the appointment of Paul Ferguson as its new CEO, to guide development of the company’s flagship Lac Rainy high-grade graphite project and advance other battery metals exploration projects. Ferguson is a highly experienced mining engineer and resource industry executive with more than 30 years’ experience in the global resources sector. This includes a senior role with Exxon-Mobil in Canada, where he was responsible for leading the design, construction and operation of the Kearl Oil Sands Project in Alberta.

Adriatic Metals (ASX:ADT)
Updated ore reserve estimate for the 100%-owned Rupice silver-zinc-lead-gold deposit in Bosnia and Herzegovina has grown to: 13.8Mt at 187g/t Ag, 5.2% Zn, 3.3% Pb, 1.4g/t Au, 0.5% Cu and 0.2% Sb containing an estimated 83Moz of silver, 723Kt of zinc, 457Kt of lead, 640Koz of gold, 64Kt of copper and 24kt of antimony. The significant increase in ore reserves underpins an 18-year mine life which now extends until 2041 based on nominal throughput capacity of 800,000tpa.

Elixir Energy (ASX:EXR)
Elixir provided an update on the next planned phase for its Daydream-2 appraisal well in its 100% owned Grandis Gas Project, located in the Taroom Trough of the Bowen Basin, Qld. Following the successful casing and suspension of the Daydream-2 well and the installation of a wellhead, the SLR 185 rig was released from location over the weekend. Laboratory analysis is now underway on various drill cuttings collected during the drilling of the well. The results therefrom are expected in January.