Market Highlights: US megacaps up on dip buying ahead of earnings; and 5 ASX small caps to watch

ASX to climb again on Tuesday as focus turns to megacaps
US megacaps stocks will be reporting their earnings
Why the recent dip in these stocks may present buying opportunities

Aussie shares are set to rise again on Tuesday on the back of a relief rally on Wall Street. At 8am AEST, the ASX200 futures contract was pointing up by +0.3%.

Overnight, the S&P 500 rose by +0.87%, its first up day in seven sessions. The blue chips Dow Jones index was up by +0.67%, and the tech-heavy Nasdaq lifted by +1.11%.

This is the busiest week in the US’ earnings season, as about 180 S&P companies (or 40% of the index) will give their trading updates to the market.

The ‘Magnificent 7’ earnings will particularly be in focus amid the recent tech slump.

“If big tech earnings and Friday’s inflation data disappoint, that could extend the duration and depth of this current stock market correction,” said Jeremy Straub at Coastal Wealth.

Nvidia was one of the best big tech performers last night, gaining back +4.35% after slumping by -10% on Friday.

Tesla keeps dipping, this time by -3.4%, even as rumours swirled that Elon Musk was planning to slash the company’s workforce by a further 20%.

Some analysts believe Tesla’s trading update this week is a crucial one for the stock.

“This is the most important conference call in many years for Musk to lay out how Tesla is going to navigate this category 5 storm,” Wedbush tech analyst Dan Ives told Fortune.

UBS Chief US equity strategist Jonathan Golub meanwhile has just downgraded six of the Magnificent 7 stocks — Apple, Alphabet, Microsoft, Amazon, Meta, and Nvidia — from Overweight to Neutral.

Golub believes the tide may be shifting for these stocks.

“Our work indicates that surging earnings momentum fueled their upside. Unfortunately, this momentum is collapsing,” Golub said.

Buy the dip?

It was indeed a tough week for big tech last week – and, as such, their earnings will come under even greater scrutiny this week.

But some analysts say this presents a buying opportunity.

“The pull back in tech, which has been driving markets all year, gives savvy investors the chance to top up their portfolios at lower prices,” said Nigel Green, the CEO of deVere Group.

Despite the short-term fluctuations, the long-term trajectory of AI remains unequivocally upward, says Green, and this is what investors are betting on as they bolster portfolios.

Green adds that companies at the forefront of AI innovation are not merely reacting to market trends but actively shaping the future.

“Their value lies not only in their current market performance but in their potential to redefine entire sectors and create new avenues of growth,” he said.

Green says that by adopting a contrarian mindset and recognising the intrinsic value of tech stocks, particularly in AI, investors can capitalise on the disconnect between short-term market sentiment and long-term industry fundamentals.

“While the tech sector sell off may be rattling some investors, it presents a compelling opportunity for those with a forward-looking perspective,” he continued.

In other markets …

Gold price fell by -2.6% to US$2,329.01 an ounce.

Oil prices also fell -0.2%,with Brent crude now trading at US$87.11 a barrel.

The benchmark 10-year US Treasury yield fell slightly by 2 basis points (bond prices higher) to 4.61%.

Iron ore price rose +0.3% to US$108.25 a tonne.

The Aussie dollar climbed by +0.45% to US64.50 cents.

Bitcoin meanwhile was up +2.5% in the last 24 hours to US$66,688.

5 ASX small caps to watch today

Cygnus Metals (ASX:CY5)
Numerous walk-up exploration targets surrounding the recently announced intersection of 43.7m @ 1.15% Li2O have been identified, highlighting the immense exploration upside at Auclair. The targets were identified using recently interpreted LiDAR and orthophotography; and this is the first time these techniques have been used in the area.

Zoono Group (ASX:ZNO)
Antimicrobial solutions biotech, Zoono, has entered into an exclusive agency agreement with OSY Group to promote the sale of Zoono products in the food supply chain sector. The agreement provided exclusivity to OSY in the markets of UK, Europe, and the rest of the world, excluding China and India.

Plenti Group (ASX:PLT)
Non-bank lender Plenti provided a trading update for Q4FY24. Loan portfolio increased to $2.14 billion, 21% above the pcp. Quarterly revenue was $59.8 million, 41% above the pcp. Unaudited H2 Cash NPAT was $4.6 million, resulting in full year Cash NPAT of $6.1 million.

James Bay Minerals (ASX:JBY)
340 high-priority targets have been identified from desktop studies across the recently acquired La Grande East Project in Quebec, Canada. Satellite imagery and government geophysical data were utilised in generating key targets. The targets generated will form the basis of the company’s upcoming La Grande East summer field exploration program expected to commence in May 2024.

Wellnex Life (ASX:WNX)
Wellnex has commenced the process to dual list on the London Stock Exchange, first announced to the market on 5 October 2023. The company says a dual listing will increase Wellnex’s international profile, aligning with the company’s international growth strategy, particularly in Europe where Wellnex has an existing supply agreement with Haleon into the UK and is working on further opportunities both with Haleon and other partners. It will also open the door to a wider pool of institutional investors.

At Stockhead we tell it like it is. While James Bay Minerals is a Stockhead advertiser, it did not sponsor this article.