Market Highlights: US tech stocks stumble on Fedspeak; and 5 ASX small caps to watch today

The ASX is expected to open lower after Wall Street fell
Fed officials signalled that any upcoming rate cuts will be gradual
Tesla dropped nearly 6pc, while Peloton surged 35pc on a revenue beat

The ASX is expected to open lower on Friday as Wall Street declined on the back of Fed officials’ remarks. At 8am AEST, the SPI ASX200 futures contract was pointing down by 0.5%.

Overnight, the S&P 500 fell by 0.89%, the blue chips Dow Jones slipped by 0.43%, and the tech heavy Nasdaq tumbled by 1.67%.

Fed policymakers have indicated that a rate cut is on the horizon, but last night, some officials said any cuts would be “gradual” and “methodical” – leaving the market uncertain about the potential implications.

Philadelphia Fed President Patrick Harker told CNBC, “In September we need to start a process of moving rates down. We need to start bringing them down methodically.”

Kansas City Fed president Jeffrey Schmid went further and said he wasn’t fully ready to support a cut. “It makes sense for me to really look at some of the data that comes in the next few weeks,” he told Bloomberg.

Despite those comments, treasury yields fell across curve, with the largest decline occurring in shorter-term maturities, indicating that traders are pricing in imminent rate cuts.

“It is problematic in my mind that the market is pricing in so many rate cuts right now,” said Mohamed El-Erian at Queens’s College Cambridge.

All eyes are now on the Fed’s Jackson Hole symposium, which began last night.

Investors are eagerly awaiting any change in tone from the central bank, particularly when Jerome Powell speaks at the event on Friday.

To stocks, Tesla tumbled almost 6% on no specific news, leading all seven of the “Magnificent Seven” stocks lower.

Nvidia fell nearly 4% while Amazon and Microsoft were both off more than 2%.

Peloton, the fitness equipment maker, jumped 35% as the company posted a revenue beat for Q4.

And Uber says it plans to introduce self-driving Cruise LLC vehicles to its ride-hailing platform next year.

Back home, earnings season continues with Fisher & Paykel , Telix, and Inghams among the companies set to release their results today.

A quick take on earnings season so far

Mathew Hodge, Director of Equity Research at Morningstar, has outlined his assessment of the reporting season so far.

Hodge notes that GDP growth has slowed over the year, which has impacted sales growth for many retailers, especially those in the discretionary sector.

However, some updates from cyclical stocks suggest that economic activity might be showing signs of improvement.

In terms of specific companies, major banks are seeing a normalisation in aggressive competition for loans and deposits, with net interest margins remaining stable.

WiseTech is increasing its market share among freight forwarders and appears poised to become a leading industry software.

A2 Milk’s share price dropped due to a weaker short-term outlook, but Lodge reckons the decline is an overreaction given that supply constraints and extra costs are likely temporary.

Woodside and Santos are performing well, with their shares appearing undervalued given the modest expectations priced in; says Lodge.

And finally, AGL outperformed Origin Energy in terms of earnings growth, benefitting from its cheap captive coal-fired power generation amid rising electricity prices.

In other markets …

Gold price fell by 1% to US$2,484.74 an ounce.

Oil prices rebounded by almost 1.5%, with Brent crude now trading at US$77.12 a barrel.

The benchmark 10-year US Treasury yield rose by 5 basis points (bond prices higher) to 3.85%.

The Aussie dollar was down by 0.6% to US67.06 cents.

Bitcoin meanwhile fell by 1% in the last 24 hours to US$60,500, and Ethereum slipped by 0.65% to US$2,625.

5 ASX small caps to watch today

Elixir Energy (ASX:EXR)
Elixir announced that the Daydream-2 well in Queensland’s Taroom Trough has successfully flowed gas from the deepest coal seams yet recorded in Australia. This marks the first gas flow from these deep coals in the region and achieves a key goal for the project. The gas flow occurred naturally through a full well-bore of water, and Elixir will now work with independent certifiers to begin converting prospective resources into contingent resources. The next phase involves removing plugs from the well’s six stimulated zones and conducting a comprehensive flow test.

Buxton Resources (ASX:BUX)
Buxton provided an update on its Graphite Bull and Narryer Projects. Core drilling at Graphite Bull has been completed, totalling 1,221.5 metres across two holes. Reverse Circulation (RC) drilling is ongoing. All holes intersected graphite, with one notable intersection of 68 metres at over 10% visually estimated Total Graphitic Carbon (TGC). Product qualification with BTR in China has begun, and RC drilling will soon start at the Narryer Project. Recent drilling aims to support a significant Mineral Resource Estimate by Q4 2024.

Playside Studios (ASX:PLY)
Playside reported record revenue of $64.6 million for the year, up 68%, with increases in original IP and work-for-hire revenues. The company achieved an EBITDA of $17.5 million and a net profit of $11.3 million. During the year, Playside secured a Game of Thrones license with Warner Bros., a publishing deal for the shooter MOUSE, and launched Dumb Ways to Survive on Netflix Games. The twin-stick shooter Kill Knight is set for an October release, and its Meta Horizon Worlds contract is extended through December 2025. Playside will provide its FY25 guidance in October.

Harmoney Corp (ASX:HMY)
Harmoney’s full-year revenue grew by 15% to $123 million, and the credit loss percentage improved to 4%, down by 20 basis points. The company’s cost-to-income ratio also improved, dropping to 24% from 28% in the previous period. Harmoney has solid funding for future growth, with a $30 million corporate debt facility (with $7.5 million undrawn), $20.6 million in unrestricted cash, and access to an Asset Backed Securitisation program. Additionally, it has growth capacity of $181 million from warehouses with three of the “big-4” Australian banks.

Chalice Mining (ASX:CHN)
Chalice has reduced its board from six to four members due to current metals prices. Non-executive Directors Linda Kenyon and Jo Gaines are stepping down Chalice is also cutting its monthly spending from $2.4 million to $1 million to focus on the Gonneville Project and essential exploration. Chalice has around $111 million in cash and investments. The Gonneville Pre-Feasibility Study will proceed soon, and a new exploration budget has been approved for FY25. Drilling for new targets is expected to start in Q4 2024.