Market Highlights: Wall Street up 1pc as September rate cut locked in; and 5 ASX small caps to watch

ASX to open higher on Monday after gains on Wall Street
US inflation data reinforced Fed’s plans to cut rates in September
And tips from Bell Asset Management

The ASX200 index is expected to offset last week’s losses and rebound when the market opens on Monday. At 8am AEST, the ASX200 futures contract was pointing up by 0.8%.

On Friday, Wall Street got a lift as economic data fuelled speculation that the Fed Reserve might prepare for an interest-rate cut in September.

The S&P 500 finished the day 1.11% higher, the blue chips Dow Jones index rose by 1.64%, while the tech heavy Nasdaq was up by 1.03%.

The shift toward economically sensitive stocks was on full force again, driven by data that aligns with the Fed Reserve’s favourable stance.

The Fed’s preferred gauge of US inflation, the core personal consumption expenditures (PCE) price index, increased in June albeit at a modest pace, while consumer spending stayed strong. However, consumer sentiment fell in July to its lowest point in eight months.

“The prospect for interest-rate cuts has helped underpin the surge-like move into smaller names,” Quincy Krosby at LPL Financial told Bloomberg.

David Russell at TradeStation added: “Investors can now focus on the big earnings this week and worry less about prices and rates.”

Apple and Microsoft are among the ‘Magnificent Seven’ group of stocks scheduled to report earnings this week.

In other stocks, Dexcom Inc was the worst large cap stock, plunging by over 40%, after the maker of devices for blood sugar monitoring for diabetics unexpectedly slashed its 2024 sales forecast, surprising analysts.

And almost a week after a major IT outage that disrupted computer systems globally, cybersecurity firm CrowdStrike’s CEO George Kurtz announced that more than 97% of Windows sensors are now back up and running.

Crowdstrike’s stock price has been down 15% since the outage began a week ago.

Tips from fundie

Meanwhile, Ned Bell, Chief Investment Officer of Bell Asset Management, has provided his analysis and outlook for global equity markets.

In June, global markets showed mixed results. The MSCI World Index rose 2.1% in USD terms, but performance was uneven.

The rally was concentrated in a few key stocks like Nvidia, which surged more than 12% despite a mid-month drop.

Bells says despite challenges, he believes his fund’s strategy of focusing on quality stocks at reasonable prices will perform well in the future.

“We have conﬁdence in the current portfolio positioning…” says Bell.

Currently, the market is similar to the 2016/17 period, says Bell, with strong performance in sectors like semiconductors and a focus on cyclical stocks.

Bell’s tip is to buy companies with strong fundamentals and stable earnings, and look for stocks that are trading at reasonable prices relative to their earnings potential.

This approach avoids overpaying for stocks and seeks to capture value over the long term.

Also, Bell recommends investors to steer clear of sectors and stocks that are highly sensitive to economic cycles, such as capital goods, banks, and insurance, which have been underperforming.

In other markets …

Gold price jumped by 1% to US$2,386.50 an ounce.

Oil prices were down by 1.5%, with Brent crude now trading at US$81.13 a barrel.

The benchmark 10-year US Treasury yield fell by a further 5 basis points (bond prices higher) to 4.20%.

The Aussie dollar rose modestly by 0.15% US65.51 cents.

The iron ore price tumbled by 0.25% to US$106.50 a tonne.

Bitcoin meanwhile was down up by 1% in the last 24 hours to US$68,071, while Ethereum slid by 0.75% to US$3,258.

5 ASX small caps to watch today

Prodigy Gold (ASX:PRX)
Prodigy has updated the gold resource estimate for its Hyperion Gold deposit in Northern Territory. The new estimate is 8.64 million tonnes at 1.5 grams per tonne gold, totalling 407,000 ounces. This is an increase from the previous estimate of 4.4 million tonnes at 2.2 grams per tonne, which totalled 314,000oz. The updated estimate follows new drilling results and uses a lower cutoff grade, which has increased the total resource but lowered the average grade.

Credit Clear (ASX:CCR)
CCR expects to report underlying EBITDA of about $4 million for FY24. This follows a record revenue quarter ending June 30. The company’s projected full-year revenue is $42 million, slightly above earlier guidance. The updated EBITDA estimate of $4 million also exceeds the previous forecast of over $3.7 million. Final results will be confirmed in the annual report.

Adore Beauty (ASX:ABY)
Adore has appointed Sacha Laing as its new CEO, starting October 1. Laing has over 25 years of experience in retail, both online and in-store. He has previously been the CEO of Alquemie Group, General Pants Co, and Colette by Colette Hayman, and has held senior roles at Country Road Group and David Jones.

TechGen Metals (ASX:TG1)
TechGen has provided an update on its Blue Devil Project, which is located near Halls Creek in WA. The project, which TechGen acquired in May, has shown promising results from previous rock chip sampling. Recent fieldwork in July, including six rock chip samples, revealed high-grade copper and gold, with assays showing 24.9% copper and 18.5 grams per tonne gold. The project has had limited drilling so far and no geophysical testing. TechGen is planning geophysical surveys to explore for copper-gold-silver mineralization in this promising area.

Bubs Australia (ASX:BUB)
Bubs reported strong financial results for the quarter ending June 30. Full-year revenue reached $100.2 million, up 35% from last year, with the fourth-quarter revenue at $29.9 million, a 50% increase. The company is progressing with its US clinical trials and expects FDA approval by October 2025. Cash outflow for Q4 was reduced to $3.6 million due to better management. The company’s total cash and available debt facilities amounted to $22.5 million.