Markets flat, Momentum back with lithium stocks

 

US equities finished mixed in fairly quiet Monday trading. Stocks struggled to hold their ground on Monday, following the S&P 500′s third straight weekly gain, as demand concerns for the semiconductor industry weighed on tech names.

A new reading for the consumer price index, slated for release Wednesday, will give investors more clarification about the central bank’s next move at its policy meeting in September.

The S&P 500 slipped 0.12 per cent to 4,140.06. The Nasdaq Composite ticked down 0.10 per cent to 12,644.46. The Dow held on to a gain of 29.07 points to close at 32,832.54.

Nvidia announced weaker-than-expected revenue for the second quarter, putting pressure on semiconductor stocks. Shares of the chip giant fell more than 6 per cent, and rival stocks like AMD and Broadcom were also under pressure.

Bed Bath & Beyond had its biggest volume day on record, with the consumer goods stock trading more than 120.5 million shares on the day. That’s well above the stock’s 30-day volume average of 14.266 million. The stock also rallied nearly 40 per cent on the day, posting a nine-day winning streak.

Sectors were mixed, with best-performing industries being gold, hydrogen, cannabis and lithium stocks. Some clean energy-related shares gained after the Senate passed the Inflation Reduction Act. The measure includes billions of dollars aimed at addressing climate change. More crucially, the bill includes requirements for domestic manufacturing of EVs and their battery components to qualify for the extended credit. As written, the law requires that 40 per cent of battery components be sourced from factories in the US or its free trade agreement partners; that batteries be US-made by 2029, and that Chinese components and minerals be phased out beginning in 2024.

Momentum now seems to be back with the lithium sector, with the catalyst being a very bullish quarterly report issued by US-listed lithum producer Albemarle last week which contained a stunning upgrade to its outlook for this year. The forecast from Albemarle – which counts Tesla and other major carmakers as customers – comes after a more than eightfold surge in the price of lithium compounds since the start of the pandemic in 2020. The global price may have steadied around the record US$70,000 level since April as demand continues to grow, but that has boosted Albemarle’s earnings and seen it lift guidance three times this year.

Albemarle’s CEO, Kent Masters, had said that carmakers would find it hard to get all the battery metals, especially lithium for the next eight years.

Judging by the performance of some leading lithium stocks on the ASX on Monday, local investors were slow to catch up to the contents of the Albemarle quarterly. Shares in lake Resources jumped more than 15 per cent, Pilbara Minerals shares closed 3.5 per cent higher, IGO shares rose 2.6 per cent and Liontown Resources shares added 7 per cent.

Albemarle now expects the price at which it sells its lithium to jump at least 225 per cent in 2022 and adjusted profit in its lithium division to rise at least 500 per cent. Adjusted EBITDA for 2022 is now forecast to be three times the 2021 figure in a range of US$3.2 to US$3.5 billion. Adjusted EBITDA was US$610.2 million, up a huge US$415.6 million from the June 2021 quarter primarily due to higher net sales. Adjusted profit in the company’s lithium division more than quadrupled.

Masters said the market will remain tight despite efforts to produce more of the metal.

“It’s systemic for a pretty long period of time,” Masters said of the challenge facing the industry. “For seven to eight years it stays pretty tight.”

Currencies

One Australian dollar has strengthened compared to the US dollar yesterday, buying 69.79 US cents.
Bitcoin futures were up 4.3 per cent.

Commodities

Iron ore futures are pointing to a 1.56 per cent gain.
Gold has gained $14.10 or 0.80 per cent to US$1805.30 an ounce.
Silver is up $0.83 or 4.17 per cent to US$20.67 an ounce.
Copper is up $3.50 or 0.99 per cent to US$358.70 a pound.
Oil has added $1.75 or 1.97 per cent to US$90.76 a barrel.

The SPI futures are pointing to an 11 point or 0.16 per cent fall.

Results expected on Tuesday: Computershare; Megaport; National Australia Bank; News Corp; and REA Group.

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.
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Source: Finance News Network