daytrading jan 14 pre-market

Morning traders. Thanks Shantaram.

Market wrap:

Wall Street's biggest fall in two months has Australian shares pointing towards a three-week opening low this morning.

The March SPI 200 futures contract slumped 48 points or 1% to 5213 as Federal Reserve taper and share valuation concerns pushed US stocks sharply lower.

The S&P 500 swooned 23 points or 1.27% to its largest loss since November as profit warnings mounted ahead of a new quarterly earnings season and after a Fed official said he supported further tapering to stimulus spending despite Friday's unexpectedly weak job numbers. The Dow gave up 179 points or 1.09% for its heaviest decline since September. The Nasdaq lost 1.48%.

"People have moved to the sidelines waiting for earnings to get a little more clarity," Michael O'Rourke, chief market strategist at JonesTrading in the US, told Reuters. "Fundamentals are going to have to support gains in the future... There's no need to be aggressive in 2014 until the companies you care about have reported earnings and given you an all-clear."

Goldman Sachs analysts caused ripples at the end of last week with a note that described current US share valuations as "lofty by almost any measure". The S&P 500 index's PE ratio of 15.5 is above the five-year average of 14.1 and the highest since 2009. The index rose almost 30% last year. More than 90% of company profit announcements in the lead-up to this earnings season have cut estimates, according to Reuters.

The overnight decline accelerated after Federal Bank of Atlanta President Dennis Lockhart said he supported further cuts to the central bank's bond-buying stimulus program because the economy was on a "solid footing". The comments dampened hopes that soggy employment numbers released on Friday might provide a reprieve for the program.

The session's only significant economic news was that the federal government recorded a budget surplus of US$53 billion last month, largely due to record mortgage payments from Fannie Mae and Freddie Mac as the real estate market runs hot.

Cyclical stocks and small caps paced the falls as all 10 S&P industry groups declined. The Morgan Stanley Cyclical index and Russell 2000 both fell 1.41%. BHP dropped 0.76% in US trade and Rio Tinto 0.77% after the price of spot iron ore for import to China edged up 20 cents to US$130.90 a dry tonne.

Gold stocks provided a rare bright spot as the metal rallied for a third night. The HUI index of gold stocks put on 3.04% as gold for February delivery rallied $6 or 0.5% to US$1,252.90 an ounce after settling at US$1,250.70.

Oil retreated after Iran and western powers agreed on curbs to Iran's nuclear program that may allow it to resume exporting oil. West Texas Intermediate crude oil for February delivery was lately off $1.09 or 1.2% at US$91.63 a barrel after settling at US$91.80.

Nickel hit a two-week high as an Indonesian ban on exporting mineral ores took effect. Nickel rallied 2.5% in London. Copper put on 0.4% and zinc, lead, tin and aluminum rose. US copper for March delivery was recently off 0.1% or less than a cent at US$3.34 a pound.

European markets advanced as bank stocks benefitted from news that tough leverage ratio requirements have been watered down. Germany's DAX gained 0.39%, France's CAC 0.29% and Britain's FTSE 0.25%.

TRADING THEMES TODAY

RETRACE ACCELERATES: Not a good night for the bulls. We might be heading towards a proper correction in the US, with a lower high and a lower low on the S&P now in place. "Might" being the key word here - the new earnings season is not into its stride yet and they tend to be choppy. It's far too soon to draw any conclusions. If the percentage of companies missing analyst targets increases significantly over the next two or three weeks, then the market is overvalued and we know what that means. The ASX has been crowning for a couple of weeks, so a retrace should not come as a big surprise to market participants. There should be bounce trade opportunities today once the dust settles. Goldies should do well.

ECONOMIC NEWS: No significant domestic news scheduled today. Chinese new loans data are due today, exact time uncertain. Europe releases monthly industrial production figures tonight. US highlights include retail sales/core retail sales, business inventories, import prices and speeches from two Fed officials.

Good luck to all.