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Daily Markets: Fed’s Fight Against Inflation Still Has Long Way To Go

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Today’s Big Picture

Asia-Pacific equity indexes ended today’s session down across the board. Taiwan’s TAIEX and South Korea’s KOSPI were off 0.74% and 0.79%, respectively while Hong Kong’s Hang Seng fell 0.89%. Japan’s Nikkei declined 1.11%, Australia’s ASX All Ordinaries fell 1.52% and India’s Sensex dropped 1.82%. China’s Shanghai Composite led the way, down 2.30% following yesterday’s U.S. market decline and overall central bank hawkishness. By mid-day trading, European equity indices are down just about 1% across the board and U.S. futures point to a rough open later this morning.

Weighing on equity futures is FedEx’s (FDX) downside guidance for the current quarter and withdrawal of the full-year guidance it issued in late June. While on its own that warning would turn heads, collected with other downside revenue guidance this week and dollar related warnings from Oracle (ORCLand Adobe (ADBE), we are seeing a re-think on earnings expectations for the second half of the year. This week’s data has shown that central bank efforts to fight inflation have had only a modest impact as yet and more work is needed, which is weighing on economic growth expectations. These doses of clarity were strong catalysts in prompting the latest round of uncertainty in the stock market, which is shaping up for another down week. The question to be answered today is whether the S&P 500 will maintain its technical support at 3,900; if not, we could see even more pressure on the market unfold in the coming days. 

Data Download

International Economy

China’s industrial production increased 4.2% YoY in August, beating the market consensus that called for a 3.8% increase following July’s 3.8% gain. The August reading was the fourth straight month of growth in industrial output, and the fastest pace since March. China’s Retail Sales rose by a stronger than expected 5.4% YoY in August, exceeding market estimates of 3.5% and up from July’s 2.7%. That marked the third straight month of increase in retail trade and the strongest pace in the sequence as covid restrictions were loosened. 

The August Consumer Price Index for the Euro Area increased at a record pace of 9.1% YoY, matching the consensus forecast and up from 8.9% in July. Core consumer prices, which exclude energy, food, alcohol, and tobacco, increased at a record pace of 4.3% YoY in August percent year-on-year in August, also matching the consensus forecast. Amid supply chain improvements, including those for chips, passenger car registrations in the EU surged 4.4% YoY to 650,305 units in August, bringing an end to thirteen months of consecutive declines.

Retail Sales in the UK fell 5.4% YoY in August, the fifth consecutive decline and worse than market forecasts of a 4.2% drop as inflation weighed on consumer spending. 

The World Bank shared its view that “As central banks across the world simultaneously hike interest rates in response to inflation, the world may be edging toward a global recession in 2023… Unless supply disruptions and labor-market pressures subside, those interest-rate increases could leave the global core inflation rate (excluding energy) at about 5 percent in 2023—nearly double the five-year average before the pandemic.”

Domestic Economy

Following a heavy weak of economic data that led the Atlanta Fed’s GDPNow Model to reduce its expectation to 0.5% for the current quarter vs. 1.3% a week ago and 2.6% on September 1, we close out the week with the Preliminary August reading for the University of Michigan Consumer Sentiment Index. That figure is expected to rise to a reading of 60 from July’s reading of 58.2 but we also suspect Fed watchers will be eyeing the Inflation Expectations component as well. 

Markets

It is often said that it is the pause that refreshes. Wednesday’s market action in retrospect only served to allow investors to figure out what they were going to sell yesterday. Apparently, it was everything except Financials and Healthcare names as they were the only two positive sectors. The Dow dropped 0.56%, the Russell 2000 declined 0.72%, the S&P 500 was down 1.13% and the Nasdaq Composite closed down 1.43%. There were still some highlights as Wynn Resorts (WYNN) saw a 7.48% jump as investors liked the company’s pursuit of a 10-year gaming license in Macau. Humana (HUM) rose 8.37% on strong quarterly results and earnings guidance. 

Following up on Ether, while there is still debate about whether cryptocurrencies are securities or not, Ether traders decided to borrow the stock trader’s tactic of “selling the news” after yesterday’s Merge event, pushing the coin down 9.51%. Here’s how the major market indicators stack up year-to-date:

  • Dow Jones Industrial Average: -14.80%
  • S&P 500: -18.15%
  • Nasdaq Composite: -26.16% 
  • Russell 2000: -18.71%
  • Bitcoin (BTC-USD): -57.46%
  • Ether (ETH-USD): -59.96%

Stocks to Watch

Before trading kicks off for U.S.-listed equities, no companies are expected to report their latest quarterly results and guidance. 

FedEx (FDX) issued downside guidance for its August quarter with EPS of $3.44 vs. the $5.14 consensus and revenue of $23.2 billion, also below the $23.5 billion consensus. According to the company, “Global volumes declined as macroeconomic trends significantly worsened later in the quarter, both internationally and in the U.S.” As a result of the preliminary first quarter financial performance and expectations for a continued volatile operating environment, FedEx withdrew the fiscal year 2023 earnings forecast it shared on June 23 of this year. For its November quarter, it sees business conditions weakening further leading it to guide revenue to $23.5-$24 billion vs. the $24.86 billion consensus but EPS to $2.65 or greater compared to the $5.47 consensus. 

Uber Technologies (UBER) shut down internal Slack messaging as it investigates a cybersecurity breach by a hacker claiming to have accessed sensitive company

Speaking at an investor conference, General Electric (GECFO Carolina Dybeck shared that “With the continued supply chain pressures, we are continuing to deliver later in the quarter.” 

Reports indicate BMO Capital Markets, the Bank of Montreal’s (BMO) capital-markets business, is making a series of job cuts as the unit gets stung from worsening market conditions,

Bed Bath & Beyond (BBBY) posted a list of 56 store closures on its website, which can be read here. The list includes locations in Stamford, Connecticut, Paramus, New Jersey, Tucson, Arizona, and Sandusky, Ohio. This is part of the company’s previously stated plan to close about 150 lower-producing Bed Bath & Beyond stores and cut 20% of jobs across the corporate and supply chain.

NCR Corp. (NCR) announced it has ended a process to sell itself and decided to split into two independent, publicly traded companies – one focused on digital commerce, the other on ATMs.

IPOs

While there are no IPOs are slated to be priced this week, it was recently revealed that the upcoming Porsche IPO will be sized to have exactly 911 million shares, paying tribute to the auto manufacturer’s most popular model. Readers looking to dig more into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

No companies are expected to report quarterly results after equities stop trading today. Those looking for more on which companies are reporting when, head on over to Nasdaq’s Earnings Calendar

On the Horizon

Monday, September 19

  • Eurozone: Construction Output – July
  • US: NABH Housing Market Index – September

Tuesday, September 20

  • Japan: Consumer Price Index – August
  • Germany: Producer Price Index – August
  • US: Housing Starts & Building Permits – August

Wednesday, September 21

  • UK: CBI Industrial Trends Orders – September
  • US: Weekly MBA Mortgage Applications
  • US: Existing Home Sales – August
  • US: Weekly EIA Crude Oil Inventories 
  • US: Federal Reserve Monetary Policy Decision and FOMC Economic Projections
  • US: FOMC Press Conference

Thursday, September 22

  • Japan: Bank of Japan Interest Rate Decision
  • UK: Bank of England Monetary Policy Meeting
  • Eurozone: Consumer Confidence – September
  • US: Weekly Initial & Continuing Jobless Claims, Weekly EIA Natural Gas Inventories

Friday, September 23

  • Eurozone: S&P Global Flash Manufacturing & Services PMIs – September
  • US: S&P Global Flash Manufacturing & Services PMIs – September

Thought for the Day

“What we do during our working hours determines what we have; what we do in our leisure hours determines what we are.” ~ George Eastman

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



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