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Daily Markets: Investors Focused on Inflation, Covid, NATO Expansion

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Today’s Big Picture

Asia-Pacific equity indexes ended today’s session mixed as India’s Sensex declined 0.41% and China’s Shanghai Composite fell 0.82% while Hong Kong’s Hang Seng advanced 0.26% Australia’s ASX All Ordinaries gained 0.47%, Taiwan’s TAIEX and Korea’s KOSPI rose 1.83% and 1.86%, respectively. Japan’s Nikkei lead the way closing up 1.93%. By mid-day trading, major European equity indices are down across the board as the discussion around Sweden and Finland’s potential NATO application has prompted speculation about a Russia reaction, and U.S. futures point to a positive market open later this morning. 

Like yesterday, the focal point for today’s trading will be inflation revelations contained in the March Producer Price Index (PPI), which is expected to accelerate to +10.6% YoY from February’s +10.0% reading. Following yesterday’s March Consumer Price Index (CPI) report, the question investors will be trying to answer is if consumer inflation peaked in March. With a number of commodities, including oil, having rolled over since their March peak it’s a fair question, but we’re inclined to wait for the April Flash PMI data and what it says about pricing pressure and pass-through price increases being making the call. 

Today also brings quarterly results from Delta Air Lines (DALas well as JPMorgan Chase (JPM), and what both companies share on the pace of the re-opening, economic activity for both the March quarter as well as what they see for the current one, and their respective cost structures will help set the tone for March quarter earnings season. 

We continue to hear more about China’s efforts to stop the spread of Covid and how those efforts are clogging ports, shutting factories and impacting global supply chains. Early this morning more than 30 Taiwan companies said that COVID-19 measures in eastern China had led them to suspend production until at least next week. And the Russia-Ukraine war shows no sign in slowing down; U.S. President Biden has accused Russian President Vladimir Putin of committing genocide in Ukraine. The Pentagon will reportedly host a meeting today with eight of the largest U.S. defense contractors, including Lockheed Martin (LMT), Raytheon (RTX), and L3Harris Technologies (LHX) to discuss the industry’s ability to meet Ukraine’s weapons needs if a war with Russia turns into a years-long protracted conflict. 

Odds are the expanded lockdowns in China and the increasing duration of the war will lead companies to issue conservative guidance as the March quarter earnings season heats up even further tomorrow and next week. 

Data Download

International Economy

Last night saw South Korea release March unemployment at 2.7%, lower than the expected 3.2% and in line with the previously released figure.

China announced March YoY Import and Export growth with Exports growing 14.7%, slightly off expectations and Imports showing a 0.10% decline off significantly from the 8.25% estimate which itself was already roughly half of the previously reported 15.5% rate. This was reflected in China’s trade balance which was reported at $47.4 billion compared to estimates of $22.4 billion and significantly higher than the previously reported $30.6 billion. While these changes are dramatic, this jump brings China’s trade balance more in line with historical norms, especially give the past two years of activity.

March UK PPI Output was reported at 11.9%, outpacing estimates and the previously reported 10.2% as energy costs continue to weigh on production. 

March YoY UK CPI was reported this morning at 7.0%, exceeding both estimates of 6.7% and the previously reported 6.2%. Core CPI (excluding energy and seasonal food) also edged up to 5.7%, 0.30% ahead of estimates and higher than the previously reported 5.2%. 

At 10:00 AM ET the Bank of Canada will make its latest Interest Rate Announcement. Expectations are for a 50-basis point hike to bring the rate to 100 basis points (1.00%).

Domestic Economy

Early morning brings the latest round of weekly MBA Mortgage Applications, which are likely to be impacted by the rise in mortgage rates. As we discussed above, the domestic economic focal point will be the pre-market open reporting of the March PPI report as investors and economists look for confirmation the March CPI report was likely the peak. Later today, we’ll get the weekly EIA Crude Oil Inventories.

Markets

Despite an early gain following the March CPI report, the S&P 500 finished the day lower by 0.3% yesterday. The Nasdaq Composite also lost 0.3% as did the Dow Jones Industrial Average, while the Russell 2000 eked out a 0.3% gain. Seven of the 11 S&P 500 sectors closed lower while the energy, utilities, and consumer discretionary sectors closed the day higher. Including yesterday’s moves, here’s how the major market indicators are performing thus far in 2022:

  • Dow Jones Industrial Average: -5.8%
  • S&P 500: -7.7%
  • Nasdaq Composite: -14.5% 
  • Russell 2000: -11.5%
  • Bitcoin (BTC-USD): -16.3%
  • Ether (ETH-USD): -19.1%

Stocks to Watch

Before trading kicks off for U.S.-listed equities, Bed Bath & Beyond (BBBY), BlackRock (BLK), Delta Air Lines (DAL), Fastenal (FAST), and JPMorgan Chase (JPM) will be reporting their latest quarterly results.

Alphabet’s Google (GOOGL) unveiled its plan to invest about $9.5 billion across its U.S. offices and data centers in 2022, up from $7 billion in 2021.

U.S. corn, wheat and soybean futures all gained yesterday, supported by ongoing concerns about disruptions caused by Russia’s war on Ukraine, with an extra sprinkling of optimism over increased demand for biofuels. In response, agriculture equipment companies like Deere & Co. (DE) traded higher. 

GlaxoSmithKline (GSK) will acquire California based Sierra Oncology in a $1.9 billion cash deal to bolster its cancer drug portfolio.

Halozyme Therapeutics (HALO) and Antares Pharma (ATRS) entered into a definitive agreement pursuant to which Halozyme will acquire Antares for $5.60 per share in cash

Shares of VerifyMe (VRME) moved higher in after-market trading last night after the company announced a ~$5M private placement of stock and warrants priced at-the-market.

Walmart (WMT) announced John Rainey has been named its next Executive Vice President and Chief Financial Officer on June 6. Rainey joins the company from PayPal (PYPLwhere he serves as CFO and Executive Vice President, Global Customer Operations.

Cirrus Logic (CRUS) appointed Venk Nathamuni CFO effective April 18. Nathamuni joins from Arista Networks (ANET), where he served as head of corporate finance, M&A, investor relations, and information technology.

IPOs

Excelerate Energy (EE), a provider of flexible liquified natural gas solutions, is expected to price its IPO offerings this week. Readers looking to dig more into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

The only company expected to report its quarterly results is Washington Federal (WAFD), but we will be watching for those that pre-announce their March quarter results as well. Those looking for more on which companies are reporting when, head on over to Nasdaq’s Earnings Calendar

On the Horizon

Thursday, April 14

  • Eurozone: ECB Governing Council decision on Monetary Policy
  • Weekly Initial & Continuing Jobless Claims 
  • US: Import/Export Prices – March
  • US: Retail Sales – March
  • US: Business Inventories – February
  • US: Weekly EIA Natural Gas Inventories

Friday, April 15

  • US: Empire State Index – April
  • US: Industrial Production & Capacity Utilization – March

Thought for the Day

“Keep your head up in failure, and your head down in success.” ~ Jerry Seinfeld

Disclosures

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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