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Daily Markets: Waiting for Inflation Data, the Dollar Trades Off

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Today’s Big Picture

Asia-Pacific equity indexes ended today’s session ahead with India’s Sensex gaining 0.54%, Australia’s ASX All Ordinaries rising 0.97% Japan’s Nikkei advancing 1.16% and Taiwan’s TAIEX finishing up 1.54%. Thanksgiving holidays are making their way across the region as China and Hong Kong markets are closed marking the Mid-Autumn Festival while Korea is celebrating the Chuseok Festivity today. By mid-day trading, European equity indices are up on positive sentiment over Ukraine’s advances in reclaiming territory and U.S. futures point to a healthy open later this morning.

Helping spur expectations for U.S. equities on this rather quiet day for economic data and earnings reports is the dollar’s second day of declines, marking its biggest two-day drop in roughly three months. That move comes ahead of the inflation data packed week ahead with the latest data for the Consumer Price Index (CPI), Producer Price Index (PPI), and Import/Export prices. Despite another round of hawkish comments from Fed Chair Powell and several Fed heads last week, some think a downside surprise in the August CPI data could result in the Fed boosting interest rate by 50-basis points next week vs. the 90% chance of a 75-basis point hike indicated by the CME FedWatch Tool

In our view, the likelihood for a somewhat softer hand on the interest rate wheel will be far clearer as we digest all of the week’s inflation data. Granted, gasoline prices as well as those for used cars and several commodities have come down, but those are counter-balanced by natural gas prices and continued wage pressures. One potential risk is the market sees too much of what it wants to see in the inflation data leading rather than heeding the Fed’s rather explicitly stated message. As we have said before, even if the headline CPI data for August falls to the expected level of 8.1% or even modestly below that, it is still very far away from the Fed’s 2% target. 

Data Download

International Economy

The UK economy expanded 2.3% YoY in July, a brisker pace than 1.9% in June but below the expected increase of 2.6%. Keeping with that YoY basis, Manufacturing Production in the UK increased 1.10% percent in July as did Industrial Production while Construction Output rose 4.3%, up vs. June but well below the market consensus of 5.6%. 

The euro jumped to a more than three-week peak versus the dollar on Monday, as European Central Bank officials argued for further aggressive monetary tightening.

Domestic Economy

We have one of those rare days with no market moving economic data being published. That will change quickly with the August reports for the Consumer Price Index, Producer Price Index, and Retail Sales being published over the next few days. Reports indicate the Biden administration could announce broader curbs on U.S. semiconductors used for artificial intelligence and chipmaking tools shipments to China.

Markets

We ended the week on a strong note as Fed Beige Book comments continued to buoy markets. The Dow rose 1.19%. the S&P 500 gained 1.53%, the Russell 2000 advanced 1.95% and the Nasdaq Composite finished up 2.11%. All sectors were positive, led by Communications Services and Energy. A big gainer on Friday was Kroger Co (KRup 7.40% as the company posted strong quarterly results. Here’s how the major market indicators stack up year-to-date:

  • Dow Jones Industrial Average: -11.52%
  • S&P 500: -14.66%
  • Nasdaq Composite: -22.58% 
  • Russell 2000: -16.14%
  • Bitcoin (BTC-USD): -54.00%
  • Ether (ETH-USD): -53.47%

Stocks to Watch

Before trading kicks off for U.S.-listed equities, no companies are expected to report their latest quarterly results and guidance. Given the number of investor conferences being held this week as we move closer toward company blackout periods for the September quarter, investors should be on watch for earnings pre-announcements. 

Elon Musk filed an amended 13D disclosing formally notifying Twitter (TWTR) that he has become aware of certain facts that serve as a new basis for terminating their merger

Ideanomics (IDEXannounced its U.S. Hybrid subsidiary is supplying Global Environmental Products with its proprietary electric and hybrid electric propulsion kits for use in the construction of 62 zero emission street sweepers.

JPMorgan Chase (JPM) agreed to acquire a payments startup called Renovite, its latest fintech acquisition. Since late 2020, JPMorgan has acquired at least five startups, from an ESG investing platform to a UK-based roboadvisor, on top of making a series of smaller fintech investments.

At the company’s D23 event over the weekend, Walt Disney (DIS) CEO Bob Chapek said the ESPN sports networks are critical to his overall vision of the company, one that involves more direct connections to consumers, including wagering on sports. According to reports, the company is working “very hard” on developing an ESPN sports-betting app. 

IPOs

There is some IPO activity this week with shares of Chinese financial services firm Lichen China (LICN) expected to start trading later today. Midweek, AIG (AIG) spin-off Corebridge Financial (CRBG) and biotech firm Jupiter Neurosciences (JUNS) are expected to begin trading on September 14. 

Readers looking to dig more into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

Oracle (ORCL) is expected to report its 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

Tuesday, September 13

  • Japan: Producer Price Index – August
  • UK: Average Earnings and Employment Change – July 
  • Germany: Consumer Price Index – August
  • Germany: ZEW Economic Sentiment and Current Conditions – September
  • US: NFIB Small Business Index – August
  • US: OPEC Report – August
  • US: Consume Price Index – August
  • US: Treasury Budget – August

Wednesday, September 14

  • Japan: Core Machinery Orders – July
  • UK: Consumer Price Index, Producer Price Index – August
  • Eurozone: Industrial Production – July
  • US: Weekly MBA Mortgage Applications
  • US: Producer Price Index – August
  • US: Weekly EIA Crude Oil Inventories

Thursday, September 15

  • Japan: Import/Exports – August
  • Eurozone: Labor Cost Index – 2Q 2022
  • UK: Bank of England Monetary Policy meeting
  • US: Weekly Initial & Continuing Jobless Claims
  • US: Retail Sales – August
  • US: Empire State Manufacturing Index – August
  • US: Philly Fed Index – August 
  • US: Import/Export Prices – August
  • US: Industrial Production & Manufacturing Capacity – August
  • US: Weekly EIA Natural Gas Inventories

Friday, September 16

  • China: Industrial Production, Retail Sales – August
  • UK: Retail Sales – August
  • Eurozone: Consumer Price Index – August
  • US: University of Michigan Consumer Sentiment Index (Preliminary) – August 

Thought for the Day

“If we worked on the assumption that what is accepted as true really is true, then there would be little hope for advance.” ~ Orville and Wilbur Wright

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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