Daily Markets: Fears Over Inflation Put Pressure on Stocks
Today’s Big Picture
Fears over inflation and rising energy prices continue to put downward pressure on equities. The major equity indices in Asia-Pacific closed in the red today with Hong Kong’s Hang Seng and South Korea’s Kospi both dropping 1.4%, China’s Shanghai Composite losing 1.3%, Japan’s Nikkei falling 0.9%, and Australia’s ASX 200 dropping 0.3%. Europe is following this lead and is mainly red across the board in midday trading on these same concerns. The UK is bucking this trend as the only major market trading up so far today.
U.S. futures are little changed this morning as the markets gear up for today’s U.S. House to vote on a short-term increase to the government’s borrowing limit which would avert the immediate threat of a catastrophic default. We’d note this is but a temporary fix and sets the stage for what will likely be a more contentious showdown in December.
According to the China Passenger Car Association (CAPA), automobile sales in China fell 19.6% YoY to 2.07 million vehicles in September with passenger cars down 17% YoY to 1.58 million vehicles. On a positive note deliveries of what the CAPA calls “new-energy vehicles” (which includes EVs) rose 202% YoY to 33,000 units. Tesla (TSLA) reported it sold 56,006 China-made vehicles in September, up 26.5% MoM.
With natural gas prices hitting new record highs almost daily as we head into the colder months, which will only drive demand further, we are seeing some energy-intensive companies shutting down operations temporarily because they are simply too costly to run. Average consumption in Europe’s industrial sector is 12% below its pre-pandemic level, according to Engie EnergyScan.
The European Union is set to offer the largest-ever green bond today, raising $13.9 billion, surpassing the prior record set by the UK last month.
On the inflation front, we had a few data points this morning:
- As expected, South Korea is keeping its base interest rate at 0.75%, but policymakers did note that tightening could come as early as November.
- Wholesale prices in Germany were up 13.2% YoY in September.
The September reading of the NFIB Small Business Optimism Index fell to 99.1 in September from 100.1 the prior month, missing the 99.5 consensus.
Later this morning, we’ll receive the August data for Job Openings and Labor Turnover Survey better known as the monthly JOLTS report. For July, the JOLTS report indicated the number of job openings hit a record high of 10.9 million.
After being up as much as 0.6% intraday, the S&P 500 ended down 0.7% yesterday, as did the Dow, with the Nasdaq fell 0.6%. The only two sectors in manage gains were real estate end materials, gaining 0.1% and 0.03% respectively. The bond market was closed in observance of Columbus Day.
Stocks to Watch
Earnings Announcements & Guidance
Before U.S. equity markets open this morning, Fastenal (FAST) is expected to report its quarterly results.
Reports indicate China Evergrande Group (EGRNY) didn't make coupon payments due Monday on U.S. dollar bonds with some bondholders sharing they hadn't received interest due on Evergrande's 9.5% note due 2022 and 10% bonds due 2023.
Sonoco Products (SON) announced it will raise the price of all paperboard tubes and cores by at least 6%, effective with U.S. and Canada shipments on or after November 8. Chemical company Celanese (CE) announced a global surcharge on its portfolio of Amcel, Celcon, Hostaform, and other polyacetal (POM) products, beginning on October 25.
While the U.S. bond market was closed yesterday for the Columbus Day holiday, shares of utility companies closed lower across the board, leading the Utilities Select Sector SPDR Fund (XLU) to close the day down 1.4% vs. 0.7% for the S&P 500. As a frame of reference shares of utilities tend to fall when bond yields rise, and the benchmark 10-year Treasury yield hit 1.614% yesterday from 1.294% at the end of August.
Stellantis (STLA) announced plans to transform its Turin factory into an electric vehicle hub in an attempt to increase efficiency in the Italian region with the facility expected to be responsible for a new Maserati electrified platform.
Bombardier (BDRBF) CEO Eric Martel says that private airline demand has recovered to pre-pandemic levels driven by new customers
EasyJet (ESYJY) now expects seat occupancy levels reach 70% of 2019 levels in the December quarter, up from 60% forecasted a month ago as demand for holiday travel rebounds, particularly in the UK.
IPOs and related
After the close on Friday, Robinhood Markets (HOOD) filed an amended form S-1, seeking approval from the Securities and Exchange Commission for an expedited 98 million share sale by early investors previously announced in early August. Sales could open as soon as Wednesday afternoon if the SEC approves the request.
EU antitrust regulators are expected to open a full-scale investigation into Nvidia’s (NVDA) $54 billion bid for ARM Holdings (ARMHF) because offered concessions are not enough to “address competition concerns.”
Online Automotive Retailer Vroom (VRM) agreed to acquire California-based United Auto Credit Corporation (UACC), a nationwide technology-enabled non-prime auto lender serving the independent dealer market, for $300 million in cash.
Dividends and More
According to data from FactSet, the S&P 500 components EPS is expected to grow by 28.4% in Q3, after Q2’s 96% expansion from the Covid-driven 2020 economic shutdown.
After Today’s Market Close
Principal Financial (PMFP) is slated to report its quarterly results. Those looking to get a jump on the earnings reports to be had in the coming days should visit Nasdaq’s earnings calendar page.
On the Horizon
- October 12: JOLTs report
- October 13: CPI, FOMC Minutes
- October 14: Weekly jobless claims, PPI, Monthly budget statement
- October 15: Retail Sales, Import & Export Prices, NY Empire State Manufacturing, Michigan Consumer Sentiment (preliminary), Business Inventories
- October 18: Industrial Production, NAHB Housing Market Index, Net Long-term Tic Flows, Foreign Bond Investment, Overall Net Capital Flows
- October 19: Building Permits, Housing Starts
Thought for the Day
“Treat yourself like someone you’re responsible for helping.” ~Jordan Peterson
- Tesla (TSLA) is a constituent of the Tematica BITA Cleaner Living Index
- Tesla (TSLA) is a constituent of the Tematica BITA Cleaner Living Sustainability Screened Index
- Nvidia (NVDA) is a constituent of the Tematica BITA Digital Infrastructure & Connectivity Index
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.