Markets

Daily Markets: Investors Await FOMC Minutes Amid Stronger-Than-Expected Economic Data

Traders - Michael Nagle / Bloomberg
Credit: Michael Nagle / Bloomberg

Today’s Big Picture

Following yesterday’s decline in the U.S. markets, the major equity indices in Asia-Pacific were mixed today. The winners were Australia’s ASX 200, gaining 0.6%, South Korea’s Kospi adding 0.3%, and Japan’s Nikkei 225 rising 0.1%. The decliners were Hong Kong’s Hang Seng, falling 0.9%, and China’s Shenzhen, which lost 0.7%. By midday trading in Europe, the main equity indices were mixed, and U.S. equity futures are relatively flat.

Yesterday’s robust job data in the JOLTS report, on top of last Friday’s better-than-expected jobs report combined with the latest ISM manufacturing and service sector data, is likely making investors rethink the likelihood that the Biden administration will be able to push through the entire stimulus package as it is currently outlined. The major focus for the day, however, will be on the minutes from the latest Federal Reserve Open Market Committee meeting, which will offer clues on when rate hikes can be expected.

Most importantly, what is going on with ketchup? People, the ketchup shortage is rapidly becoming a national emergency. What’s next? Ranch dressing?

Data Download

Coronavirus

President Biden is calling on U.S. states to make vaccine appointments available to all adults by Monday, April 19; most already have done so. Just over a year after the first restrictions were implemented in the country’s most populous state, California’s Governor Gavin Newsom plans to fully reopen his state on June 15 if hospitalizations remain stable, but masks will still be required. Texas is already allowing businesses to operate at 100% capacity and has rolled back its mask mandate.

International Economy

Today brings final Service PMI’s from around the world for March, which was overall stronger-than-expected with just a few exceptions:

  • Australia’s came in at 55.5, up from 53.4.
  • Spain’s rose more than expected to 48.1 (still in contraction) from 43.1 from which it was expected to rise to just 46.8.
  • Italy’s unexpectedly fell to 48.6 from 48.8 versus expectations for an increase to 49.1.
  • France’s rose more than expected to 48.2 from 45.6, from which it was expected to rise to 47.8.
  • Germany’s rose more than expected to 51.1 (expansionary) from 45.7, from which it was expected to rise to just 50.8.
  • Overall, the Eurozone came in stronger than expected at 49.6 (still in contraction) from 45.7, from which it was expected to rise to 48.8.
  • The UK rose slightly less than expected to 56.3 from 49.5, from which it was expected to rise to 56.8.

India’s central bank, the Reserve Bank of India (RBI), kept its benchmark repurchase interest rate at 4% during its April meeting, as expected, and plans to maintain an accommodative stance as long as necessary to sustain growth on a durable basis, mitigate the impact of Covid-19 on the economy while keeping inflation within its target range.

Yesterday the International Monetary Fund raising its 2021 growth outlook for the global economy to 6% from January’s 5.5%.

Domestic Economy

Yesterday’s JOLTS report from the Bureau of Labor Statistics for February found that job openings rose to a 2-year high on an absolute basis and as a percent of the total labor force are at a record high with a labor force that is smaller than it was pre-Covid with the total number of job openings within 171,000 of the November 2018 record-high. Total private hires as a percentage of the labor force were in the 91st percentile of all-time in February, with job openings in the 100th percentile and layoffs in the 2nd percentile.

On a sector basis, two areas with the greatest level of hiring were Manufacturing (97th percentile) and Leisure and Hospitality (98th percentile). The weakest were Mining and Logging (10th percentile) and Government (27th percentile). The areas with the highest level of job openings as a percent of the labor force were Manufacturing (99th percentile), Education and Health Services (100th percentile), and Professional and Business Services (98th percentile).

Yesterday’s IBD/TIPP Economic Optimism Index for April rose 1.8% to 56.4, a new high since February 2020 with the 6-month outlook rising 5.1%, yet the personal finances subindex, which measures how people feel about their own finances over the next six months, dropped 1.2% to 57.3.

According to the Mortgage Bankers Association, with mortgage rates rising again last week, the overall mortgage application volume fell 5.1% WoW. Applications for refinancing home loans dropped 5% and were down 20% YoY, the slowest pace since last June and the fifth consecutive decline in activity on refinances.

The vacancy rate for U.S. malls reached a record high of 11.4% in Q1 2021, up from 10.5% in Q4, according to Moody’s Analytics which tracks about 700 of the nation's estimated 1000 malls. UBS Group (UBS) this week released a report that estimates the closure of roughly 80,000 retail stores in the U.S. over the next five years.

Later today, we will get the Balance of Trade for February, the usual weekly EIA Energy Stocks, but most importantly, the Minutes from the last FOMC meeting will be released this afternoon at 2 pm EST.

Markets

Yesterday the S&P 500 made a new all-time intraday high but closed lower by 0.1%, as did the Nasdaq Composite, while both the Dow and the Russell 2000 lost 0.3%. The U.S. dollar fell 0.2%, while WTI crude gained 1.3% and gold was up 0.9%. The yield on the 10-year Treasury fell slightly to 1.66%.

Stocks to Watch

Yesterday SMART Global Holdings (SGH) reported quarterly earnings that saw EPS of $0.87, beating expectations of $0.80 and up from $0.52 last year. Revenue of $304.01 million was also a beat of 2.7% over expectations and up from last year’s $270.04 million.

Shares of Chipotle Mexican Grill (CMG) rose 2.4% yesterday after Truist issued a bullish update on the company’s shares in light of the latest price increases on the chain’s menu.

This morning MSC Industrial (MSM) shares fell 4.0% in premarket trading after the company reported fiscal Q2 EPS (adjusted) of $1.03, which was up marginally from expectations for $1.02, which was the same level as last year. Net sales came in at $774 million, down from $786.1 million last year and below the expected $778.1 million.

RMP International (RPM) reported a beat of $0.08 non-GAAP EPS, which came in at $0.38, and a miss of $0.09 on GAAP EPS, which came in at $0.29. Revenue rose 8.5% YoY to $1.27 billion, beating expectations by $60 million. Adjusted EBIT was slightly weaker than expected at $79.9 million versus consensus of $60.5 million.

Coinbase, which will start trading on the Nasdaq next week under the ticker COIN, said it expects to report revenue of $1.8 billion for its first quarter, a nearly ten-fold increase YoY. Net Income is expected to be between $730 million and $800 million, up from $32 million in Q1 2019. The number of verified users rose to 56 million in the first quarter versus 43 million in 2020, while the number sticking a transaction on a monthly basis in the quarter rose to 6.1 million, more than twice the 2.8 million in Q1 2020.

Later this morning, Lamb Weston (LW) will report, and after today’s market close, Resources Connection (RGP) is expected to report its latest quarterly results. Investors looking to get the details on those reports as well as others slated to be had this week should visit Nasdaq’s earnings calendar page.

On the Horizon

  • April 8: Weekly jobless claims
  • April 9: PPI, Wholesale Inventories
  • April 12: Monthly Budget Statement for March
  • April 13: Inflation, API Crude Oil Stock report
  • April 14: Import/Export prices, EIA energy stock reports
  • April 15: Retail Sales, NY Empire State Manufacturing, Philadelphia Fed Manufacturing, weekly Jobless Claims, Industrial Production, Business Inventories, NAHB Housing Market Index, Net Capital, and TIC flows, Foreign Bond Investment
  • April 16: Housing Starts, Building Permits, Michigan Consumer Sentiment

Thought for the Day

“Spring is here, and I am so excited I wet my plants.” Anonymous and fantastic

Disclosures

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

Chris Versace

Christopher (Chris) Versace is the Chief Investment Officer and thematic strategist at Tematica Research. The proprietary thematic investing framework that he’s developed over the last decade leverages changing economic, demographic, psychographic and technology landscapes to identify pronounced, multi-year structural changes. This framework sits at the heart of Tematica’s investment themes and indices and builds on his more than 25 years analyzing industries, companies and their business models as well as financial statements. Versace is the co-author of “Cocktail Investing: Distilling Everyday Noise into Clear Investing Signals” and hosts the Thematic Signals podcast. He is also an Assistant Professor at NJCU School of Business, where he developed the NJCU New Jersey 50 Index.

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Lenore Elle Hawkins

Lenore Elle Hawkins serves as the Chief Macro Strategist for Tematica Research. With over 20 years of experience in finance, her focus is on macroeconomic influences that create investing headwinds or tailwinds. Lenore co-authored the book Cocktail Investing and in addition to her Tematica work, provides M&A consulting services for companies in Europe looking to expand globally. She holds a degree in Mathematics and Economics from Claremont McKenna College, an MBA in Finance from the Anderson School at UCLA and is a member of the Mont Pelerin Society.

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Mark Abssy

Mark Abssy is Head of Indexing at Tematica Research focused on index and Exchange Traded Product development. He has product development and management experience with Indexes, ETFs, ETNs, Mutual Funds and listed derivatives. In his 25 year career he has held product development and management positions at NYSE|ICE, ISE ETF Ventures, Morgan Stanley, Fidelity Investments and Loomis Sayles. He received a BSBA from Northeastern University with a focus in Finance and International Business.

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