Markets

Daily Markets: Stocks May Be in Holding Pattern Until Powell Speaks

Jereome Powell - Jonathan Ernst / Reuters
Credit: Jonathan Ernst / Reuters

Today’s Big Picture

Asia-Pacific equity markets ended today’s session up across the board except for Japan’s Nikkei, which closed 0.21% lower. Hong Kong’s Hang Seng set the pace, up 2.16% on a broad rally led by Consumer Services and Consumer Durables. China’s Shanghai Composite closed essentially flat, gaining a mere 0.05%, Australia’s ASX All Ordinaries advanced 0.52%, India’s SENSEX rose 0.67%, and Taiwan’s TAIEX and South Korea’s KOSPI added 1.16%, and 1.61%, respectively. 

By mid-day trading, European equity indices are mostly higher with only the Czech Republic markets off slightly. U.S. futures point to a modestly positive market open later this morning, but several pieces of fresh economic data out before the market open could alter that outlook which may explain why both stock and VIX futures are up, at least at the time of writing. Barring any shocking or unforeseen findings, we are likely to see the stock market in a holding pattern until it hears what Fed Chair Powell will say at 1 PM ET. Powell will give a speech at the Brookings Institution, which could confirm recent Fed official indications the Fed may opt for smaller rate hikes ahead. What he says about the potential terminal rate will likely have a far greater impact on the stock market and yield curve.

Data Download

International Economy

Japan's housing starts declined 1.8% YoY in October, missing the expected 1.3% decline. 

China’s NBS Manufacturing PMI declined to 48.0 in November from 49.2 in the prior month, missing market forecasts of 49.0. This was the second straight month of contraction in factory activity and the steepest pace since April, amid a new wave of COVID cases and tough restrictions in some large cities. The NBS Non-Manufacturing PMI dropped to 46.7 in November 2022 from 48.7 a month earlier. 

The annual inflation rate in the Euro Area eased to 10% in November from a record high of 10.6% in October, beating market forecasts of 10.4%, preliminary estimates showed. The rate of cost increases for energy (34.9% vs 41.5%) and services (4.2% vs 4.3%) slowed compared to October, while prices for food, alcohol, and tobacco rose at a faster pace (13.6% vs 13.1%). The annual core inflation rate, which excludes prices for energy, food, alcohol & tobacco, was steady at a record-high level of 5% in November, matching forecasts.

Amid Russia bombing Ukraine’s energy infrastructure, the North Atlantic Treaty Organization (NATO) doubled down on a vow to one day make Ukraine a member of the military alliance.

Domestic Economy

We have a big day of economic data that includes the usual weekly Wednesday data like the MBA Mortgage Application Index and Energy Information Administration’s Crude Oil inventory data. Ahead of Fed Chair Jerome Powell’s presentation later this afternoon, we expect the data on the labor market culled from ADP’s November Employment Change Report and the October JOLTS Job Openings reports will be picked over closely, as will the second revision for 3Q 2022 GDP. 

Following Powell’s comments, the latest Fed Beige Book will be published at 2 PM ET. No doubt market watchers will be sizing up what it says against Powell’s comments as they look to triangulate the likely outcome of next week’s Fed monetary policy meeting. 

The House of Representatives is expected to vote today on legislation to avert a rail strike.

Markets

On the surface, markets seemed somewhat muted yesterday with the Russell 2000 up 0.31%, the Dow unchanged, the S&P 500 off just 0.16%, and the Nasdaq Composite declining 0.59%. Sectors were mixed led by Real Estate up 1.67% and Energy gaining 1.51% but offset by Utilities and Technology, down 0.74% and 0.98%, respectively. Aside from Crowdstrike (CRWDdropping 18% on a reduced Q4 revenue and lower forward guidance, there were no big surprises in individual names yesterday. What we did see was various large-cap names battling it out in certain sectors. For example, Consumer Discretionary saw names like Best Buy (BBY)Chipotle Mexican Grill (CMG), and General Motors (GM) post gains on the day only to be offset by losses in Amazon (AMZN)McDonald’s (MCD), and Tesla (TSLA).

Here’s how the major market indicators stack up year-to-date:

  • Dow Jones Industrial Average: -6.84%
  • S&P 500: -16.96%
  • Nasdaq Composite: -29.79% 
  • Russell 2000: -18.45%
  • Bitcoin (BTC-USD): -64.56%
  • Ether (ETH-USD): -67.03%

Stocks to Watch

Before trading kicks off for U.S-listed equities, Frontline (FRO), Hormel Foods (HRL), and Petco Health and Wellness (WOOFwill be among the handful of companies reporting their latest quarterly results.

October quarter revenue at Hewlett Packard Enterprises (HPErose 7% YoY to $7.87 billion, well ahead of the $7.39 billion consensus. However, EPS for the quarter only matched expectations coming in at $0.57. The Compute and Intelligent Edge businesses had particularly strong revenue growth, each rising more than 20%. Ahead of its HPE Discover Frankfurt event that will focus on hybrid cloud transformation strategies, HPE reaffirmed its 2022 EPS guidance of $1.96-$2.04 vs. the $2.00 consensus and issued upside EPS guidance for the current quarter of $0.50-$0.58 compared to the market consensus of $0.49.

While CrowdStrike (CRWD) reported October quarter results that topped consensus revenue and EPS expectations, the company issued mixed guidance for the current quarter. While EPS for the January quarter is forecasted to be $0.42-$0.45 vs. the $0.34 consensus, the company shared revenue guidance for the quarter of $619.1-$628.2 million vs. the $634.2 million consensus. As Crowdstrike explained, “total net new ARR was below our expectations as increased macroeconomic headwinds elongated sales cycles with smaller customers and caused some larger customers to pursue multi-phase subscription start dates, which delays ARR recognition until future quarters." In response, CRWD shares fell in aftermarket trading last night, leading other cybersecurity stocks lower. 

Despite reporting October quarter results that easily cleared consensus expectations, Intuit (INTU) issued downside revenue and EPS guidance for its January quarter. As the company explained, Credit Karma experienced continuing deterioration across all verticals in the last few weeks of the first quarter. For its January quarter, Intuit sees EPS of $1.41-$1.45 vs. the $2.06 consensus with revenue in the range of $2.8-$2.9 billion, below the $3.06 billion consensus. 

IPOs

As we head into the holiday season the near-term IPO calendar is fairly light. Readers looking to dig more into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

Box (BOX), Credo Technology Group (CRD), Five Below (FIVE), Okta (OKTA), PVH (PVH), Salesforce (CRM), Snowflake (SNOW), Splunk (SPLK), and Victoria’s Secret (VSCO) are among the names 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

Thursday, December 1

  • Japan: au Jibun Bank Japan Manufacturing PMI - November
  • Taiwan: S&P Global Taiwan Manufacturing PMI - November
  • China: Caixin China General Manufacturing PMI - November
  • Eurozone: S&P Global Eurozone Manufacturing PMI - November
  • JPMorgan Global Manufacturing PMI - November
  • US: Challenger Job Cuts Report - November 
  • US: Weekly Initial & Continuing Jobless Claims
  • US: Personal Income & Spending - October 
  • US: PCE Price Index - October 
  • US: S&P Global Manufacturing PMI - October 
  • US: ISM Manufacturing Index - November 
  • US: Construction Spending - October 
  • US: Weekly EIA Natural Gas Inventories

Friday, December 2

  • Germany: Import/Exports - October
  • Eurozone: PPI - October
  • US: Employment Report - November 

Thought for the Day

“Smile! We’re halfway to Friday.” ~ Anonymous

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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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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