Daily Markets: All Eyes on Key Inflation Data
Today’s Big Picture
Asia-Pacific equity markets finished the day ahead except for Hong Kong’s Hang Seng, which fell 0.86% on what is reported as insider selling in Tencent (TCEHY) and BYD (BYDDY). Both South Korea’s KOSPI and Taiwan’s TAIEX rose just over 0.10%, India’s SENSEX gained 0.39%, China’s Shanghai Composite advanced 0.41% and Australia’s ASX All Ordinaries closed 0.46% higher. Japan’s Nikkei ended today’s session up 0.57%, buoyed by comments from the Oracle of Omaha himself, Warren Buffet.
Major European markets are ahead in midday trading and futures point to a positive open.
Before US equities begin trading, the March Consumer Price Index (CPI) will be published and has the potential to shape not only today’s market open but the road ahead for monetary policy actions by the Fed. On a year-over-year basis, headline inflation is expected to climb 5.2%, a slower pace than February’s 6.0% figure. The more closely watched core CPI, which strips out food and energy prices is expected to advance 5.6% YoY compared to February’s 5.5% gain. Here’s the thing, even if the March inflation data is softer than expected, it will likely remain a hefty distance from the Fed’s 2% target, keeping the now expected 25-basis point rate hike in early May on the table.
The larger question is how today’s CPI report will impact monetary policy expectations for the second half of 2023. Currently, the market as measured by the CME FedWatch Tool, continues to see several rate cuts from August onwards despite recent comments by Fed officials they see a slow path to its 2% target. Last night, Minneapolis Federal Reserve Bank President Neel Kashkari said he sees inflation only getting "the mid threes" by the end of this year, still far above the Fed's 2% target, echoing comments earlier this week from New York Fed President John Williams.
Those comments were ahead of today’s CPI data, and we expect market watchers will be tuning in to see what Federal Reserve Bank of Richmond President Thomas Barkin has to say about the data when he speaks before the Investing in Rural America 2023 conference at 9 AM ET. Similarly, the market will be assessing post CPI report comments from San Francisco Fed President Mary Daly at 12 PM ET today when she speaks with the Salt Lake Chamber.
Data Download
International Economy
Japan's core machinery orders, which exclude those for ships and electric power companies, fell 4.5% MoM in February, reversing from a 9.5% gain in January but coming in better than the expected 7.8% drop.
Producer prices in Japan increased by 7.2% YoY in March, easing from an upwardly revised +8.3% the month before but a tad warmer than the expected 7.1%. Even so, the March figure was the lowest producer inflation since September 2021.
Domestic Economy
As we discussed above, the market open will reflect what’s learned in the March Consumer Price Index and its close will likely be influenced by the latest Fed meeting minutes published at 2 PM ET. In addition to those reports, today also brings the latest weekly data for the MBA Mortgage Applications Index and crude oil inventories from the Energy Information Administration.
The Biden administration is proposing new limits on vehicle tailpipe emissions for model years 2027-2032, a move that would help foster the adoption of EVs. A separate proposal, covering medium-duty vehicles, is expected to electrify nearly half of those vehicles by the 2032 model year.
Markets
Equities were mixed yesterday as traders waited patiently for today’s CPI update. Microsoft (MSFT) and Apple (AAPL) weighed on technology stocks as the Nasdaq Composite declined 0.43% while the S&P 500 index ended the day flat, down a mere 0.17 points. The Dow gained 0.29% and the Russell 2000 closed 0.80% higher. Sectors reflected the broad market as only Technology (-0.94%) and Communication Services (-0.26%) declined while Energy (0.95%) and Financials (0.87%) showed strength. In individual names, CarMax (KMX) surged 9.46% on strong reported earnings despite lower-than-expected revenue.
Here’s how the major market indicators stack up year-to-date:
- Dow Jones Industrial Average: 1.62%
- S&P 500: 7.02%
- Nasdaq Composite: 14.96%
- Russell 2000: 1.44%
- Bitcoin (BTC-USD): 82.40%
- Ether (ETH-USD): 57.94%
Stocks to Watch
Before US equity markets begin trading today, Apogee Systems (APOG) and Bed Bath & Beyond (BBBY) are expected to report their quarterly results.
Several major US banks, including JPMorgan Chase & Co (JPM), Wells Fargo & Co (WFC), Citigroup Inc (C) and Bank of America (BAC), that contributed a significant portion of the $30 billion in deposits to aid First Republic Bank last month are now planning to bolster their reserves by setting aside around $100 million each.
Mercedes-Benz Group (MBGAF) announced a 3% increase in 1Q 2023 sales to 503,500 vehicles with its EVs soaring 89% YoY to 51,600, just over 10% of total unit sales.
Ford (F) announced it will be spending $1.3 billion to revamp its Oakville, Ontario manufacturing plant into an EV hub. Part of the plan is to add a 407,000 square foot battery plant at the location. The company has set a sales target of 2 million EVs globally by 2026.
ASE Technology (ASX) reported March net revenue of ~$1.5 billion, up 13.1% MoM but down 18.6% YoY with revenue for its assembly, testing, and material business up 9.8% MoM but plummeting 22% on a YoY basis.
Walmart (WMT) said it will close four of its eight stores in Chicago, Illinois by April 16 due to underperformance.
Emerson Electric (EMR) is in advanced talks to purchase National Instruments (NATI) for around $60 per share after beating a rival bid from Fortive Corp. (FTV).
Goldman Sachs (GS), which acquired a Japanese banking license in 2021, is launching its transaction banking business for corporate clients in Japan.
IPOs
Near-term the calendar for such activity looks rather thin. Readers looking to dig more into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.
After Today’s Market Close
Sportsman’s Warehouse (SPWH) and Veradigm (MDRX) are slated to report their quarterly results after equities stop trading. Those looking for more on which companies are reporting when should head on over to Nasdaq’s Earnings Calendar.
On the Horizon
Thursday, April 13
- China: Imports, Exports – March
- UK: Industrial and Manufacturing Production – February
- Germany: Consumer Price Index – March
- Eurozone: Industrial Production – February
- OPEC Monthly Report
- US: Weekly Initial & Continuing Jobless Claims
- US: Producer Price Index – March
- US: Weekly EIA Natural Gas Inventories
Friday, April 14
- US: Retail Sales – March
- US: Import/Export Prices – March
- US: Industrial Production & Capacity Utilization – March
- US: The University of Michigan Consumer Sentiment – April Preliminary
Thought for the Day
"I can accept failure, everyone fails at something. But I can't accept not trying." ~ Michael Jordan
Disclosures
- Apple (AAPL), Microsoft (MSFT), Walmart (WMT) are constituents of the Tematica Research Thematic Dividend All-Stars Index
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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