Markets

Daily Markets: Can America Dodge a Recession in 2023?

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Today’s Big Picture

Asia-Pacific equity markets finished the day up except for South Korea’s KOSPI, which declined 0.67% and China’s Shanghai Composite, which fell a mere 0.07 points to close flat as fears of new U.S. AI technology sanctions muted any positive effects of the country’s announcement it sees 5% GDP growth as a reachable target. Hong Kong’s Hang Seng gained 0.12%, Taiwan’s TAIEX rose 0.28%, India’s SENSEX advanced 0.79%, and Australia’s ASX All Ordinaries added 1.15%. Japan’s Nikkei resumed its bull run, closing 2.02% higher as Semiconductor names rallied, and yesterday’s strong U.S. economic data eased recession fears. European markets are up across the board in midday trading and U.S. futures point to a lower open.

President Biden is expected to give a speech today as part of his “Investing in America” tour that will tout the strength of the economy due in part to the infrastructure and other stimulus packages of his administration. The latest monthly economic survey from Bloomberg finds the economy is expected to narrowly dodge a recession in 2023; however, underlying inflation will be more persistent than previously thought. 

At 9:30 AM ET, Fed Chair Powell will speak at the European Central Bank Forum, and following the string of hot U.S. housing data the market will be watching to see if his comments about monetary policy become even more hawkish. Powell’s comments will be joined by those from ECB President Christine Lagarde, BOJ Governor Kazuo Ueda, and BoE Governor Andrew Bailey. Later today, the Federal Reserve is scheduled to publish the results of its annual stress test of large banks, the first following a string of bank failures in the spring. 

Data Download

International Economy

Germany's GfK Consumer Climate Indicator dropped to -25.4 heading into July, compared to a slightly revised -24.4 the previous month and falling short of market expectations of -23.0. It marked the first deterioration in consumer morale in nine months, primarily driven by a decline in economic (3.7 vs 12.3 in June) and income expectations (-10.6 vs -8.2).

Domestic Economy

While we wait for the Federal Reserve to release the latest bank stress tests findings, investors will review the latest weekly data for the MBA Mortgage Applications Index and the crude oil inventory data. Given the recent strength in homebuilder stocks, we expect the focus inside the MBA data to be on new mortgage originations, not refinancing activity. Ahead of the EIA’s oil inventory report, yesterday data from the American Petroleum Institute showed a draw of 2.41 million barrels of oil in U.S. commercial stockpiles for the week ending June 23.

The U.S. is weighing new restrictions on AI chip exports to China as part of the final rules codifying the export control measures announced in October. The latest restrictions could be implemented as soon as next month, following Treasury Secretary Janet Yellen's China visit.

Markets

Investors liked what they saw in yesterday’s economic releases and aside from Health Care (-0.23%), bid up all sectors with the strongest showing coming from Consumer Discretionary (2.15%) and Technology (1.97%) names. The Dow gained 0.63%, the S&P 500 rose 1.15%, the Russell 2000 added 1.46% and the Nasdaq Composite closed 1.65% higher. Shares of Walgreens Boots Alliance (WBA) fell 9.34% yesterday after the company posted a weak quarter, announced the closing of 450 stores across the US and the UK, and lowered EPS guidance for 2023.

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

  • Dow Jones Industrial Average: 2.35%
  • S&P 500: 14.04%
  • Nasdaq Composite: 29.52%
  • Russell 2000: 5.04%
  • Bitcoin (BTC-USD): 84.72%
  • Ether (ETH-USD): 57.66%

Stocks to Watch

Before U.S. equity markets begin trading today, General Mills (GISand UniFirst (UNF) are expected to report their quarterly results. 

Jefferies (JEF) reported May quarter results that met top-line expectations of $1.04 billion, down 22.5% YoY, but bottom-line results for the quarter missed consensus forecasts. Breaking down the company’s revenue for the quarter, Investment Banking net revenue of $510 million fell 26% YoY while Capital Markets net revenue of $543 million climbed 30% YoY. Management noted the quarter included “fallout from the regional banking crisis, the government-supported forced merger of Credit Suisse and UBS, and the tumultuous process of extending the U.S. debt ceiling.” It also shared "The month of June has brought green shoots in our investment banking and capital markets business and we are growing increasingly optimistic about the return to a more normal environment.” 

Spirit AeroSystems (SPR), a key supplier to Boeing and Airbus, reached a tentative labor agreement with a union representing about 6,000 workers at its airplane parts factory in Wichita, Kansas. Members of the International Association of Machinists and Aerospace Workers (IAM) will vote to approve the contract on June 29.

U.S. electric truck manufacturer Lordstown Motors (RIDE) filed for bankruptcy protection and put itself up for sale after failing to resolve a dispute over a promised investment from Taiwan's Foxconn.

Walgreens warned that lower spending by inflation-spooked consumers and a hit from a larger-than-expected drop in COVID-19 product sales would likely persist into next year.

Alphabet’s (GOOGL) Google will cut jobs at the mapping app Waze as it merges the unit with its own map products. The Waze unit has over 500 employees and the number of employees affected by the expected job cuts was not disclosed.

Eargo’s (EAR) board approved a cost reduction plan to optimize its cost structure and operating model to be implemented by the end of fiscal 2023. The plan is expected to impact 90–120 employees, or ~32%–42% of the company's workforce.

IPOs

Korean BBQ group GEN Restaurant (GENK), Vesta Real Estate (VTMX), Kodiak Gas Services (KGS), Savers Value Village (SVV), and Fidelis (FIHL) are set to debut this week. Readers looking to dig deeper into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

Blackberry (BB), Micron (MU), and Worthington (WOR) are slated to report their quarterly results after equities stop trading. Those looking for more on upcoming quarterly earnings reports should head on over to Nasdaq’s Earnings Calendar

On the Horizon

Thursday, June 29

  • Japan: Retail Sales – May
  • UK: Bank of England Consumer Credit – May
  • Eurozone: Business and Consumer Survey – June
  • Germany: Consumer Price Index - June
  • US: Weekly Initial & Continuing Jobless Claims
  • US: GDP (Third Estimate) – 1Q 2023 
  • US: Pending Home Sales – May 
  • US: Weekly EIA Natural Gas Inventories 

Friday, June 30

  • China: Manufacturing and Non-Manufacturing PMI – June
  • UK: Business Investment, GDP – 1Q 2023
  • Eurozone: Consumer Price Index - June
  • US: Personal Income & Spending, PCE Price Index – May
  • US: The University of Michigan Consumer Sentiment Index (Final) – June 

Thought for the Day

“Things turn out best for the people who make the best of the way things turn out.” ~ John Wooden

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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