Markets

Daily Markets: Crucial Jobs Report Closes Out Trading Week

Empty Times Square at dusk, New York City
Credit: Eduardo Munoz - Reuters / stock.adobe.com

Today’s Big Picture

Asia-Pacific equity markets finished the day down across the board as yesterday’s U.S. market action ricocheted around the region. South Korea’s KOSPI declined 1.01%, India’s SENSEX fell over 1%, Taiwan’s TAIEX fell 1.55%, China’s Shanghai Composite dropped 1.40%, Japan’s Nikkei shed 1.67%, Australia’s ASX All Ordinaries -2.21%, and Hong Kong’s Hang Seng closed approximately 3% lower. By mid-day trading, European equity indices are down across the board, and U.S. futures, as we write this morning’s note, are mixed.

The February Employment Report showed 311,000 nonfarm jobs created during the month, versus expectations of 225,000 jobs. However, hourly earnings slowed, rising 4.6% versus expectations of 4.8%. With the February report hotter than expected, we are likely to see the market brace even further for a half-percentage point rate hike at the Fed’s next policy meeting later this month, but the slowdown in hourly earnings may keep the rate at 0.25%. But readers should remember, we have more inflation data coming next week, and we continue to see the market trading data point to data point, at least for the next several trading days until a much clearer picture of inflation and the Fed’s likely reaction emerges.

As readers contend with that data and its implications, we will also have to see what unfolds next with SVB Financial Group (SIVB) after sharing it lost nearly $2 billion selling assets following a larger-than-expected decline in deposits. To say that spooked investors over potentially greater risks to the economy as the Fed raises interest rates further is something of an understatement as evidenced by the KBW Nasdaq Bank Index making its biggest decline since the pandemic. We’d note this comes on the heels of the collapse of Silvergate Capital Corp. (SI), a bank steeped in the crypto market, understandably making investors even more uneasy when it comes to the banking sector. Now for the February Employment Report...

Note: The next edition of Daily Markets will be published on Monday, March 20. We know you’ll miss us and the daily prep for the trading day ahead, but we’ll be back before you know it.

Data Download

International Economy

Producer prices in Japan increased by 8.2% YoY in February slowing from a 9.5% increase the prior month and coming in softer that the market consensus for +8.4%. We’d note the February reading marked the lowest producer inflation since October 2021.

The annual inflation rate in Germany was confirmed at 8.7% in February, not far from a peak of 8.8% seen in October and November and remaining well above the European Central Bank's target of about 2%.

Industrial production in the UK fell 0.3% MoM in January vs. +0.3% in December and the market expectation for a 0.1% decline. Taking a closer look at manufacturing, production activity in the UK dropped 0.4% MoM after stalling the previous period and here too fell more than was expected in January.

Domestic Economy

As we mentioned above, the February Employment Report will be out at 8:30 PM ET, and what we learn will likely shape how equities finish the week.

Markets

The Dow fell 1.66%, the S&P 500 dropped 1.85%, the Nasdaq Composite shed 2.01% and the Russell 2000 closed 2.81% lower. Sectors were down across the board, but as we discussed above Financials gave shareholders the most pain, down just over 4%. Consumer Discretionary names followed, losing 2.38%, and Real Estate and Communications Services both fell over 2% on the day. Bucking yesterday’s “sell everything” mode was General Electric (GE) which gained 5.27% after the company announced strong forward guidance and went on to state a recession was the last thing on his mind.

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

  • Dow Jones Industrial Average: -2.69%
  • S&P 500: 2.05%
  • Nasdaq Composite: 8.33%
  • Russell 2000: 3.71%
  • Bitcoin (BTC-USD): 22.54%
  • Ether (ETH-USD): 19.93%

Stocks to Watch

Before trading kicks off for U.S.-listed equities, Buckle (BKE) and Genius Sports (GENI) are expected to report their latest quarterly results.

Oracle (ORCL) reported better than expected February quarter EPS while revenue for the period came in at $12.4 billion, essentially matching the consensus forecast. Cloud was a key driver of the company’s revenue during the quarter with its segments each posting strong double-digit gains vs. the year-ago quarter even after adjusting for currency headwinds. For its May quarter, the company sees EPS of $1.56-$1.60 vs. the $1.46 consensus with revenue climbing 15%-17% YoY.

Ulta Beauty (ULTA) crushed January quarter expectations with revenue that soared 18.2% YoY $3.23 billion vs. the $2.99 billion consensus and EPS of $6.68 vs. the $5.60 consensus. Same-store sales growth was 15.6% YoY, which was on top of +21.4% comps in the year-ago period. For its fiscal 2024, Ulta sees EPS of $24.70-$25.40 vs. the $24.26 consensus with revenue of $10.95-$11.05 billion vs. the $10.75 billion consensus. Baked inside that guidance is same-store sales growth of +4%-5% which is on top of +15.6% for fiscal 2023.

January quarter results and guidance at the Gap (GPS) came up short relative to Wall Street expectations. EPS for the January quarter was -$0.75 vs. the -$0.46 consensus and revenue fell 6.2% YoY during the quarter to $4.24 billion vs. the $4.37 billion consensus. Total comps across the company’s portfolio fell 5% YoY in the quarter with Old Navy down 7%, Gap down 4%, Banana Republic down 3%, and Athleta down 5%. For the current quarter, Gap sees revenue down mid-single digits YoY vs. the consensus view that was calling for +1% YoY. On a positive note, the company’s inventory stood at $2.4 billion exiting the January quarter, down sharply from just over $3 billion at the end of October.

DocuSign (DOCU) reported better-than-expected January quarter results for both its top and bottom lines. Billings for the quarter rose 10% YoY to $739 million, topping the company’s guidance of $705-$715 million. For the current quarter, DocuSign sees revenue of $639-$643 million vs. the $639.77 million consensus. However, it went on to share that customer sentiment continues to be cautious and that it is leveraging AI into its products. It also expects to release web forms in April to help customers move from legacy contract forms to a modern web and app experience.

Data from the Semiconductor Industry Association (SIA) found global semiconductor industry revenue was $41.3 billion in January, down 5.2% vs. December and 18.5% YoY. However, this morning Taiwan Semiconductor (TSM) reported its February revenue rose 11.1% YoY but fell 18.4% vs. January. For the first two months of 2023, TSM’s revenue was up 13.8%.

IPOs

As we close out the week, there are no pending IPO transactions left to price. 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

Once again, friends, we have made it to the end of the week, and we have no companies slated to report their quarterly results after equities markets close for the day and the week. Those looking for more on which companies are reporting when, head on over to Nasdaq’s Earnings Calendar.

On the Horizon

Tuesday, March 14

  • UK: Employment Change, Average Earnings - January
  • OPEC Monthly Report
  • US: Consumer Price Index – February

Wednesday, March 15

  • China: Industrial Production, Retail Sales – February
  • Eurozone: Industrial Production - January
  • US: Empire State Manufacturing Index – March
  • US: Retail Sales – February
  • US: Producer Price Index – February
  • US: Business Inventories – January
  • US: NAHB Housing Market Index – March

Thursday, March 16

  • Japan: Core Machinery Orders, Industrial Production & Capacity Utilization – January
  • Eurozone: European Central Bank Interest Rate Decision
  • US: Housing Starts & Building Permits – February
  • US: Philadelphia Fed Index – March
  • US: Import/Export Prices – February

Friday, March 17

  • Eurozone: Consumer Price Index – February
  • Eurozone: Labor Cost Index – 4Q 2022
  • US: Industrial Production & Capacity Utilization – February
  • US: Leading Indicators – February
  • US: University of Michigan Consumer Sentiment Index (Preliminary) – March

Thought for the Day

"Don’t spend time beating on a wall, hoping to transform it into a door." ~Coco Chanel

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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