Daily Markets: Economic Data Comes in Focus After Powell's Jackson Hole Comments

Today’s Big Picture

Asia-Pacific equity markets finished the day higher as China’s 50% reduction in a trading-related Stamp Duty goes into effect, stimulating trading and leading to China’s Shanghai Composite 1.13% gain today. Japanese investors took advantage of recent declines to snap up discounted shares, which helped Japan’s Nikkei add 1.73% by the end of today’s close. Hong Kong’s Hang Seng and South Korea’s KOSPI both gained just under 1%, Australia’s ASX All Ordinaries gained 0.45% and India’s SENSEX and Taiwan’s TAIEX both closed up 0.17%. European markets are up across the board in midday trading except for the UK, which is closed for a bank holiday, and U.S. equity futures point to a positive open.

After Federal Reserve Chairman Jerome Powell's firm and slightly hawkish comments at Jackson Hole on Friday, investors this week will be focusing on economic data and what that could mean for the Fed's path ahead in battling inflation. Powell reinforced the Fed’s 2% inflation target and noted the economy has been performing better than expected. As we navigate the data and its impact on the economy and monetary policy prospects, traders will be closely watching the 4,400 level on the S&P 500. After closing at 4,405.71 on Friday, a sustained move above that level could indicate the stock market is gaining renewed strength.

Before you break out the bubbly, we will remind you of two things. First, before we swap the end of August for the start of September, we are likely to see trading volumes thin throughout the week ahead of the Labor Day holiday. Second, September has been the worst month for the S&P 500 on average over the past three decades. As the usual disclaimer goes, past performance is no guarantee of future results, but you'll want to keep both eyes open.

Data Download

International Economy

According to China’s National Bureau of Statistics, July industrial profits fell 6.7% YoY vs. 8.3% in June. For the first seven months of 2023, profits declined 15.5%, easing from a 16.8% decrease a year earlier. China also announced measures to support the equities market, lowering the stamp duty on stock trades for the first time since 2008 and pledging to slow the pace of initial public offerings. Earlier this month, China’s central bank unexpectedly cut a key policy interest rate by the most since 2020 and authorities have taken steps to relax some housing policies.

Bank lending to companies in the Eurozone rose by 2.2% YoY to EUR 5.15 trillion in July, the slowest pace of growth since September 2021, due to the stagnant economy and the dampened demand for credit caused by rapid rate hikes. European Central Bank Governing Council member Robert Holzmann shared that inflation hasn’t been defeated and the bank probably needs to raise interest rates again in September. Holzmann went on to say the economy isn’t in danger of a recession, and tight labor markets mean labor unions may clinch large wage increases. “If there aren’t any big surprises, I see a case for pushing on with rate increases without taking a pause.”

India, the world’s biggest exporter of rice, imposed more curbs on shipments of the grain in a move that’s likely to further squeeze global supplies of the food staple.

Domestic Economy

We have a very light today, but as you can see in On the Horizon below that will change very quickly. Following Fed Chair Powell’s Jackson Hole comments on Friday, market watchers will likely tune in when Fed Vice Chair for Supervision Michael S. Barr speaks at 12:30 PM today. They, and we, will be looking for follow-through on Powell’s comments as well as his reaction to Saturday's comments from Cleveland Federal Reserve Bank Loretta Mester that beating inflation will probably require one more rate hike and then going on hold for "a while."

Tropical Storm Idalia strengthened in the Gulf of Mexico as it bore down on Florida, where it’s forecast to make landfall as a hurricane as soon as Wednesday.

Markets

Traders took Fed Chair Powell’s comments from Jackson Hole in stride and bid up equities across the board as evidenced by all sectors posting gains to close out the week. Consumer Discretionary (1.12%) and Technology (1.02%) led the way, followed closely by Energy (0.97%) as speculation on future oil demand turned positive. Relative laggards included Real Estate (0.28%) and Communication Services (0.11%) as Warner Brothers Discovery Inc (WBD) [-3.39%] and Meta Platforms (META) [-0.44%] combined to contribute to almost -200% of the sectors results.

Broad indexes saw gains to close out the week as the Russell 2000 rose 0.40%, the S&P 500 added 0.67%, the Dow saw a 0.73% rise and the Nasdaq Composite closed 0.94% higher. Ulta Beauty (ULTA) saw its shares fall 3.69% as the old adage of “buy the rumor, sell the news” came into play after the company posted what has been described as a “beat and raise quarter” promoting some analyst firms to cut their price target estimates.

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

• Dow Jones Industrial Average: 3.62%
• S&P 500: 14.75%
• Nasdaq Composite: 29.85%
• Russell 2000: 5.25%
• Bitcoin (BTC-USD): 56.85%
• Ether (ETH-USD): 37.88%

Stocks to Watch

Before U.S. equity markets begin trading today, there are no market-moving earnings reports expected.

Shares of China Evergrande Group (EGRNF) lost as much as 80% of its market value earlier today after its shares resumed trading in a crucial step for the world's most indebted property firm as it seeks to restructure its offshore debt.

3M (MMM) tentatively agreed to a more than $5.5 billion, five-year settlement to resolve over 300,000 lawsuits claiming the company sold the U.S. military defective combat earplugs.

Last week the United Auto Workers union landed approval from workers at Ford Motor (F), General Motors Company (GM), and Stellantis (STLA) to strike if a new contract is not worked out before September 14.

Jabil (JBL) announced a preliminary agreement with BYD Electronic Company Limited relating to the sale of its Mobility business in a potential transaction expected to be valued at ~$2.2 billion.

XPENG (XPEV) announced its strategy to accelerate the adoption of Smart EVs and technologies through a strategic partnership with DiDi Global (DIDIY). As part of this partnership, XPENG plans to launch an all-new EV brand in 2024 and DiDi will provide support with access to its nationwide shared mobility market.

Shares of Horizon Therapeutics (HZNP) moved higher after the Federal Trade Commission dropped its in-house trial challenging Amgen's (AMGN) $28 billion acquisition.

IPOs

Readers looking to dig deeper into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

Heico (HEI) is slated to report its 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

Tuesday, August 29

• Germany: GfK Consumer Confidence – September
• France: Consumer Confidence - September
• US: Consumer Confidence - August
• US: JOLTS Job Openings – July

Wednesday, August 30

• Japan: Consumer Confidence – August
• Eurozone: New Car Registrations – July
• UK: Bank of England Consumer Credit – July
• Euro Area: Economic Sentiment, Consumer Confidence – August
• Germany: Inflation Rate (Prelim.) - August
• US: ADP Employment Change Report – August
• US: 2Q 2023 GDP – Second Estimate
• US: Pending Home Sales – July

Thursday, August 31

• China: NBS Manufacturing & Non-Manufacturing PMI – August
• Germany: Retail Sales, Import/Export Prices – July
• Eurozone: Flash Inflation Rate - August
• US: Challenger Job Cuts – August
• US: Personal Income & Spending, PCE Price Index – July

Friday, September 1

• Japan: Jibun Bank Manufacturing PMI - August
• China: Caixin Manufacturing PMI - August
• Eurozone: HCOB Manufacturing PMI – August
• UK: S&P Global/CIPS Manufacturing PMI - August
• US: Employment Report – July (8:30 AM ET)
• US: S&P Global Manufacturing PMI Index (Final) – August
• US: ISM Manufacturing Index – August
• US: Construction Spending – August

Thought for the Day

“Summer is leaving silently. Much like a traveler approaching the end of an amazing journey.”

~ Darnell Lamont Walker

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

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