Daily Markets: Fed Comments, Budget Woes Weigh on Markets

Today’s Big Picture

Asia-Pacific equity markets finished the day down across the board as continued Chinese property developer debt issues, and rate action warnings from the Bank of Japan rattled markets. India’s SENSEX declined 0.12%, China’s Shanghai Composite gave back 0.43%, Australia’s ASX All Ordinaries fell 0.55%, Taiwan’s TAIEX dropped 1.07%, Japan’s Nikkei lost 1.11%, and South Korea’s KOSPI closed 1.31% lower. Hong Kong’s Hang Seng ended the day down 1.48% in a broad decline led by Producer Manufacturing names. European markets are down in midday trading, and U.S. equity futures point to a lower open.

Markets are rolling into today with treasury yields at levels not seen in 15 years. While traders generally concern themselves with micro-scale opportunities and short-term volatility, that view is being pushed out as macro signals are becoming harder to ignore. The combination of current yields on the 10-year treasury hitting above 4.5%, a strengthening dollar putting pressure on exports, and persistent inflation pressures are seeing the Fed double down regarding what steps it may take to cool what seems to be an increasingly hot economy. Yesterday’s comments by Chicago Fed’s Austan Goolsbee underscored that the Fed's goal of taming inflation is one that they are prepared to take whatever steps needed to achieve, even if that means pushing the economy towards recession territory. This stance, coupled with concerns about Congress’ ability to pass a funding bill before September 30 to avoid a government shutdown, is weighing on markets today.

Data Download

International Economy

9:00 pm ET tonight sees the September update from Korea on Business Confidence. Estimates are calling for a slight uptick to 69 from the previously reported 67. Figures below 100 indicate pessimism, and all of the past year’s figures have been below 80, with a handful posting in the 60s.

Domestic Economy

Today sees a number of updates covering the housing sector including August Building Permits at 8:00 am ET and New Home Sales 10:00 am ET. Both are expected to have slipped with Building Permits moving to 1.442 million from July’s 1.543 million and New Home Sales declining to 699,000 from the previously reported 714,000. While this speaks to prospects for homebuilders, it also plays to the broader markets of Consumer Staples and Consumer Discretionary and any surprises to the downside could prompt selling pressure on those names.

Also today is the S&P/Case-Shiller Home Price Index, which is expected to tick up 0.30% on a YoY basis for the month of July, recovering some of the previous month’s 1.20% decline. If realized, this positive print is a good indication that housing price increases have troughed since seeing 20%+ levels in the spring of 2022. To be clear, this doesn’t mean that housing prices themselves have declined materially, but rather, that they have been rising at a slower pace since the April 2022 peak.

The Conference Board’s September survey of Consumer Confidence will be released at 10:00 am ET and is expected to decline to 105.0 just over a point below the previous reading of 106.1, still higher than recent survey results but well under the 130 levels seen just prior to the pandemic.

Markets

Equities took a breather from last week’s decline as all major broad indexes closed modestly higher on the day. The Dow gained 0.13 and the S&P 5000, Russell 2000, and the Nasdaq Composite all rose between 0.40% and 0.45%. The announcement of a resolution to the Hollywood writers' strike didn’t have as much of an impact on Communication Services names as thought, despite some strong pre-market trading in a number of names, most likely due to the lower projected profit margins forecasted as a result of the concessions made to achieve the deal. Energy was the leading sector, up 1.25% with Materials (0.79%) and Consumer Discretionary (0.62%) following. Consumer Staples took the biggest hit, down 0.36%. Shares of Qualcomm (QCOM) were bid up 2.55% after the company confirmed it will be downsizing its operations in China, further, a teardown of Apple’s (AAPL) iPhone 15 revealed embedded Qualcomm modem technology.

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

• Dow Jones Industrial Average: 2.59%
• S&P 500: 12.97%
• Nasdaq Composite: 26.80%
• Russell 2000: 1.31%
• Bitcoin (BTC-USD): 58.42%
• Ether (ETH-USD): 32.52%

Stocks to Watch

Before U.S. equity markets begin trading today, Cintas Corporation (CTAS) is among those names scheduled to report their latest quarterly results.

Thor Industries (THO) announced EPS of $1.68, and revenues of $2.47 billion for the fourth quarter, with revenues down over 28% and EPS at $5.15 per share for the same period in 2022. The company took steps to strengthen its balance sheet in the latest quarter, paying down $300 million of principal on its term loan, and $50 million on its Asset-Based Lending (ABL) program. Overall, 2023 saw a total of $502.4 million in debt paydowns. “As a result of the operational and commercial strategies enacted across our operating companies during the current RV down-cycle period, THOR and its independent dealers are well-positioned for both the next cyclical upturn and sustainable long-term growth,” said Bob Martin, President and CEO of THOR Industries.

Plug Power (PLUG) received an updated “Buy” rating from HSBC analysts noting that the company’s recent hydrogen generation plant development project will provide a strong platform for future growth. A price target of $11 was set as the firm sees significant support from both the U.S. Inflation Reduction Act as well as the Infrastructure Law.

IPOs

Near-term the calendar for such activity looks rather thin. Readers looking to dig deeper into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

Costco Corporation (COST), Progress Software Corporation (PRGS), and Miller Knoll (MLKN) are slated to report 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

Wednesday, September 27

• Germany: GfK Consumer Confidence – October
• US: MBA 30-Year Mortgage Rate - September 22
• US: Durable Goods Orders – August
• US: Weekly EIA Crude Oil Inventories

Thursday, September 28

• Germany: Inflation Rate – September
• US: GDP Growth Rate (Final) - Q2
• US: GDP Price Index (Final) - Q2
• Initial Jobless Claims - September 23
• US: Pending Home Sales - August
• Japan: Unemployment Rate - August
• Japan: Industrial Production (Preliminary) - August

Friday, September 29

• France: Inflation Rate – September
• UK: BoE Consumer Credit - August
• Eurozone: Inflation Rate (Flash) – September
• Eurozone: Core Inflation Rate (Flash) – September
• US: Core PCE Price Index - August
• US: PCE Price Index - August
• US: Personal Spending - August
• US: Personal Income - August
• US: Retail Inventories Ex Autos - August
• US: Wholesale Inventories - August
• US: Chicago PMI - September
• US: Michigan Consumer Sentiment (Final) - September

Thought for the Day

“The stock market is a device for transferring money from the impatient to the patient.” ~ Warren Buffett

Disclosures

• Qualcomm (QCOM) is a constituent of the Tematica BITA Digital Infrastructure & Connectivity Index
• Apple (AAPL) is a constituent 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.

Other Topics

Stocks Economy Smart Investing Central Banks Earnings