Markets

Daily Markets: Inflation, Fed to Drive Today's Market Action

Person shopping for groceries during high inflation
Credit: Mariana Nedelcu - Reuters / stock.adobe.com

Today’s Big Picture

Asia-Pacific equity markets finished the day mixed. India’s SENSEX declined 0.34% and China’s Shanghai Composite fell 0.78%, while Japan’s Nikkei closed 0.81% lower after markets reacted to Japan’s military identifying and tracking a test missile fired from North Korea. Australia’s ASX All Ordinaries and Taiwan’s TAIEX rose 0.35% and 0.37%, respectively, South Korea’s KOSPI gained 0.48% and Hong Kong’s Hang Seng advanced 1.08% led by Technology Services names. European markets are up across the board in midday trading and U.S. futures point to a positive open.

The June Consumer Price Index report was released at 8:30 am. The headline CPI rose 0.2% MoM, against expectations of 0.3%, and 3.0% YoY, against expectations of 3.1%. Core CPI rose 4.8% YoY against expectations of 5.1%. Because of the Fed’s focus on core CPI, markets ripped higher immediately after the report's release. Soon after reviewing the data, the market will turn to comments from Federal Reserve Bank President Neel Kaskari at 9:45 AM ET.

As those comments are being received, the Atlanta Fed will update its Business Inflation Expectations Index, which measures the year-ahead inflation sentiments of businesses under its purview. At 2 PM, the market will get another view on the economy and inflation pressures in the latest Fed Beige Book, an anecdotal collection of comments from the various Fed banks. Capping today’s data will be Federal Reserve Bank President Loretta Mester, who yesterday shared that she sees more rate hikes being needed to bring inflation back to the Fed’s target. Investors will be looking for any wavering in Mester’s comments following today’s data and whether the June CPI data shows enough progress the Fed could entertain just one more rate hike in 2023.

Data Download

International Economy

Japan's core machinery orders, which exclude those for ships and electric power companies, declined by 7.6% month-on-month in May, reversing from a 5.5% rise in April and defying expectations for a 1% gain. Producer prices in Japan rose by 4.1% year-on-year in June, slowing for the sixth straight month to their lowest level since April 2021.

Domestic Economy

In addition to the 8:30 AM ET print of the June CPI and this afternoon’s receipt of the latest Fed Beige Book, today also brings the usual Wednesday fare that includes the weekly MBA Mortgage Applications Index and Crude Oil Inventories data from the Energy Information Administration.

Markets

Traders anticipated positive inflation news and bid up shares across the board yesterday as all sectors posted positive returns. Energy (2.20%) showed the biggest gains followed by Communication Services (1.74%), and Utilities (1.24%). Relative laggards included Consumer Staples (0.15%) and Health Care (0.02%). Broad equity indexes reflected this move as the Nasdaq Composite gained 0.55%, the &SP 500 rose 0.67%, the Dow added 0.93% and the Russell 2000 closed 0.96% higher. In index-related news, both the Nasdaq Composite and Nasdaq 100 indexes will be undergoing a special rebalance to reduce the concentration of top-performing tech names. This action is being taken to reduce the risk that ETFs tracking these indexes, like the Invesco QQQ Trust (QQQ), might run afoul of IRS concentration rules and incur an additional 4% levy on earnings and income.

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

  • Dow Jones Industrial Average: 3.36%
  • S&P 500: 15.62%
  • Nasdaq Composite: 31.47%
  • Russell 2000: 8.64%
  • Bitcoin (BTC-USD): 84.38%
  • Ether (ETH-USD): 56.73%

Stocks to Watch

Before U.S. equity markets begin trading today, AngioDynamics (ANGO) is expected to report its quarterly results.

Canalys shared that the worldwide PC market fell by 12% in 2Q 2023, a much smaller decline than the over 30% drops seen in the previous two quarters. Per the firm’s findings, Apple (AAPL) grew the most among the major PC makers, with shipments hitting 6.8 million units and its market share expanding to 11% from 6.4% a year earlier.

Adobe (ADBE) is expected to release 2023 Amazon (AMZN) Prime Day 1 sales data.

The Biden administration will proceed with a $20 billion sale of F-16 fighter jets to Turkey per national security adviser Jake Sullivan, a positive for Lockheed Martin (LMT) shares.

Kim Kardashian is in talks to buy back the minority stake in the beauty company she had sold to beauty and fragrance seller Coty (COTY). The business, previously known as KKW Holdings, was valued at $1 billion when Coty acquired a 20% stake three years ago.

CVS Health (CVS) and GoodRx (GDRX) announced the launch of Caremark Cost SaverTM to help lower pharmacy out-of-pocket drug costs for CVS Caremark clients' members.

Indian tech services provider Wipro (WIT) plans to spend $1 billion to advance AI capabilities over the next three years as well as accelerate investments in startups through Wipro Ventures.

Netflix (NFLX), Walt Disney (DIS), and Hollywood's other major film and television studios are racing against a midnight deadline on Wednesday to reach a deal with the SAG-AFTRA actors union and avert a second labor strike this summer.

Disney is exploring strategic options, including a joint venture or sale, for its Star India business, which it acquired from Fox (FOX).

A federal judge denied the Federal Trade Commission's request for a preliminary injunction to block the $69 billion Activision (ATVI) deal with Microsoft (MSFT). In addition, the UK anti-trust authority and Microsoft agreed to stay in litigation in the regulator's attempt to block the combination. Reports indicate Microsoft is offering to make a small divestiture to meet the objections of the UK's antitrust regulator.

Online used-car seller Shift Technologies (SFT) said it will lay off about 34% of its employees, and end investment into its dealer marketplace business.

The EU Commission has cleared Broadcom’s (AVGO) acquisition of VMware (VMW).

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

MillerKnoll (MLKN) 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

Thursday, July 13

  • China: Imports/Exports – June
  • UK: GDP, Industrial Production, Manufacturing Production – May
  • Eurozone: Industrial Production – May
  • OPEC Monthly Report
  • US: Weekly Initial and Continuing Jobless Claims
  • US: Producer Price Index – June
  • US: Weekly EIA Natural Gas Inventory

Friday, July 14

  • Japan: Industrial Production & Capacity Utilization - May
  • US: Import/Export Prices – June
  • US: The University of Michigan Consumer Sentiment Index (Preliminary) – June

Thought for the Day

“Money is, in some respects, like fire. It is a very excellent servant, but a terrible master.” ~ PT Barnum

Disclosures

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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