Today’s Big Picture
Asia-Pacific equity markets finished the day mixed. Australia’s ASX All Ordinaries declined 0.24%, China’s Shanghai Composite fell 0.27% and Taiwan’s TAIEX closed 0.80% lower, led by Technology Services. India’s SENSEX ended the day essentially flat, up a mere 0.06% while Hong Kong’s Hang Seng rose 0.17%, Japan’s Nikkei gained 0.26% and South Korea’s KOSPI added 0.43% led by Health Technology names.
European markets are mixed in midday trading and futures point to a positive open.
Yesterday’s March Consumer Price Index report showed little to no progress in core inflation during the March quarter, bringing an even greater focus on today’s March Producer Price Index (PPI) report. The headline figure is expected to come in at +3.0% YoY for March, a nice step down from February’s 4.6%. This is thought to be largely due to improved energy prices. The core PPI reading for March is also expected to step down to +3.4% YoY from February’s 4.4%, which would be a welcome sight. Similar to what we’ve seen in recent inflation data sets, softer than expected figures will argue for the Fed needing to do less, but a hotter than expected update will likely cement expectations for a 25-basis point rate hike in early May and raise questions over expected rate cuts in 2H 2023. Providing further insight, S&P Global (SPGI) will soon publish its Flash Manufacturing & Services PMIs for April which will contain an even fresher perspective on input cost inflation.
In addition to inflation data out this morning, the market will keep no doubt keep a watchful eye on US-China-Taiwan tensions. Sparking those efforts were comments from China’s President Xi Jinping to "strengthen military training oriented towards actual combat" after Beijing conducted military drills intended to intimidate Taiwan.
Data Download
International Economy
Imports to China fell 1.4% YoY to $227.4 billion in March, weaker than the expected 5% drop following the 10.2% slump in January-February combined. However, exports from China surged 14.8% YoY from a year earlier to an eight-month high of $315.59 billion in March, rebounding sharply from a 6.8% drop in the combined January-February combined, and far stronger than the expected 7% fall.
Germany's consumer price inflation was confirmed at a seven-month low of 7.4% YoY in March, down from 8.7% in the previous two months but well above the European Central Bank's target of about 2%. Energy inflation eased sharply to 3.5% from 19.1% in February, while food prices increased at a faster 22.3%, compared with a 21.8% gain the month before.
Industrial production in the Euro Area rose by 2.0% YoY in February, stronger than the expected gain of 1.5%.
Industrial production in the UK fell 0.2% MoM (down 3.1% YoY) in February, marking its second consecutive drop after an upwardly revised 0.5% decrease in January. The February figure also missed market expectations of a 0.2% growth.
Domestic Economy
As we discussed above, the economic data point the market will be focusing on this morning will be the March Producer Price Index and what it says about the pace of inflation. We also have the usual Thursday data suspects which are the weekly and continuing jobless claims as well as natural gas inventories from the Energy Information Administration.
Crude oil prices popped Wednesday after Secretary of Energy Jennifer Granholm said the U.S. government could begin buying oil to replenish the Strategic Petroleum Reserve later this year "if it is advantageous to taxpayers."
The White House is expected to announce around $300 million for nine bridge projects in both rural and urban areas in eight states and the District of Columbia, funded by the Bipartisan Infrastructure Law's Bridge Investment Program. These bridges reportedly serve over 230,000 vehicles combined per day. To date, the Administration has funded over 4,600 bridge repair and replacement projects across the country. This is all part of the Biden Administration’s Investing in America agenda that has unleashed over $435 billion in private sector manufacturing investments and funded 23,000 infrastructure projects across 4,500 cities and towns.
Markets
Equities came under some pressure yesterday as Amazon (AMZN) and Tesla (TSLA) combined to contribute to just under 60% of Consumer Discretionary (-1.55%) sector losses, and Communications Services names fell -1.04% on general weakness. The Dow declined 0.11%, the S&P 500 fell 0.41%, the Russell 2000 gave back 0.72% and the Nasdaq Composite closed 0.85% lower. Yesterday saw airline stocks tumble as American Airlines (AAL) and United Airlines (UAL) fell 9.22% and 6.50%, respectively after AAL updated Q1 guidance lower, dragging down the industry.
Here’s how the major market indicators stack up year-to-date:
- Dow Jones Industrial Average: 1.51%
- S&P 500: 6.58%
- Nasdaq Composite: 13.98%
- Russell 2000: 0.71%
- Bitcoin (BTC-USD): 80.24%
- Ether (ETH-USD): 60.34%
Stocks to Watch
Before US equity markets begin trading today, Delta Air Lines (DAL), Fastenal (FAST), and Progressive (PGR) are expected to report their quarterly results.
While Sportsman’s Warehouse (SPWH) reported better than expected January quarter results for both revenue and EPS, the outlook for its April quarter came up short relative to consensus expectations. For the current quarter, it sees EPS of $(0.40)-$(0.35) vs. the $0.02 consensus with revenue of $265-$270 million vs. the $319.69 million consensus. Per the company, “…the macroeconomic environment and inflationary pressures are weighing on the consumer and their discretionary spending. Additionally, the unusually wet and cold weather in the western U.S., where a large portion of our stores are located, is creating a later than normal start to the spring shooting, fishing, and camping seasons, negatively impacting our current business."
Rent the Runway (RENT) reported a smaller than expected bottom line loss for its January quarter, one that saw revenue rise 17.6% YoY to $75.4 million vs. the $73.5 million consensus. However, the company issued weaker than expected revenue guidance for its April quarter and full year 2023. For the April quarter, it sees revenue of $72-$74 million vs the $76.64 million consensus. In terms of 2023, it forecasts revenue in the range of $320-$330 million, below the $346 million consensus but expects active subscriber growth of more than 25%.
In a letter to shareholders, Amazon (AMZN) CEO Andy Jassy wrote Amazon Web Services “faces short-term headwinds right now as companies are being more cautious in spending given the challenging, current macroeconomic conditions.”
Heico (HEI) disclosed a cybersecurity incident impacted certain of its information technology systems. The incident also involved the theft of some internal business documents. The Company became aware on April 7, 2023, that information related to the Company was posted on the dark web.
Diagnostics company Oncocyte Corporation (OCX) announced plans to reduce about 20% of its workforce in an attempt to cut costs and extend its cash runway.
Shares of SiriusPoint (SPNT) jumped 10% after hedge fund Third Point said the firm is exploring taking the reinsurer private.
Luxury goods provider LVMH Moet Hennessy Louis Vuitton (LVMUY) posted strong Q1 results, with revenues up 17% on a YoY basis. All sectors saw healthy double-digit growth except for Wines & Spirits (3%) with management noting that virtually all growth was the result of organic sales following the lifting of covid restrictions in China throughout the first quarter of 2023.
Reports suggest IBM (IBM) is exploring the sale of its weather operation, which could fetch over $1.0 billion.
IPOs
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
Edgio (EGIO) and Washington Federal (WAFD) are slated to report their quarterly results after equities stop trading. Those looking for more on which companies are reporting when should head on over to Nasdaq’s Earnings Calendar.
On the Horizon
Friday, April 14
- US: Retail Sales – March
- US: Import/Export Prices – March
- US: Industrial Production & Capacity Utilization – March
- US: The University of Michigan Consumer Sentiment – April Preliminary
Thought for the Day
"Some people want it to happen, some wish it would happen, others make it happen." ~ Michael Jordan
Disclosures
- Tesla (TSLA) is a constituent of the Tematica BITA Cleaner Living Sustainability Screened Index
- LVMH Moet Hennessy Louis Vuitton (MC-FR, LVMUY) is a constituent of the Tematica BITA Big Spenders & Savers Index
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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