Daily Markets: Investors Watching Inflation Data Closely

Today’s Big Picture

Asia-Pacific equity markets finished their day mixed. Australia’s ASX All Ordinaries and South Korea’s KOSPI both fell 0.73% led by Process Industries, and Non-Energy Materials, respectively. Taiwan’s TAIEX declined 032%, and Hong Kong’s Hang Seng closed close to flat, down a mere 0.04%. China’s Shanghai Composite gained 0.12%, India’s SENSEX rose 0.15%, and Japan’s Nikkei closed 0.62% higher as Automakers and other exporters reacted to weaker Yen/USD levels. European markets are flat to lower in midday trading and U.S. equity futures point to a lower open.

Soon after U.S. equities begin trading, we will receive back to back data telling us how the U.S. Services economy fared in August. Given continued contractions in the U.S. Manufacturing economy reported last week, this morning’s data from S&P Global and the Institute for Supply Management will offer a sobering take on the 5.6% figure put forth by the Atlanta Fed’s GDPNow model for the current quarter. Because of the Fed’s focus on inflation in the Services sector, we should expect pricing data in these reports to be of more than passing interest.

After the August Manufacturing and Services PMI data is released, investors' focus will shift to this afternoon’s Fed Beige Book report and the anecdotal picture it paints for economic activity across the U.S. Here too, the focus will be on the strength of the economy and inflation as well as job growth. Readers looking to gauge the market’s reaction to today’s data should look no further than the movement in Treasury yields following these updates.

Data Download

International Economy

Factory orders in Germany plunged 11.7% MoM in July, far worse than market estimates for a 4% fall and the upwardly revised 7.6% growth in June. This was the first drop in industrial orders since March, dragged down by weakness in large-scale orders, particularly in air and spacecraft manufacturing.

Retail sales in the Euro Area decreased by 0.2% MoM (-1.0% YoY) in July, a slightly larger decline than the expected 0.1% MoM drop. Sales of automotive fuel were down by 1.2% amid rising prices, while sales of food, drinks, and tobacco increased by 0.4%. Sales of non-food products advanced by 0.5%, marking the fourth consecutive month of gains. Online trade growth accelerated to 3.8% vs. June's 1.5%.

Domestic Economy

In addition to the August Services PMI reports out this morning and the latest Fed Beige Book this afternoon, we also have the weekly MBA Mortgage Applications Index. Following yesterday’s sell-off in homebuilder and related stocks, the report will tell us if potential homebuyers still have an appetite despite the national average for the 30-year fixed mortgage rate topping 7.5% according to Bankrate.

Federal Reserve Governor Christopher Waller said last week's strong economic data will buy the central bank some time as it mulls whether further interest rate hikes are needed, given that the economy is slowing down as intended. Waller went on to say the Fed can afford to keep rates higher for longer and it is key to "see whether this low inflation is a trend or if it was just an outlier."

Markets

Sectors were either down or flat yesterday except for Technology (0.36%) which was lifted by Microsoft (MSFT) [1.49%] which contributed to just over 90% of the sector’s results. Energy (0.53%) was also up, extending recent gains after both Saudi Arabia and Russia unexpectedly announced that recent production cuts would be extended through the end of the year. Yesterday’s biggest hits were taken by Materials (-1.85%), Industrials (-1.68%), and Utilities (-1.53%). The Nasdaq Composite closed essentially flat, down 0.08% while the S&P 500 declined 0.42%, the Dow fell 0.56% and the Russell 2000 closed 2.10% lower. Homebuilders took a hit yesterday as Pultegroup (PHM) declined 5.74%, and both Lennar Corporation (LEN), and D.R. Horton (DHI) gave back 4.91% as rate pressures continue to weigh on this sector.

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

• Dow Jones Industrial Average: 4.51%
• S&P 500: 17.12%
• Nasdaq Composite: 33.96%
• Russell 2000: 6.77%
• Bitcoin (BTC-USD): 55.39%
• Ether (ETH-USD): 36.27%

Stocks to Watch

Before U.S. equity markets begin trading today, Core & Main (CNM) and Photronics (PLAB) will report their quarterly results.

Following the more than 20% climb in jet fuel prices since mid-July, United Airlines (UAL) now expects its all-in fuel price to be $2.95-$3.05 per gallon.

Alaska Airlines (ALK) narrowed its 2023 revenue guidance to +1%-2% YoY vs. its prior guidance of 0%-3% due to cancellations to Hawaii. Similar to United above, Alaska shared that "over the past several weeks, fuel prices have increased considerably, driving a downward revision to our adjusted pre-tax margin expectations for the quarter. We now expect economic fuel cost per gallon to be approximately $3.15 to $3.25 and adjusted pre-tax margin to be 10% to 12% for Q3 2023.”

Roku (ROKU) announced it will reduce its workforce by 10%, perform a strategic review of its content portfolio, and reduce outside services expenses as part of its continued plan to reduce operating expenses.

Shares of AeroVironment (AVAV) surged in aftermarket trading after the drone maker reported a beat and raise July quarter. The company anticipates FY2024 revenue in the range of $645-$675 million, up from a previous forecast of $630-$660 million, and reaffirmed its EPS guidance of $2.30-$2.60 vs. the $2.60 consensus.

Shares of Enbridge (ENB) dropped after the pipeline operator agreed to buy East Ohio Gas Co, Questar Gas, and Public Service Company of North Carolina from Dominion Energy (D) for $14 billion.

Rockwell Automation (ROK) will acquire Clearpath Robotics, accelerating its end-to-end autonomous production logistics solutions.

Food and uniform services provider Aramark (ARMK) announced Vestis as the name of the new company to be created through the expected spin-off of its uniform services business.

Kroger (KR) is reportedly in talks with C&S Wholesalers to sell grocery stores in an effort to gain antitrust approval for its planned $24 billion purchase of Albertsons (ACI).

Abbott Laboratories (ABT) announced the acquisition of Bigfoot Biomedical, a Milpitas-based company involved in developing insulin management systems for people with diabetes.

IPOs

• Grocery operator Maison Solutions (MSS) is raising $12 million by offering 3 million shares that are expected to be priced at $4 per share.
• Forestry company Nature Wood Group Limited (NWGL) will offer 0.9 million shares with price talk in the range of $9-$11 per share.
• Online brokerage and investment advisory company Solowin Holdings (SWIN) will offer an expected 2.5 million shares, targeting $4 per share.
• E-sports event promotion and product marketing company Gamer Pakistan (GPAK) aims to raise $7.7 million via an offering of ~1.7 million shares.

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

After Today’s Market Close

American Eagle (AEO), Calavo Growers (CVGW), ChargePoint (CHPT), Dave & Buster’s (PLAY), Sportsman’s Warehouse (SPWH), Sprinkler (CXM), and Verint Systems (VRNT) 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

Thursday, September 7

• China: Imports/Exports – August
• Japan: Leading Economic Index (Preliminary) – July
• Germany: Industrial Production – July
• Eurozone: 3Q 2023 GDP – Third Estimate
• US: Weekly Initial & Continuing Jobless Claims
• US: Productivity and Unit Labor Cost – 2Q 2023
• US: Weekly EIA Natural Gas Inventories
• US: Weekly EIA Crude Oil Inventories

Friday, September 8

• Japan: 2Q 2023 GDP (Final)
• Germany: Inflation Rate, Consumer Price Index – August
• China: Inflation Rate, Producer Price Index - August
• US: Consumer Credit – July

Thought for the Day

“How smartly September comes in, like a racing gig, all style, no confusion.” -Eleanor Clark

Disclosures

• Microsoft (MSFT) 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 Earnings Central Banks