Today’s Big Picture
Asia-Pacific equity markets finished the day down across the board except for Taiwan’s TAIEX, which posted a 0.32% gain on Health Technology and Communications strength. Japan’s Nikkei declined 0.13%, Australia’s ASX All Ordinaries fell 0.15%, and South Korea’s KOSPI dropped 0.39% while China’s Shanghai Composite, Hong Kong’s Hang Seng, and India’s SENSEX all closed between 0.64% and 0.69% lower to close out the week. European markets are down in midday trading, in many cases approaching or over 2% as banking fears resurface and U.S. futures point to a lower open.
Renewed pressure on Deutsche Bank (DB) shares have rekindled concerns over the European banking sector following UBS’s quickly-announced acquisition of rival Credit Suisse (CS) last weekend. This is dragging down not only U.S. futures but shares of most banks as evidenced by the current near 3% pre-market drop in the SPDR S&P Bank ETF (KBE). That move lower comes despite Treasury Secretary Janet Yellen’s comments yesterday that regulators are prepared to take additional actions to ensure Americans' deposits are safe, even after ruling out coverage of all uninsured deposits at U.S. banks.
Adding to concerns that the banking crisis is spreading, data published by the Fed yesterday showed emergency borrowing under its two backstop facilities totaled another $163.9 billion this week, roughly the same as last week’s $164.8 billion. Contrasting those figures against typical weekly discount window borrowing of $10 billion shows the extent of the current crisis and efforts banks are taking to contain it. Further, Fed loans to bridge banks established by the Federal Deposit Insurance Corp. (FDIC) to resolve SVB and Signature Bank rose to $179.8 billion from $142.8 billion the previous week.
Based on these developments and the market still forecasting multiple cuts to the fed funds rate later this year despite comments this week by Fed Chair Powell that the central bank doesn’t see that in the cards, we expect a far greater focus on comments to be made by St. Louis Fed President James Bullard at 9:30 AM ET today.
Data Download
International Economy
The core consumer price index in Japan, which excludes fresh food but includes fuel costs, rose 3.1% YoY in February, decelerating sharply from an over four-decade high of 4.2% in January to the lowest in five months.
The Flash au Jibun Bank Japan Manufacturing PMI increased to 48.6 in March from February’s 47.7, which was the lowest reading since September 2020. This was the fifth straight month of an indicated contraction in the data, but both output and new orders shrunk at the softest pace in five months. The Flash au Jibun Bank Japan Services PMI rose to 54.2 in March from a final reading of 54.0 in February. New orders rose the most in ten months, and new export orders increased at the joint-quickest rate since the series began in September 2014.
The S&P Global Flash Manufacturing PMI for the Euro Area dropped to 47.10 in March from 48.50 points in February, widely missing the consensus forecast of 49.0. The Flash S&P Global Eurozone Services PMI rose to 55.6 in March 2023 from 52.7 in February, above market expectations of 52.5. New orders rose faster leading backlogs of work accumulating at the steepest rate since last May, which will help support further growth in the coming months.
The Flash S&P Global/CIPS Manufacturing PMI for the UK fell to 48 in March of 2023 from 49.3 in February, well below forecasts of 49.8. The reading pointed to an eighth straight month of falling factory activity, with production declining once again, and held back by subdued order books. The Flash S&P Global/CIPS UK Services PMI retreated to 52.8 in March 2023 from February’s 53.5, missing market expectations of 53. However, new orders growth accelerated due to improved client confidence, resilient demand for consumer services, and a boost to spending from falling inflationary pressures.
Retail sales in the UK unexpectedly surged 1.2% MoM in February, following an upwardly revised 0.9% rise in January and the expected February reading of 0.2%.
Yesterday, the Bank of England announced a 25-bps rate hike and hinted at more increases in the future while central banks from Switzerland, Norway, Hong Kong, and the Philippines also hiked their policy rates. The Swiss National Bank also said the country's bank crisis is over.
Domestic Economy
At 8:30 AM ET, February Durable Orders will be released, and they are expected to rebound to 0.6% MoM after falling 4.5% the month before.
At 9:45 AM ET, S&P Global will publish its Flash Manufacturing & Services PMIs for March, and we expect the market will focus on what the data says about the pace of the economy but also inflation and the job market.
Markets
Yesterday saw the shadow of Fed comments lift slightly as, except for the Russell 2000 falling 0.41%, major equity indexes were up. The Dow gained 0.23%, the S&P 500 rose 0.30% and the Nasdaq Composite closed 1.01% higher. Sectors were mixed, with Technology (1.63%) and Communications Services (1.62%) leading the way as Energy (-1.39%) and Utilities (-1.03%) saw pressure. Netflix (NFLX) had a strong day as traders bid shares up 9.01% on speculation that the company’s continued push into cloud-based gaming, as well as the introduction of an ad-supported subscription tier, will boost company results going forward.
Here’s how the major market indicators stack up year-to-date:
- Dow Jones Industrial Average: -3.14%
- S&P 500: 2.84%
- Nasdaq Composite: 12.62%
- Russell 2000: -2.33%
- Bitcoin (BTC-USD): 70.99%
- Ether (ETH-USD): 51.78%
Stocks to Watch
We have a rare treat for market watchers in that no companies are expected to report their quarterly results before U.S. equity markets begin trading.
Ford Motor (F) plans to produce 500,000 electric trucks a year at its manufacturing complex in Tennessee, as per multiple published reports which cited the automaker. Following the last year’s rollout of the Ford F-150 Lightning, an all-electric version of its bestselling full-size pickup, the company is expected to start producing its next-generation electric truck in 2025.
Motorola Solutions (MSI) won a $340.25 million firm-fixed-price, indefinite-delivery/indefinite-quantity contract for Enterprise Land Mobile Radio support.
The Service Trades Council Union, which represents about 45,000 Disney (DIS) employees reached a deal with the company for a wage of $18 per hour. Later this month, ~7,000 job cuts associated with Disney’s previously announced $5.5 billion cost reduction plan are likely to occur. All company divisions, including theme parks, are expected to be impacted by the planned labor reduction.
IPOs
Readers looking to dig more into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.
After Today’s Market Close
Once again, we have made it to the end of the trading week, and no companies are slated to report their quarterly results after equities stop trading. Those looking for more on which companies are reporting when should head over to Nasdaq’s Earnings Calendar.
On the Horizon
Monday, March 27
- Germany: Ifo Business Climate Index – March
Tuesday, March 28
- France: Business Survey – March
- Italy: Business and Consumer Confidence - March
- US: Retail Inventories ex Auto – February
- US: FHFA Housing Price Index – January
- US: S&P Case-Shiller Home Price Index - January
- US: Consumer Confidence – March
Wednesday, March 29
- Germany: GfK German Consumer Climate – April
- European Central Bank Non-Monetary Policy Meeting
- US: Weekly MBA Mortgage Applications
- US: Pending Home Sales – February
- US: Weekly EIA Crude Oil Inventories
Thursday, March 30
- Eurozone: Business and Consumer Survey – March
- Germany: Consumer Price Index - March
- US: Weekly Initial & Continuing Jobless Claims
- US: 4Q 2022 GDP, PCE Price Index – Third Estimate
- US: Weekly EIA Natural Gas Inventories
Friday, March 31
- Japan: Tokyo Core CPI – March
- Japan: Industrial Production, Retail Sales – February
- China: Manufacturing and Non-Manufacturing PMIs – March
- Eurozone: Consumer Price Index - March
- US: Personal Income & Spending, PCE Price Index – February
- US: University of Michigan Consumer Sentiment Index – March
Thought for the Day
“There are no rules for good photographs, there are only good photographs.” ― Ansel Adams
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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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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