Daily Markets: Renewed Rate Hike Concerns Emerge

Today’s Big Picture

Asia-Pacific equity markets finished the day lower except for India’s SENSEX, which gained 0.58% on gains in bank stocks. South Korea’s KOSPI declined 0.59%, Taiwan’s TAIEX fell 0.71%, Japan’s Nikkei gave back 0.75%, and both Australia’s ASX All Ordinaries and China’s Shanghai Composite lost around 1.15%. Hong Kong’s Hang Seng closed 1.34% lower on a broad decline led by Electronic Technology names.

Major European markets are down in midday trading except for France and Germany, and U.S. equity futures point to a mixed open as heavyweights Apple (AAPL), Nvidia (NVDA), and Tesla (TSLA) are seeing some pre-market pressure leaving only Dow futures in the green, at least at the time of writing. Market watchers are grappling with renewed strength in the dollar and yesterday’s additional climb in Treasury yields prompted by the better than expected August Non-Manufacturing Index data from the Institute for Supply Management. While that data pointed to an improving Services economy in the U.S., its price component found inflation pressures intensified further during August.

The Fed has voiced concern over inflation in the services economy and the August data sparked fresh concerns the Fed could take a more hawkish bent at its upcoming policy meeting. While we’ve seen some movement in rate hike expectations for later this year in the CME FedWatch Tool, next week’s August Consumer Price Index report should help provide a clearer picture of inflation pressures and monetary policy prospects. Even so, we expect today’s trading could move based on comments later today from New York Fed President John Williams and Atlanta Fed President Raphael Bostic about the economy, inflation, and monetary policy.

Data Download

International Economy

Exports from China dropped 8.8% YoY $284.87 billion in August following the 14.5% plunge in July, better than the expected 9.2% fall but August was still the fourth straight month of decline in exports, amid weakening global demand. Imports into China also declined yet again in August, down 7.3% YoY, better than the forecasted 9.0% drop but the month marked the seventh consecutive fall for the data set.

A preliminary reading for Japan’s index of leading economic indicators declined to 107.6 from 108.8 the month before, hitting its lowest reading since October 2020.

The Euro Area economy expanded 0.5% YoY in 2Q 2023, slower than the initial reading of 0.6% and far slower than +1.1% in 1Q 2023. Industrial production in Germany shrank by 0.8% MoM in July, worse than the market consensus of a 0.5% drop as compared to the downwardly revised 1.4% drop in June.

Domestic Economy

We have the usual complement of Thursday data out this morning, including the latest weekly Initial & Continuing Jobless Claims data and Energy Information Administration (EIA) Natural Gas Inventories. Because of the compressed week, we also have the weekly oil inventory data from EIA, which is likely to get a closer-than-usual look following extended supply cuts announced by Saudi Arabia and Russia earlier this week.

Given renewed concerns for inflation following yesterday’s August Non-Manufacturing Index that showed price pressures accelerated further during the month, today’s second look at Unit Labor Cost data for 2Q 2023 may get a closer-than-usual inspection. That data will be out at 8:30 AM ET.

The U.S. and European Union are working on an agreement that would introduce new tariffs aimed at excess steel production from China and other countries, as well as put behind them a Trump-era trade conflict.

Markets

Equities took a break yesterday as all sectors were down modestly except for Utilities (0.23%), Energy (0.04%), and Technology which closed 1.06% lower on selling in Apple and Nvidia. Consumer Discretionary names fell 0.89% led by pressure on Amazon (AMZN) and Tesla. Broad indexes reflected these results as the Russell 2000 declined 0.33%, the Dow fell 0.57%, the S&P 500 gave back 0.70% and the Nasdaq Composite closed 1.03% lower. Shares of Dexcom (DXCM) jumped 6.53% after it disclosed in its latest investor presentation (p23) that its Continuous Glucose Monitoring (CGM) product saw increased use as patients sought to monitor and treat type 2 diabetes.

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

• Dow Jones Industrial Average: 3.91%
• S&P 500: 16.30%
• Nasdaq Composite: 32.54%
• Russell 2000: 6.24%
• Bitcoin (BTC-USD): 55.21%
• Ether (ETH-USD): 36.25%

Stocks to Watch

Before U.S. equity markets begin trading today, ABM Industries (AMB), Designer Brands (DBI), G-III Apparel (GIII), Science Applications (SAIC), and Toro (TTC) will report their quarterly results.

July quarter EPS at American Eagle (AEO) topped expectations on revenue that rose modestly year over year to match the $1.2 billion consensus. Comp sales at Aerie were flat while those at American Eagle fell 2%. For the current quarter, American Eagle expects revenue to be up low single digits, compared to the consensus forecast for it to be down by about 1.1%. For its full year, the company now sees revenue up low single digits compared to prior guidance for flat to down low single digits.

Sprinklr (CXM) reported July quarter results topping consensus expectations and guided the current quarter ahead of consensus forecasts. Subscription revenue in the July quarter rose 23% YOY to $163.5 million with the company noting it had 120 $1 million customers, up 22% YoY. For the current quarter, Sprinklr sees EPS of $0.06-$0.07 vs. the $0.05 consensus with revenue between $179-$181 million vs. the $179.38 million consensus.

EV charging company ChargePoint (CHPT) missed expectations for its July quarter despite revenue rising 39% YoY and guided its current quarter below expectations. Wall Street has been expecting $180.91 million in revenue for the October quarter vs. the company’s guidance of $150.49 million.

Shares of Blackberry (BB) are under pressure in pre-market trading following the company reporting preliminary quarterly revenue of $132 million vs. the expected $155.5 million.

Shares of C3.ai (AI) are also under pressure this morning after the enterprise software company said it would not be profitable on a non-GAAP basis in FY4Q 2024, but it still anticipates being cash positive in FY2025.

Uber Technologies (UBER) announced a four-year deal to expand its partnership with the National Football League (NFL), becoming the official on-demand delivery partner and official rideshare partner of the NFL.

KKR (KKR) announced it is investing approximately $750 million to scale Zenobe, a market leader in transport electrification and battery storage solutions, to accelerate the global decarbonization of diesel fleets and provide grid services that are critical for the decarbonization of the energy sector.

Nestle (NSRGY) announced an agreement with Advent International to acquire a majority stake in Grupo CRM, a premium chocolate player in Brazil.

SAP SE (SAP) announced it will acquire privately held LeanIX, an architecture management software provider, expanding its business transformation portfolio and facilitating AI-enabled process optimization.

In an effort to increase transparency and curb the spread of inauthentic content in political advertising, Google (GOOG,GOOGL) introduced a new policy that will mandate political advertisers to "prominently" disclose when their ads contain AI-generated material.

Apple is expected by analysts to raise prices by as much as $100 for some updated iPhone models when it unveils the iPhone 15 this coming Tuesday.

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

DocuSign (DOCU), Guidewire Software (GWRE), RH (RH), Smartsheet (SMAR), Smith & Wesson Brands (SWBI), and Zumiez (ZUMZ) 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

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

“Wine is the divine juice of September.” — Voltaire

Disclosures

• Nvidia (NVDA) 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 Earnings Central Banks Economy