Today’s Big Picture
Asia-Pacific equity markets finished the day mixed. India’s SENSEX led the region, gaining 0.41% on Technology, and Financial strength, Japan’s Nikkei rose 0.37%, South Korea’s KOSPI advanced 0.17%, and Taiwan’s TAIEX closed the day flat, picking up a mere 0.18 index points. Australia’s ASX All Ordinaries declined 0.41%, China’s Shanghai Composite fell 1.24%, and Hong Kong’s Hang Seng closed 1.82% lower in a broad decline led by Transportation, and Producer Manufacturing names.
European markets are up in midday trading and U.S. equity futures point to a positive open.
As we begin to wind down August, questions of a “hard” or “soft” landing seem to be fading into a distant memory. Consumer and producer price inflation aren’t throwing up any major red flags and current GDP estimates are calling for growth we haven’t seen since early 2022. Despite this aggressive growth forecast, Fed Funds futures aren’t pricing in any cuts until the beginning of Q2 in 2024. Near-term, both markets and the Fed remain data-dependent although markets have been starting to pay attention to property credit issues in China. Markets have spent the past three weeks rolling over with Technology leading the way. Friday saw a break of sorts in this short-term trend. “Buy the dip” seems to be passé at this point and our expectation is that even though the stock market is oversold, it may struggle somewhat to resume its 1H rally.
Data Download
Producer prices in Germany declined by 6.0% YoY in July, the first drop since November 2020. The fall was largely due to the 19.3% tumble in energy prices, which included electricity prices dropping 30.0%. On a monthly basis, producer prices fell 1.1% in July, the third straight month of drop and the steepest pace in the sequence.
Domestic Economy
This week starts off relatively slowly from an economic data perspective. Markets are still absorbing the latest Q3 GDP forecast from the Atlanta Fed which puts a 5.8% pace on growth. This week will see more PMI, Existing Homes Sales, and Employments updates, as well as scheduled comments from Fed Governor Michelle Bowman.
Markets
Equities shrugged off some of the week’s pessimism as the Russell 2000 gained 0.51% and the Dow and S&P 500 ended the day close to flat, up 0.07% and down 0.01%, respectively. The Nasdaq Composite declined 0.20% as Meta Platforms (META) and Alphabet (GOOG, GOOGL) accounted for just over 100% of Communications Services’ 0.60% decline and playing into the indexes results. Overall, sectors were somewhat muted except for Energy, which was up 0.99%. Utilities and Consumer Staples followed, advancing 0.52% and 0.37%. In individual names, Ross Stores (ROST) gained 5.01% after the company posted a strong quarter and positive guidance which led various research firms to raise price targets.
Here’s how the major market indicators stack up year-to-date:
- Dow Jones Industrial Average: 4.08%
- S&P 500: 13.81%
- Nasdaq Composite: 26.98%
- Russell 2000: 5.57%
- Bitcoin (BTC-USD): 56.92%
- Ether (ETH-USD): 38.56%
Stocks to Watch
No market-moving earnings announcements are scheduled before today’s equity markets open.
Palo Alto Networks (PANW) announced quarterly earnings with revenues coming in at $1.95 billion, just under estimates of $1.95 billion. The company provided quarter-ahead EPS guidance of $1.15 - $1.17 as compared to the consensus of $1.11 and revenues of $1.82 - $1.85 billion, below the $1.93 billion estimate. CFO Dipak Golechha stated "Our top-line strength showed through in our remaining performance obligation and next-generation security ARR. Our billings this quarter didn't fully capture that strength. We continue to make great progress in our financial transformation."
XPeng (XPEV) reported another quarter of EPS losses despite deliveries coming in line with estimates. The company mentioned that Tesla’s (TSLA) price cuts were not having any impact on demand for their G6 model and that Volkswagen’s $700 million investment in the development of two Eurovan RV vehicles. Management stated they expect the company to become cash flow positive in the back half of the year.
Madison Square Gardens Entertainment Corp (MSGE) reported $147.9 million in revenues, beating estimates of $140 million for the quarter. While EPS came in at a $0.47 per share loss, it exceeded estimates of -$0.63. The company offered improved guidance for 2024 of revenues ranging from $900 - $930 million, exceeding both the top and bottom ranges for previous estimates.
Shares of Napco Security (NSSC) are under pressure following the company sharing its first three quarters of Fiscal 2023 will have their financials restated due to cost accounting error. Napco also reported preliminary quarterly results that fell short of top-line consensus expectations.
The battle for social media continues as Meta Platform’s (META) Facebook looks to launch a web-based version of its Threads platform to extend its reach against privately held X, formerly known as Twitter.
The UK’s Competition and Markets Authority has cleared Broadcom’s (AVGO) deal to acquire VMware (VMW).
Reports indicated Dupont (DD) is in advanced talks to sell its Delrin resins unit to the private equity firm, The Jordan Company, for around $1.8 billion.
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
Zoom Video Communications (ZM), Nordson Corporation (NDSN), and Fabrinet (FN) 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
Tuesday, August 22
- UK: CBI Industrial Trends Orders - August
- US: Existing Home Sales – July
Wednesday, August 23
- Japan: Flash Manufacturing & Services PMIs – August
- Eurozone: Flash Manufacturing & Services PMIs – August
- UK: Flash Manufacturing & Services PMIs – August
- Eurozone: Consumer Confidence - August
- US: Weekly MBA Mortgage Applications
- US: Flash Manufacturing & Services PMIs – August
- US: New Home Sales – July
- US: Weekly EIA Crude Oil Inventories
Thursday, August 24
- US: Weekly Initial & Continuing Jobless Claims
- US: Durable Orders – July
- US: Weekly EIA Natural Gas Inventories
Friday, August 25
- Japan: Consumer Price Index – August
- Germany: GDP – 2Q 2023
- Germany: Ifo Business Climate Index - August
- US: The University of Michigan Consumer Sentiment Index (Final) – August
Thought for the Day
“It’s better to have something to remember than anything to regret.“ - Frank Zappa
Disclosures
- Palo Alto Networks (PANW) is a constituent of the Foxberry Tematica Research Cybersecurity & Data Privacy Index
- Broadcom’s (AVGO), VMware (VMW) are constituents of the Tematica BITA Digital Infrastructure & Connectivity Index
- Ross Stores (ROST) 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.
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.
Read Mark's Bio
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.
Read Chris' Bio