Today’s Big Picture
Asia-Pacific equity markets finished the day up across the board: India’s SENSEX 0.24%, China’s Shanghai Composite 0.31%, Australia’s ASX All Ordinaries 0.82%, South Korea’s KOSPI 1.20%, Taiwan’s TAIEX 1.59%, and Hong Kong’s Hang Seng 1.73%. Japan’s Nikkei set the pace today, up 1.93% on a banking stock rebound and positive overall sentiment. European markets are mixed in midday trading and U.S. equity futures point to a flattish to slightly lower open as investors wait for the Fed’s monetary policy decision due at 2 PM ET.
With measures taken to shore up the U.S. banking system over the last few days, we’ve seen expectations shift back to the Fed boosting the fed funds rate by 25-basis points later today and again at its May meeting. However, the CME FedWatch Tool still sees 25-basis point rate cuts following the Fed’s July, September, and December policy meetings. We’d note that expectation comes despite the upward trajectory in sequential core Consumer Price Index data over the last few months, sticky service sector Producer Price Index data, and the Atlanta Fed’s GDPNow model estimating real GDP growth of 3.2% for the current quarter.
Should the Fed reiterate that it will stay the course to fight inflation, including holding interest rates at elevated levels until inflation returns to its target level, this would run counter to the scenario depicted in the CME FedWatch Tool and foster a re-think of what’s ahead. As we’ve mentioned before, this has happened more than a few times over the last year, and it has tended to be a bitter pill for the market to swallow.
Data Download
International Economy
Annual inflation rate in the UK unexpectedly edged higher to 10.4% in February from 10.1% in January, the first increase in four months and compared to forecasts of 9.9%. The annual core inflation rate in the UK, which excludes prices of energy, food, alcohol, and tobacco, increased to 6.2% in February from 5.8% in January, compared to forecasts of 5.7%.
Domestic Economy
As we discussed above, at 2 PM ET today, the Federal Reserve will announce its latest monetary policy decision and updated economic projections. That announcement will be followed by Fed Chair Powell’s press conference which typically begins around 2:30 PM ET.
Markets
With the potential banking crisis largely in traders’ review mirror, equities had a strong session yesterday. The Dow was up 0.98%, the S&P 500 gained 1.30%, the Nasdaq Composite rose 1.58% and the Russell 2000 closed 1.88%. With traders seemingly in “Risk-On” mode, the classically defensive Utilities sector saw the largest drawdown, shedding 2.01%, by far the worst-performing sector yesterday as Real Estate (-0.58%), and Consumer Staples (-0.08%) rounded out the group of underperforming sectors. Yesterday’s leaders included Energy (3.46%), Consumer Discretionary (2.76%), and Financials (2.53%). In advance of what is expected to be a busy construction and maintenance cycle, United Rentals (URI) posted a 5.24% gain as traders once again became upbeat about the overall state of the economy in the near term.
Here’s how the major market indicators stack up year-to-date:
- Dow Jones Industrial Average: -1.77%
- S&P 500: 2.45%
- Nasdaq Composite: 13.32%
- Russell 2000: 0.94%
- Bitcoin (BTC-USD): 69.70%
- Ether (ETH-USD): 50.85%
Stocks to Watch
Before trading kicks off for U.S.-listed equities, Olllie’s Bargain Outlet (OLLI), Petco Health & Wellness (WOOF), and Winnebago (WGO) are expected to report their latest quarterly results.
Shares of GameStop (GME) soared following the company reporting January quarter bottom line results that blew away consensus expectations. Revenue for the quarter fell 1.2% YoY $2.23 billion vs the $2.18 billion consensus. Hardware and accessories sales accounted for 55.8% of total sales vs. 52.7% a year ago, while software sales fell to 30.1% of the mix from 34.9% last year. Collectibles revenue was up to 14.1% of the total vs. 12.4% a year ago.
Nike (NKE) reported better-than-expected February quarter top and bottom line results but shared it expects wholesale revenue growth to moderate for the next few quarters. The company also indicated its fiscal 2023 gross margin will decline approximately 250 basis points, coming in at the low end of its prior guidance. Exiting the February quarter, Nike’s inventories were $8.9 billion, up 16% YoY, primarily driven by higher product input costs and elevated freight costs.
Intel (INTC) announced several management changes, including Stuart Pann, who will head up the company's foundry business, replacing Dr. Randhir Thakur.
UBS (UBS) announced that it would buy back $2.96 billion of debt issued less than a week ago to boost confidence among investors shaken by the ongoing financial turmoil and its $3 billion interaction with Credit Suisse (CS).
IPOs
Golden Heaven Group (GDHG), Ohmyhome Ltd (OMH), and Shengfeng Development (SFWL) are expected to price their IPOs this week. Readers looking to dig more into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.
After Today’s Market Close
Chewy (CHWY), KB Home (KBH), Steelcase (SCS), and Worthington (WOR) are slated to report their quarterly results after equities markets close for the day. Those looking for more on which companies are reporting when, head over to Nasdaq’s Earnings Calendar.
On the Horizon
Thursday, March 23
- UK: Bank of England Interest Rate Decision
- US: New Home Sales – February
Friday, March 24
- Japan: Flash Manufacturing PMI - March
- UK: Retail Sales - February
- Eurozone: Flash Manufacturing PMI – March
- US: Durable Orders - February
- US: S&P Global Flash Manufacturing & Services PMIs - March
Thought for the Day
“Inspiration is wonderful when it happens, but the writer must develop an approach for the rest of the time... The wait is simply too long.” ― Leonard Bernstein
Disclosures
- Intel (INTC), Marvell Technologies (MRVL) are constituents of the Tematica BITA Digital Infrastructure & Connectivity Index
- Olllie’s Bargain Outlet (OLLI) is a constituent of the Tematica BITA Big Spenders & Savers Index
- Nike (NKE) 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.
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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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