Daily Markets: Dueling Market Narratives Continue

Today’s Big Picture

Asia-Pacific equity markets finished trading today mostly higher led by the 1.0% gains in both Japan’s Nikkei and Australia’s ASX All Ordinaries. Hong Kong’s Seng rose 0.5% and South Korea’s KOSPI added 0.4%, while India’s Sensex was unchanged on the day and China’s Shanghai Composite shed 0.2%. By mid-day trading, European equity indices are green across the board, and U.S. futures point to a positive start to the trading day ahead.

We have a potential calm before the storm day today ahead of the December Consumer Price Index (CPI) tomorrow, a rash of bank earnings on Friday, and a gaggle of Fed speakers making the rounds as well. Despite Fed officials reiterating inflation remains a problem that will spur additional rate hikes in the coming months, a battle over how long the Fed will keep rates at elevated levels to quash inflation remains. While Fed officials have been adamant, they see no rate cut this year, but a narrative calling for just that in the back half of 2023 persists.

While the December CPI report will be the next focal point in this battle, odds are it will continue at least until the Fed’s next monetary policy meeting is completed and investors have that policy statement and the transcript of Fed Chair Powell’s remarks. While we navigate that path and digest upcoming economic data, next week kicks the December quarter earnings season into higher gear.

Data Download

International Economy

In its latest Global Economic Prospects Report, the World Bank now sees the global economy growing by 1.7% in 2023 vs. its 3.0% forecast from six months ago, and 2.7% in 2024. The sharp downturn in growth is expected to be widespread, with forecasts in 2023 revised down for 95% of advanced economies and nearly 70% of emerging market and developing economies.

Domestic Economy

7:00 AM ET saw the release of the latest Weekly MBA Mortgage Applications figures which climbed 1.2% week over week as homeowners took advantage of the modest decline in mortgage rates.

10:30 AM ET will see the latest round of Crude, Ethanol, and Oil inventories as well as refinery utilization figures. The latest Refinery Utilization figures showed a dip that rivaled February 2021, down 12.40%, but with China’s reopening and ongoing European fuel demand, we would expect this figure to normalize.

Markets

Markets seemed to like the comments from Fed officials yesterday as the major indexes were all up. The Dow advanced 0.56%, the S&P 500 rose 0.70%, the Nasdaq Composite gained 1.01%, and the Russell 2000 closed 1.49% higher. Sectors were all up except for Consumer Staples which traded off slightly, down 0.13%. Leadership came from Communication Services (1.51%) and Consumer Discretionary (1.26%). In individual names, International Flavors and Fragrances (IFF) was up 4.15% yesterday on an analyst upgrade and news that IFF Technical Fellow Philippe Horvath has been inducted to the National Inventors Hall of Fame for work he and his research partner did in the development of early CRISPR (gene editing) technology.

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

• Dow Jones Industrial Average: 1.71%
• S&P 500: 2.49%
• Nasdaq Composite: 3.42%
• Russell 2000: 4.11%
• Bitcoin (BTC-USD): 4.96%
• Ether (ETH-USD): 11.47%

Stocks to Watch

Before trading kicks off for U.S.-listed equities, Shaw Communications (SJR) is expected to report its quarterly results. We would caution readers to be on the watch for earnings pre-announcements especially as we ramp up to the 4th quarter earnings cycle.

Wells Fargo (WFC) announced it will refocus its mortgage business amid regulatory pressure and the impact of higher interest rates to concentrate on home loans for existing bank and wealth management customers and borrowers in minority communities.

Tesla (TSLA) applied with the Texas state department of licensing for a massive $700 million expansion of Gigafactory Texas in Austin. According to Electrek, the company is looking to add Cybertruck production in the existing facility and it has talked about expanding for future production of vehicle programs and battery production.

In a bid to challenge Amazon (AMZN) and Walmart (WMT), Best Buy (BBY) is offering free shipping on all orders, with no minimum spend required, for those who join Best Buy's membership program. Previously, an order needed to be $35 or over to qualify for the complimentary shipping.

The Semiconductor Industry Association (SIA) announced global semiconductor industry sales were $45.5 billion in November, a decrease of 2.9% MoM and down 9.2% YoY. The World Semiconductor Trade Statistics Organization, which is endorsed by SIA, projects annual global sales will increase 4.4% to $580.1 billion in 2022 but fall 4.1% in 2023 to $556.5 billion. This sets the stage for quarterly results and guidance tomorrow from Taiwan Semiconductor (TSM), the largest semiconductor company by revenue.

Bloomberg reports Apple (AAPL) is planning to start using its own custom displays in mobile devices as early as 2024, an effort to reduce its reliance on technology partners and bring more components in-house.

Victoria’s Secret (VSCO) sees its January quarter EPS in the range of $2.05-$2.25 vs. the $2.34 consensus, and its previously communicated guidance range of $2.00 to $2.45. Revenue for the quarter is now expected to post a high-single-digit decline vs. the down 7% YoY consensus.

IPOs

Outside of the possible pricings for Rhodium Enterprises (RHDM) and Skyward Specialty Insurance Group (SKWD), the near-term IPO calendar is relatively light. Readers looking to dig more into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

KB Home (KBH) is the lone company expected to report its latest quarterly results after equities stop trading today. We would caution readers to be on the watch for earnings pre-announcements.

Those looking for more on which companies are reporting when, head on over to Nasdaq’s Earnings Calendar.

On the Horizon

Thursday, January 12

• Japan: Economy Watchers Current Index – December
• US: Weekly Initial & Continuing Jobless Claims
• US: Consumer Price Index – December
• US: Weekly EIA Natural Gas Inventories

Friday, January 13

• UK: Industrial Production, Manufacturing Production, Construction Output – November
• Eurozone: Industrial Production – November
• US: Import/Export Prices – December
• US: University of Michigan Consumer Sentiment (Preliminary) – January

Thought for the Day

“Happy Hump Day. When life gives you limes, rearrange the letters… smile.” ~Paulina Obrist

Disclosures

• Tesla (TSLA) is a constituent of the Tematica BITA Cleaner Living Sustainability Screened Index
• Walmart (WMT) is a constituent of the Tematica BITA Big Spenders & Savers Index
• Apple (AAPL), International Flavors and Fragrances (IFF), Walmart (WMT) are constituents 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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