Today’s Big Picture
Of the Asian markets that were open today, South Korea’s KOSPI gained 1.66% while Japan’s Nikkei declined 1.06% and India’s Sensex lost 1.29%. Hong Kong, China, and Taiwan markets remained closed in observance of the Lunar New Year. By mid-day trading, European equity indices are down across the board as yesterday’s 5.1% Eurozone CPI print has raised fears of hawkish rate actions by the European Central Bank. U.S. futures point to a rough open.
Disappointing results at Meta Platforms (FB), Spotify (SPOT), and PayPal (PYPL) combined with yesterday’s negative ADP Employment Change report for January are weighing on equities this morning. Also weighing on equity futures this morning is word that President Biden has ordered the deployment of more than 3,000 American troops to bolster the defense of European allies as part of a move to deter Russia from attacking Ukraine and avert war in Eastern Europe.
Ahead of tomorrow’s print for the January Employment Report, investors will be combing through both the IHS Markit January Services PMI and ISM’s Non-Manufacturing Index to sniff out potential downside to the current January job creation figure of 150K. A substantially weaker-than-expected figure could lead investors to dial the pace of expected Fed interest rate hikes to be had in the coming months.
Data Download
Coronavirus
Earlier this week, the FDA issued formal approval for Moderna’s (MRNA) Covid-19 vaccine for adults, joining Pfizer (PFE) which was approved by the agency in August of 2021. Reports are that Johnson & Johnson has yet to apply for full approval for its vaccine.
International Economy
Bank of England announced it had raised UK interest rates 0.25% to 0.50%. The release notes that there was pressure by some to raise rates.50% but overall consensus settled on the smaller hike. The Bank indicated it currently expects the coming rate cycle to peak in mid-2023 at 1.50% but also stated there were “materials risks around this assumption” when discussing the underlying rationale for the rate projection.
The January UK Services PMI print of 54.0 surprised 0.80 over estimates and 0.70 over the previous figure.
While Tuesday saw a number of countries report recent January Manufacturing PMI figures, today sees a number of January Services PMI releases. Germany (52.2), France (53.1), Italy (48.5), and Spain (46.6) all reported today with Germany and France matching both the prior release and expectations while Italy and Spain both disappointed on estimates as well as printing below 50 indicating a contraction in that part of the economy during January.
The aggregate January Eurozone Services PMI (54.1) printed 0.10 lower than both the previous figure and expectations of 51.2. The region’s Composite PMI figure for January (52.3) also ended up 0.10 below estimates and last month’s report (52.4).
December Eurozone YoY PPI (26.20%) printed 2.50% higher than the previous month’s figure but fell 0.20% shy of estimates.
Japan Services PMI for January (47.6) was in line with estimates and 5.50 lower than December’s figure, crossing into contraction territory.
Domestic Economy
There are a number of economic indicators being published today in addition to the usual weekly initial and jobless claims figures. While the Durable Goods Orders, Factory Orders, and Productivity data should factor into forthcoming revisions to the initial 4Q 2021 GDP print, we suspect more attention will be paid to the January facing data contained in the Service PMI data to be published from IHS Markit and the ISM Non-Manufacturing Index. As we discussed above in Big Picture, not only will folks be looking to assess how much of an impact the omicron variant had on the services economy but to what degree it hit job creation during the month.
Markets
Better than expected earnings, including the stellar report from Alphabet (GOOGL), spurred equities higher yesterday, shaking off the dismal ADP Employment Change report for January. The S&P 500 advanced 0.9%, the Dow Jones Industrial Average added 0.6% and the Nasdaq Composite gained. The small-cap-laden Russell 2000, however, shed 1.0% on the day. As we barrel toward the end of the week here are how the major market indicators stack up on a year-to-date basis:
- Dow Jones Industrial Average: -2.0%
- S&P 500: -3.7%
- Nasdaq Composite: -7.9%
- Russell 2000: -9.6%
- Bitcoin (BTC-USD): -20.0%
Stocks to Watch
Before trading kicks off for US-listed equities, Cardinal Health (CAH), Check Point Software (CHKP), Cummins (CMI), Estee Lauder (EL), Hain Celestial (HAIN), Lazard (LAZ), Merk (MRK), Nokia (NOK), Ralph Lauren (RL), Shell (RDS.A), and Xylem (XYL) will be among the companies reporting their latest quarterly results.
Following December quarter results that included weaker than expected profits and user numbers, shares of Meta Platforms are under pressure this morning. Included in the company’s comments were that it now expects iOS privacy changes put in place by Apple (AAPL) last year will cost Facebook $10 billion in sales over the coming year. For the current quarter, Meta sees revenue of $27-$29 billion vs. the $30 billion consensus. That outlook is weighing on the shares of other social media companies, such as Pinterest (PINS) and Twitter (TWTR) this morning.
Wireless chip company Qualcomm (QCOM) reported better than expected December quarter results and boosted its outlook for the current quarter, expecting revenue of $10.2-$11 billion vs. the $9.6 billion consensus. The company reiterated its prior guidance that calls for 750 million 5G handsets in 2022, up from ~535 million in 2021.
Weaker than expected guidance is weighing on the shares of Spotify (SPOT) this morning even though the company’s December quarter results topped expectations. For the December quarter, monthly active users rose 18% to 406 million, matching expectations, and total premium subscribers rose 16% to 180 million. And likely ruffling a few feathers, Spotify shared it will no longer issue annual guidance "since the vast majority of our initiatives are multi-year in nature and measured as such."
Costco Wholesale (COST) reported January net sales of $15.76 billion, up 15.5% YoY with adjusted comparable sales growth of 10.8%.
IPOs
There are no IPO offerings expected to price 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
Activision Blizzard (ATVI), Amazon (AMZN), Clorox (CLX), Deckers Outdoor (DECK), Ford Motor (F), Fortinet (FTNT), NortonLifeLock (NLOK), Pinterest (PINS), Skyworks (SWKS), and Synaptics (SYNA) will be among those companies reporting their latest quarterly results. Those looking for more on which companies are reporting when, head on over to Nasdaq’s Earnings Calendar.
On the Horizon
Friday, Feb. 4
- Germany: Manufacturing Orders & Turnover – December
- France: Industrial Production – December
- US: Employment Report - January
Thought for the Day
“Even if you make a mistake, you can go back and do the right thing.” ~Will Arnett
Disclosures
- Check Point Software (CHKP), Fortinet (FTNT), NortonLifeLock (NLOK) are constituents of the Foxberry Tematica Research Cybersecurity & Data Privacy Index
- Hain Celestial (HAIN) is a constituent of the Tematica BITA Cleaner Living Index
- Hain Celestial (HAIN) is a constituent of the Tematica BITA Cleaner Living Sustainability Screened Index
- Qualcomm (QCOM), Skyworks (SWKS) are constituents of the Tematica BITA Digital Infrastructure & Connectivity Index
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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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