Markets

Daily Markets: Inflation Data Takes Center Stage

Woman shopping at a produce section in the supermarket
Credit: Andrew Kelly - Reuters / stock.adobe.com

Today’s Big Picture

Asia-Pacific equity indexes ended today’s session down across the board: China’s Shanghai Composite declined 0.39%, Australia’s ASX All Ordinaries 0.58%, India’s Sensex 0.69%, South Korea’s KOSPI 0.91%, Japan’s Nikkei 0.98%, and Taiwan’s TAIEX 0.99%. Hong Kong’s Hang Seng set the pace, down 1.70% on a broad selloff led by consumer durables and Retail Trade names

By mid-day trading, European equity indices are mixed, and U.S. futures point to a positive open later this morning.

According to Reuters: "The consumer price index rose 0.4% last month after climbing by the same margin in September, the Labor Department said on Thursday. Economists polled by Reuters had forecast the CPI would advance 0.6%. In the 12 months through October, the CPI increased 7.7% after rising 8.2% on the same basis in September."

There are 34 days until the Fed concludes its December monetary policy meeting and that time will bring several more inflation data points, including next week’s October Producer Price Index (PPI) as well as the November CPI and PPI figures. As that data is released, we are likely to get a far clearer picture of what the Fed will do on the afternoon of December 14. Until that clarity has been achieved, we would expect market swings to be driven by whatever latest data point is available.

As we contend with that, we continue to wait and see which political party will gain control of the U.S. Senate. President Biden said he will not make any "fundamental concessions" during a meeting with Chinese President Xi next week. This has us anticipating another round of saber-rattling in addition to slowing economic data, retailer earnings, rising layoffs, and downward earnings expectations. Such a combination has the potential to keep the stock market volatile and more than likely rangebound.

Data Download

International Economy

We have a quiet day on the international economic calendar today, but tomorrow brings several data points to watch including Germany’s Consumer Price Index for October.

China's COVID outbreak continues to increase, with new case numbers at their highest since April. In the manufacturing hub of Guangzhou, cases hit more than 2,000 for a third straight day and while officials have launched mass testing, they have resisted a city-wide lockdown for now.

Domestic Economy

In the U.S. the focal point will be the October Consumer Price Index that we discussed above. In addition, we have the usual Thursday fare which is the weekly data for Initial & Continuing Jobless Claims and Natural Gas Inventories.

Markets

Markets reacted to political uncertainty yesterday with the Dow declining 1.95%, the S&P 500 down 2.08%, the Nasdaq Composite off 2.48%, and the Russell 2000 closing 2.68% lower. All sectors finished lower, led by Energy which fell 4.89%, and Consumer Discretionary which was 3.05% lower. The least impacted sector was Utilities, down only 0.78%. One name avoiding yesterday’s drawdown was Akamai Technologies (AKAM) up 6.19% on strong earnings.

Crypto land was shaken up even further yesterday as the announced acquisition of FTX by Binance fell apart. Estimates of the potential FTX loan liability rose to above $8 billion, not to mention the specter of potential regulatory actions, prompted Binance to walk away from the deal. Bitcoin dropped 14.65% and Ether fell 17.79% despite not being directly tied to FTX’s issues.

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

  • Dow Jones Industrial Average: -10.52%
  • S&P 500: -2135%
  • Nasdaq Composite: -33.82%
  • Russell 2000: -21.60%
  • Bitcoin (BTC-USD): -65.86%
  • Ether (ETH-USD): -70.25%

Stocks to Watch

Before trading kicks off for U.S.-listed equities, Dillard’s (DDS), Edgewell Personal Care (EPC), Honest Company (HNST), Paysafe (PSFE), Ralph Lauren (RL), and Tapestry (TPR) will be among the companies slated to report their latest quarterly results.

We Work (WE) reported a larger-than-expected bottom-line loss for its September quarter as revenue that rose 23.6% YoY to $817 million missed the $865 million consensus. The company issued downside guidance for the current quarter with revenue of $870-$890 million vs. the $923.79 million consensus.

Snacking company Utz Brands (UTZ) reported mixed September quarter results with EPS that missed the consensus forecast despite sales rising 16% YoY to $362.8 million, easily topping the $341.74 million consensus. As the benefits associated with pricing actions and productivity programs continue to build, the company expects to offset high inflation for the full year of fiscal 2022. That along with boosting its 2022 revenue guidance to +17%-19% YoY from +13%-15% led Utz to raise its EBIDTA forecast for 2022 to $166-$170 million.

Taiwan Semiconductor (TSM) announced its net revenue for October was ~NT$210.27 billion, up 1% MoM and 56.3% YoY.

Following weaker-than-expected quarterly results last week, C.H. Robinson Worldwide (CHRW) is laying off between 1,000 and 1,200 employees as it contends with slowing demand and rising costs.

IPOs

Readers looking to dig more into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

Beazer Homes, Duolingo (DUOL), Flower Foods (FLO), indie Semiconductor (INDI), Poshmark (POSH), Sierra Wireless (SWIR), and Toast (TOST) are expected to report quarterly results after equities stop trading today. Those looking for more on which companies are reporting when, head on over to Nasdaq’s Earnings Calendar.

On the Horizon

Friday, November 11

  • Japan: Producer Price Index – October
  • UK: 3Q 2022 GDP
  • UK: Industrial and Manufacturing Production – September
  • Germany: Consumer Price Index - October
  • US: University of Michigan Consumer Sentiment Index (Preliminary) – November

Thought for the Day

“If you’re going through hell, keep going.” ~ Winston Churchill

Disclosures

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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