Daily Markets: Inflation Increases More Than Expected

Today’s Big Picture

Asia-Pacific equity indexes ended today’s session down across the board. Australia’s ASX All Ordinaries declined 0.11%, China’s Shanghai Composite fell 0.30%, Japan’s Nikkei lost 0.60%, India’s Sensex was down 0.68%, and South Korea’s KOSPI and Hong Kong’s Hang Seng closed 1.80% and 1.87% lower, respectively. Taiwan’s TAIEX set the pace, down 2.07% on a broad decline fueled by Transportation and Electronic Technology names. By mid-day trading, major European equity indices are up across the board and U.S. futures point to a positive open later this morning.

Once again, we have some potentially market-moving inflation data coming before equity markets in the U.S. According to CNBC, "the consumer price index for the month increased 0.4% for the month, more than the 0.3%" expected. The headline inflation number came in at 8.2%, down from the June highs of 9%; and excluding food and energy, "core CPI accelerated 0.6% against the Dow Jones estimate for a 0.4% increase."

With this hotter-than-expected headline or core CPI reading for September, it marks the third set of data after the September Employment Report and yesterday’s September Producer Price Index that will keep the Fed on its go-bigger-for-longer path to tame inflation. We concede a trifecta of hotter than consensus figures may also reignite criticism of the Fed still being behind the curve, but the answer to that would be for the Fed to lift rates by even more than currently expected per the CME FedWatch Tool at its next two meetings.

Data Download

International Economy

The Financial Times reports Shanghai is tightening Covid-19 restrictions to combat a rise in cases.

Producer prices in Japan rose by 9.7% YoY in September, topping the market consensus of 8.8% and an upwardly revised 9.4% gain in August. The culprits in the hotter than expected print, which marks the 19th consecutive month of producer inflation, were elevated commodity prices and the impact of the yen’s rapid decline.

The annual inflation rate in Germany was confirmed at 10% in September, matching the consensus forecast and up from 7.9% the prior month. Goods inflation rose to 17.2% from 14.7% in August, led by rising cost of energy (43.9% vs 35.6% in August) and food (18.7% vs 16.6%).

Data from the World Health Organization suggests another wave of covid infections has begun. For the week ended October 3, the number of cases increased ~5% from the prior week, and for the week ended September 26, the case count cases grew by 21% compared to the prior week.

Domestic Economy

Yesterday afternoon, the September Federal Reserve FOMC meeting minutes were published and there was no surprise to be had. As expected, the minutes reiterated what Fed officials have been saying recently about raising rates and keeping them at a restrictive level for longer.

In addition to the September CPI Index, the latest weekly Initial & Continuing Jobless Claims will also be published at 8:30 AM ET. After the market open, the weekly reports from the Energy Information Administration on natural gas as well as crude oil inventories will be released.

Markets

Yesterday saw the markets down but not aggressively as the Nasdaq Composite and the Dow declined 0.09% and 0.10%, respectively, the Russell 2000 lost 0.30% and the S&P 500 closed 0.33% lower. Utilities took the biggest hit, down over 3% while Consumer Staples and Consumer Discretionary names were slightly positive, along with Energy. Cruise lines were the place to be yesterday as Carnival Corporation (CCL) traded up over 10% and Royal Caribbean Group (RCC) jumped 11% as analysts at UBS upgraded competitor Norwegian Cruise Lines (NCLH) to a “Buy” and recommended an “Overweight” to the sector prompting an 11.61% rise in NCLH. Here’s how the major market indicators stack up year-to-date:

• Dow Jones Industrial Average: -19.61%
• S&P 500: -24.95%
• Nasdaq Composite: -33.42%
• Russell 2000: -24.83%
• Bitcoin (BTC-USD): -58.72%
• Ether (ETH-USD): -64.92%

Stocks to Watch

Before trading kicks off for U.S.-listed equities, BlackRock (BLK), Delta Air Lines (DAL), Domino’s Pizza (DPZ), Fastenal (FAST), and Walgreens Boots Alliance (WBA) are slated to report their latest quarterly results. In addition to those reports, readers will want to be on the lookout for earnings pre-announcements, both good and bad, and what they could mean for other companies poised to report in the coming days and weeks.

Taiwan Semiconductor (TSM) reported better-than-expected top and bottom-line results for its September quarter and issued upside revenue guidance for the current one. Revenue for the December quarter is forecasted to be $19.9-$20.7 billion vs. the $19.09 billion consensus. However, TSM cut its 2022 capital spending budget by 10% to $36 billion, suggesting it sees a slower than expected growth ahead for its end markets and chip capacity needs.

Applied Materials (AMAT) issued downside guidance for its October quarter with EPS of $1.54-1.78 vs. the $2.01 consensus and its prior guidance of $1.82-$2.18. In cutting that forecast, Applied cited the U.S. government's decision on new export regulations for U.S. semiconductor technology sold in China, including wafer fabrication equipment and related parts and services. Applied estimates the new regulations will reduce its sales for the quarter by $250-550 million and it expects the new regulations will impact net sales in its January 2023 quarter by a similar amount.

Ahead of today’s Investor Day, Victoria’s Secret (VSCO) issued upside guidance for its October quarter with EPS at the high end of its prior range of $0.00-$0.25 and the $0.14 consensus.

The U.S. Food and Drug Administration announced a shortage of the popular ADHD drug Adderall and said top manufacturer, generic drugmaker Teva Pharmaceutical Industries (TEVA) was experiencing manufacturing delays.

Philips (PHG) shared it expanded the rollout of its augmented reality (AR) surgical navigation solution ClarifEye to Japan.

IPOs

As of now, it looks like a rather quiet week on the IPO front. Readers looking to dig more into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

Washington Federal (WAFD) is the lone company expected to report its quarterly results. As we mentioned above, readers will want to take note of any earnings pre-announcements to be had and their implications. Those looking for more on which companies are reporting when, head on over to Nasdaq’s Earnings Calendar.

On the Horizon

Friday, October 14

• China: Consumer Price Index, Producer Price Index, Imports/Exports – September
• US: Retail Sales – September
• US: Import/Export Prices – September
• US: Business Inventories – August
• US: University of Michigan Consumer Sentiment Index (Preliminary) – October

Thought for the Day

“If you’re competitor focused, you have to wait until there is a competitor doing something. Being customer focused allows you to be more pioneering.” ~ Jeff Bezos

Disclosures

• BlackRock (BLK), Walgreens Boots Alliance (WBA) 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.

Other Topics

Stocks Economy Earnings Central Banks