Daily Markets: Key Inflation Data Closes Out the Week
Today’s Big Picture
Asia-Pacific equity indexes ended today’s session down across the board, except for China’s Shanghai Composite which gained 1.42% as tech rallied on speculation of a potential revival of the IPO for ANT Group and an influx of foreign investment. Hong Kong’s Hang Seng declined 0.29%, Taiwan’s TAIEX fell 0.97%, South Korea’s KOSPI dropped 1.13% and Australia’s ASX All Ordinaries and Japan’s Nikkei closed down 1.31% and 1.49%, respectively. India’s Sensex led the way down ending 1.84% lower on the day.
By mid-day trading, major European equity indices are down across the board with Italian markets leading that charge, currently, down about 3.50%, and U.S. futures point to a mixed open later this morning.
Following yesterday’s equity sell-off and simultaneous rise in the Cboe Volatility Index (VIX), today, investor attention will be focused on the May Consumer Price Index (CPI) report that will be released at 8:30 AM ET. Consensus expectations look for the May headline CPI figure to come in at 8.3% YoY, unchanged vs. April, while the core CPI reading for May is expected to inch lower to 5.9% YoY vs. April’s 6.2% reading. The outcome of that report, which will dictate how equities trade today, will also influence the expected size and speed of Fed interest rate hikes over the next set of monetary policy meetings.
Given the influence of record gas prices during the month, which has only escalated further so far in June, there is the possibility we could get a “split-decision” with the headline CPI figure coming in hotter than expected while the May core figure declining month over month. That less than decisive outcome runs the risk of continuing yesterday’s sell-off as investors try and square how the Fed could accelerate its actions to curb inflation. To add more intrigue to the proceedings, yesterday Janet Yellen commented that she does not expect a recession. This puts a lot of pressure on the May Producer Price Index report that comes just before the Fed’s next monetary policy meeting next week.
Data Download
International Economy
Last night saw the release of Japan's YoY Corporate Good Price Index (CGPI) for May which posted a decline to 9.10% from the previously reported 9.80%. This latest release shows Japanese PPI starting to roll even though producer prices remain at decade high levels.
Chinese CPI and PPI for May were released as well with YoY CPI posting at 2.10%, slightly lower than expectations and matching the previously reported figure. YoY PPI came in at 8.10% which was slightly lower than the previously reported 8.50% but came in hotter than expectations of 6.60%.
Domestic Economy
As we discussed above in today’s Big Picture, the Consumer Price Index for May will be released at 8:30 AM ET, and the results will shape how equities trade today and potentially re-shape interest rate hike expectations. Soon after the stock market begins trading today, the preliminary June data for the University of Michigan Consumer Sentiment and Inflations Expectations Index will be had. The overall index reading is suspected to slip to 58.1 vs. 58.4 in May with the initial view on 1-year inflation holding steady at 5.3% vs. May.
Late yesterday, U.S. Treasury Secretary Janet Yellen shared her view that the U.S. economy isn’t going to experience a recession, but gasoline prices are unlikely to fall anytime soon.
Markets
Amid renewed concerns over the speed of the economy and higher interest rates, S&P 500 shed 2.38% yesterday with all 11 S&P 500 sectors sporting losses that ranged from 1.50% to 2.80%. The worst performing sector of the day was Communication Services with its 2.8% fall. The Dow Jones Industrial Average lost 1.94% and the Nasdaq Composite finished down 2.75%, while the CBOE Volatility Index jumped 9.1% to 26.15, and data from AAA put the average gas price across the U.S at $4.97 per gallon vs. $4.328 a month ago and $3.067 this time last year. Including yesterday’s moves, here’s how the major market indicators stack up year-to-date:
- Dow Jones Industrial Average: -11.19%
- S&P 500: -15.70%
- Nasdaq Composite: -24.87%
- Russell 2000: -17.5%
- Bitcoin (BTC-USD): -37.2%
- Ether (ETH-USD): -52.8%
Stocks to Watch
Before trading kicks off for U.S.-listed equities, breathe a sigh of relief as there are no companies slated to report their quarterly results this morning.
Shares of DocuSign (DOCU) were under pressure last night following the company’s April quarter earnings report missed EPS expectations while the company delivered better than consensus revenue for the quarter. Billings for the quarter rose 16% YoY to $613.6 million, well ahead of the guided $573-583 million range. While the company issued inline guidance for the current quarter and reaffirmed its revenue guidance for the fiscal year, it cut its full year billings guidance to $2.521-2.541 billion from its prior $2.706-2.726 billion forecast.
Vail Resorts (MTN) reported top and bottom line April results that came in nicely ahead of consensus expectations. For the season-to-date period ended April 30, visitation on weekday and non-holiday periods increased approximately 8% YoY while visitation on weekend and holiday periods decreased approximately 3% YoY, excluding Peak Resorts visitation in both periods. Vail believes this trend, which it expects to continue, is driven by the growth in pass sales as pass holders tend to spread their visitation more across the season, and, with the increase in flexible and remote work.
Online personalized shopping business Stitch Fix (SFIX) saw its shares fall last night following quarterly results that missed expectations. While the company guided the current quarter’s revenue in line with the consensus forecast, it also shared that 15% of salaried positions or about 4% of total headcount will be laid off.
At its 2022 Financial Analyst Day late yesterday, AMD (AMD) shared it will re-align its reporting segments to Data Center, Embedded, Client (including the desktop and PC notebook business), and Gaming. The company also announced expanded multi-generational CPU core, graphics, and adaptive computing architecture roadmaps and revealed an expanded portfolio of high-performance, next-generation CPUs, accelerators, data processing units (DPUs), and adaptive computing products optimized for multiple workloads.
Taiwan Semiconductor (TSM) reported its consolidated May revenue rose 7.6% MoM and 65.3% YoY to NT$185.71 billion.
Acer (ACEYY) reported May revenues of NT$22.18 billion, down 10.6% YoY but up 15.4% MoM. The company’s gaming line revenue grew 23.0% MoM while its Chromebook business revenue soared 174.5% MoM.
IPOs
No new IPOs are expected to start trading 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
We made it through another week, and after today’s close, there are no companies expected to report their quarterly results. Those looking for more on which companies are reporting when, head on over to Nasdaq’s Earnings Calendar.
On the Horizon
Monday, June 13
- UK: Construction Output, Industrial Production, Manufacturing Production – April
Tuesday, June 14
- Japan: Industrial Production & Capacity Utilization – April
- UK: Average Earnings and Employment Change – April
- Germany: CPI - May
- Germany: Zew Economic Sentiment Index - June
- US: NFIB Small Business Optimism Index – May
- US: Producer Price Index – May
Wednesday, June 15
- Japan: Core Machinery Orders – April
- China: Industrial Production, Retail Sales – May
- Eurozone: Industrial Production - April
- US: Weekly MBA Mortgage Applications
- US: Retail Sales – May
- US: NAHB Housing Market. Index - June
- US: Weekly EIA Crude Oil Inventories
- US: FOMC Meeting Decision
Thursday, June 16
- UK: Car Registrations – May
- Eurozone: Wages & Labor Cost Index – 1Q 2022
- UK: Bank of England Interest Rate Decision
- US: Weekly Initial & Continuing Jobless Claims
- US: Housing Starts & Building Permits – May
- US: Philly Fed Manufacturing Index – June
- US: Weekly EIA Natural Gas Inventories
Friday, June 17
- Eurozone: Consumer Price Index - May
Thought for the Day
“I tried every diet in the book. I tried some that weren’t in the book. I tried eating the book. It tasted better than most of the diets.” ~ Dolly Parton
Disclosures
- Apple (AAPL), Microsoft) 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.
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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