Today’s Big Picture
Asia-Pacific equity markets ended today’s session down across the board as the catalysts for the mutli-day U.S. market slump continue to weigh on global markets. India’s SENSEX declined 0.33%, China’s Shanghai Composite fell 0.40%, South Korea’s KOSPI lost 0.43%, Taiwan’s TAIEX was 0.67% lower and Japan’s Nikkei and Australia’s ASX All Ordinaries were down 0.72% and 0.86%, respectively. Hong Kong’s Hang Seng traded off 3.22% on a broad decline led by Electronic Technology, Retail Trade and Consumer Services names.
By mid-day trading, European equity indices are down across the board, and U.S. futures point to a lower open. Renewed recession concerns are adding to the market’s recent selloff, fueled by the greater-than-expected drop in China exports during November, fresh layoff announcements, and concerns over an inverting yield curve. Added to the mix is the growing chorus warning about 2023, a group that saw the addition of Goldman Sachs (GS) after CEO David Solomon sharing that he expects stocks and residential real estate to be lower a year from now, and he sees the odds of a “soft landing” at around 35%.
Data Download
International Economy
Exports from China plunged 8.7% YoY in November to $296.1 billion, worse than the market consensus of a 3.5% drop and a greater decline compared to the 0.3% fall in October. For context, the November drop was the steepest fall since February 2020. Exports to the U.S. slumped 25.43%, the fourth straight month of contraction, while shipments to the EU fell 10.62%.
Also this morning, China announced a sweeping change to its anti-COVID policies, further loosening curbs and allowing asymptomatic COVID-19 cases and people with mild symptoms to quarantine at home. Changes to measures regarding travel, according to the National Health Commission, will be “gradual.”
Domestic Economy
In addition to the usual Wednesday economic data which are the MBA Mortgage Applications Index and crude oil inventory report from the Energy Information Administration, today also brings the final print for 3Q 2022 Productivity & Unit Labor Costs, and the October report for Consumer Credit.
Yesterday, the American Petroleum Institute reported a draw of 6.43 million barrels of oil for the week ending December 2.
Markets
Equities continued to trade off, extending the current slump. the Dow lost 1.03%, the S&P 500 declined 1.44%, the Russell 2000 fell 1.50 and the Nasdaq Composite closed down 2%. All sectors closed lower but Communications Services (-2.88%), Energy (-2.64%), and Technology (-2.14%) took the biggest hits. Meta Platforms (META) accounted for over a third of the contribution to Communication Services’ returns from yesterday. The company traded down 6.79% on news that it and other social media companies will be barred from using targeted ad technology on user data privacy concerns in Europe.
Here’s how the major market indicators stack up year-to-date:
- Dow Jones Industrial Average: -7.55%
- S&P 500: -17.31%
- Nasdaq Composite: -29.59%
- Russell 2000: -19.27%
- Bitcoin (BTC-USD): -63.22%
- Ether (ETH-USD): -65.56%
Stocks to Watch
Before trading kicks off for U.S.-listed equities, Brown-Forman (BF.B), Campbell Soup (CPB), Ollie’s Bargain Outlet (OLLI), Thor Industries (THO), and United Natural Foods (UNFI) will be among the few companies reporting their latest quarterly results.
October quarter results for homebuilder Toll Brothers (TOL) topped consensus revenue and EPS expectations. Exiting October, the company had almost 8,100 homes in backlog, down ~21% YoY. For its January quarter, Toll sees deliveries of 1,750-1,850 and 8,000-9,000 units for the full year 2023. It guided the Average Delivered Price per Home in the range of $950-$970K for the January quarter and $965-$985K for 2023.
Dave & Buster’s (PLAY) October quarter revenue rose just over 51% YoY to $481.2 million, topping the $470.8 million consensus. Despite the revenue beat, EPS for the quarter came in at $0.04, matching the consensus forecast. Through the first five weeks of Q4, pro forma combined comparable store sales (including Main Event branded stores) increased +3.1% YoY and were up +9.2% vs. the same period in 2019.
SentinelOne (S) reported a smaller than expected bottom line loss for its October quarter while revenue for the quarter rose more than 105% YoY to $115.3 million, clearing the $111 million consensus. The company’s total customer count grew about 55% to over 9,250 customers and customers with average recurring revenue over $100,000 grew nearly 100% to 827. For its current quarter, SentinelOne sees revenue of $125 million, a tad higher than the $124.5 million consensus.
Stitch Fix (SFIX) reported a larger than expected bottom line loss for its October quarter while revenue for the period fell 21.6% YoY to $455.6 million, missing the $459.6 million consensus. Exiting the quarter, the company’s active clients fell 11% YoY to 3.7 million and net revenue per active client was flat YoY in the quarter at $525. For its January quarter, Stitch Fix forecasted revenue of $410-$420 million vs. the $444.6 million consensus.
Mosaic (MOS) shared it has temporarily curtailed production at its Colonsay potash mine in Saskatchewan (Canadian Midwest) to reflect ”near-term dynamics and not long-term agricultural market fundamentals."
Electronic component and module company Murata Manufacturing (MRAAY) expects Apple (AAPL) to further reduce iPhone 14 production plans in the coming months due to weak demand.
Adobe (ADBE) has joined the ranks of companies trimming staff, announcing 100 job cuts, mostly in sales jobs. Yesterday, Morgan Stanley (MS) announced it will reduce its global workforce by about 2,000 ahead of a potential U.S. recession, while Bank of America (BAC) said it was slowing hiring.
Microsoft (MSFT) President Brad Smith is planning to meet with the Federal Trade Commission’s three Democratic members later today, reportedly a last-ditch bid to keep the company’s $69 billion acquisition of Activision from getting scrapped over antitrust concerns.
IPOs
As we head into the holiday season the near-term IPO calendar is fairly light so there are no significant IPOs slated 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
Descartes (DSGX), GameStop (GME), Sportsman’s Warehouse (SPWH), and Verint Systems (VRNT) 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
Thursday, December 8
- Japan: GDP – 3Q 2022
- US: Weekly Initial & Continuing Jobless Claims
- US: Weekly EIA Natural Gas Inventories
Friday, December 9
- China: CPI, PPI - November
- US: Producer Price Index – November
- US: University of Michigan Consumer Sentiment (Preliminary) – December
Thought for the Day
“Hump Day: not as depressing as Monday, not as exciting as Friday.” ~ Anonymous
Disclosures
- Apple (AAPL), Brown-Forman (BF.B), Microsoft (MSFT) 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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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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