Daily Markets: Stocks Start Fourth Quarter Fresh but With Persistent Issues

Today’s Big Picture

Asia-Pacific equity indexes ended today’s session mixed. Australia’s ASX All Ordinaries declined 0.33%, Hong Kong’s Hang Seng fell 0.83%, Taiwan’s TAIEX lost 0.92%, and India’s Sensex closed 1.11% lower. Japan’s Nikkei bucked today’s trend, gaining 1.07% on speculation that the Japanese government will once again step in to support the Yen as it approaches historic lows against the US Dollar. China’s markets are closed today marking that country’s National Day celebrating the 1949 establishment of what we now refer to as the People’s Republic of China. Today’s holiday kicks off Golden Week which will see China’s equity markets closed through Friday. South Korean markets are also closed today to mark their own National Foundation Day which celebrates the forming of the first state of the Korean nation in 2,333 B.C. By mid-day trading, European equity indices are down, and US futures point to a positive open later this morning.  

Following the September drubbing for equities, markets are looking to claw back some of those losses this morning as we kick off the final quarter of 2022. However, pushing against that are fresh data pointing to the continued slowdown in the global economy, rising oil prices and prospects for another round of geopolitical gamesmanship. In addition to those factors, worries over the upcoming September quarter earnings season are likely to keep investors on edge in the coming weeks, keeping markets volatile in the near term. 

Data Download

International Economy

The final reading for the au Jibun Bank Japan Manufacturing PMI slipped to 50.8 in September from the flash reading of 51.0 and compared to August’s 51.5 figure. Of note, new orders fell the most in two years, amid weaker demand from foreign markets, particularly China, South Korea, Europe, and the US.

The S&P Global Eurozone Manufacturing PMI was revised lower to 48.4 in September from the preliminary figure of 48.5 and below 49.6 in August, pointing to the biggest contraction in factory activity since June 2020. Slides in both output and new orders were linked to high energy prices in some cases, while many firms reportedly adjusted their operating schedules lower to match the decline in order books. Inflationary pressures accelerated due to rising costs for energy although pressures arising from material shortages had reportedly faded slightly.

Per the IEA’s quarterly Gas Market Report, “Russia's continued curtailment of natural gas flows to Europe has pushed international prices to painful new highs, disrupted trade flows, and led to acute fuel shortages in some emerging and developing economies, with the market tightness expected to continue well into 2023.” 

The S&P Global/CIPS UK Manufacturing PMI was revised slightly lower to 48.4 in September from the preliminary estimate of 48.5, pointing to a second successive month of deterioration in the sector's business conditions.  The level of new business dropped for the fourth month running, with new export business falling the most since May 2020, amid reports of expected orders being postponed, or canceled, due to factors such as rising uncertainty, inflationary pressure, and the cost-of-living crisis.

The European Union is aiming for a preliminary deal as soon as today for a new sanctions package in response to Russia escalating the war in Ukraine and illegally annexing four occupied territories there.

Domestic Economy

At 9:45 AM ET, S&P Global’s US Manufacturing PMI will be published, and the headline figure is expected to inch up to 51.8 vs. 51.5 in August. With those results in hand as well as those from other geographies, later today the JPMorgan Global Manufacturing PMI will be published.  

Investors, economists and Fed watchers alike will compare those September US Manufacturing PMI findings for the U.S. with the September ISM Manufacturing Index when it’s published at 10 AM ET. The consensus forecast has the ISM data falling to 52.2 from the August print of 52.8. Also at 10 AM ET, August Construction Spending will be released, but those reading the report will want to delineate between residential and nonresidential activity during the month.  

President Biden signed into law a bill to fund the government through December 16 which includes $12 billion in funding for Ukraine. Congress is now on recess through mid-November, returning after the mid-term elections are held on November 8. 

Oil prices are moving higher in response to reports OPEC+ is planning a substantial cut in production to prop up falling prices.  

Markets

On Friday, the market continued to be jittery on speculation about the stability of “too big to fail” bank Credit Suisse (CS) despite the latest Q3 GDP forecast from the Atlanta Fed which moved from a paltry 0.3% to a robust 4.2% estimate. All sectors were off, led by Consumer Discretionary, Utilities and Technology names. The Russell 2000 declined 0.61%, both the S&P 500 and Nasdaq Composite fell 1.51% and the Dow closed 1.71% lower. This closed out a quarter that started strong but made it almost exactly halfway through August before rolling over. Here’s how the major market indicators stack up year-to-date:

• Dow Jones Industrial Average: -20.95%
• S&P 500: -24.77%
• Nasdaq Composite: -32.40% 
• Russell 2000: -25.86%
• Bitcoin (BTC-USD): -28.05%
• Ether (ETH-USD): -63.97%

Stocks to Watch

Before trading kicks off for U.S.-listed equities, there are no companies expected to issue their latest quarterly results but 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. 

Tesla (TSLA) produced 365,923 vehicles during the September quarter but even though its deliveries rose 42.5% YoY and 35% QoQ to 343,830, it missed the consensus forecast of 357,938 units. Li Auto (LI) delivered 11,531 vehicles in September, up 62.5% YoY, bringing its 3Q 2022 deliveries to 26,524, a 5.6% increase vs. 3Q 2021. Nio (NIO) delivered 10,878 vehicles in September and 31,607 for all of 3Q 2022. Total deliveries for 3Q 2022 at Xpeng (XPEV) totaled 29,570 with 8,468 Smart TVs delivered during September. 

InterDigital (IDCC) issued upside guidance for 3Q 2022 with revenue of $112-115 million vs. the $98.83 million consensus and the company’s prior forecast of $96-100 million. Per InterDigital, the updated guidance includes approximately $100 million of recurring revenue as well as new licensing agreements signed within our consumer electronics, automotive, and IoT revenue category. 

Intel’s (INTC) self-driving unit Mobileye Global has filed for an initial public offering of its class A common shares. 

Over the weekend, Consolidated Edison (ED) agreed to sell its wholly-owned Con Edison Clean Energy businesses to German utility RWE (RWEOY) in a transaction valued at $6.8 billion. 

Innovative Eyewear (LUCY) announced it has licensed the global lifestyle brand Nautica for smart eyewear with a collection expected to launch for Holiday 2022 or soon thereafter.

Vodafone PLC (VOD) confirmed it is in discussions with CK Hutchison Holdings Limited in relation to a possible combination of Vodafone UK and Three UK. 

Redwire (RDW) will acquire QinetiQ Group plc's QinetiQ Space business, a Belgium-based commercial space business providing design and integration of critical space infrastructure and other instruments for end-to-end space missions. 

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

No companies are expected to report quarterly results after equities stop trading today, but as we mentioned above, readers will want to take note of any earnings pre-announcements and their implications. Those looking for more on which companies are reporting when, head on over to Nasdaq’s Earnings Calendar. 

On the Horizon

Tuesday, October 4

• Eurozone: Producer Price Index - August
• US: Factory Orders – August 
• US: JOLTs Job Openings Report – August

Wednesday, October 5

• Japan: au Jibun Bank Japan Services PMI – September
• Eurozone: S&P Global Eurozone Composite PMI – September
• UK: S&P Global/CIPS UK Services PMI - September
• JPMorgan Global Composite PMI – September
• US: Weekly MBA Mortgage Applications 
• US: ADP Employment Change Report – September
• US: S&P Global US Services PMI – September
• ISM Non-Manufacturing Index – September 
• US: Weekly EIA Crude Oil Inventories

Thursday, October 6

• Eurozone: Retail Sales - August
• US: Challenger Job Cuts Report – September 
• US: Weekly Initial & Continuing Jobless Claims
• US: Weekly EIA Natural Gas Inventories 

Friday, October 7

• Japan: Household Spending, Leading Index – August
• Germany: Industrial Production – August
• US: Employment Report – September
• US: Consumer Credit – August

Thought for the Day

“I look to the future because that's where I'm going to spend the rest of my life.” ~ George Burns

Disclosures

• Tesla (TSLA), Nio (NIO), Xpeng XPEV), Li Auto (LI)  are constituents of the Tematica BITA Cleaner Living Index
• Tesla (TSLA), Nio (NIO), Xpeng XPEV), Li Auto (LI)  are constituents of the Tematica BITA Cleaner Living Sustainability Screened Index
• Intel (INTC), InterDigital (IDCC) 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.

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