Nasdaq Markets Outlook

A mostly graphical daily curated roundup of the markets and the economy from Nasdaq's IR team.

#marketseverywhere | bifurcated market / sentiment declining | "The average small-cap stock in the Russell 2000 is now 33% below its 52-week high. Health Care, Communication Services, and Technology names are down even more." -Bespoke Investment Group 

| US small cap stocks wilt in the heat of higher interest rates -FT

* source: Yardeni Research

| #QualityMatters | "we continue to recommend overweighting quality fundamentals (CFROE, Growth, Revisions, Lower Beta) in our Macro Select portfolio until the odds of an economic “landing” are evident" 

-Piper Sandler, Michael Kantrowitz

* source: Piper Sandler

| Rising yields are pressuring stocks...

* source: Barclays' Emmanuel Cau

\ "The hard or soft landing question continues to be the most important one out there for markets right now, given how recessions have such a big impact on the performance of different assets." -Deutsche Bank, Jim Reid

* source: Oxford Economics

| THEMES: persistent moderate inflation a risk | yield back-up + dollar rising | Fed = hawkish skip + rate cut expectations dialed back | IPO market to improve? | "this year has been all about owning quality growth stocks" + high interest coverage stocks | a bifurcated market: wide gap between large cap and small cap performance | monetary tightening = equities compete w/ cash & bonds | drag on the economy = auto strikes, government shutdown, student loan payments ... | continued strong labor market

| Earnings season around the corner, can corporates hold up? | October seasonally weak for markets | Can the consumer hold up with higher rates biting + gas & food prices rising? 

-by Shon Wilk, Nasdaq

1) KEY TAKEAWAYS

1) Equities + Oil HIGHER TYields LOWER | UAW strike against automakers continues

| "Durable goods orders point to slowdown in investment" -Oxford Economics

| S&P 500 on track for its worst monthly decline since Dec 2022 | VIX (equity volatility) + MOVE Index (interest rate volatility) climb...

* source: CNBC

DJ +0.3% S&P500 +0.4% Nasdaq +0.4% R2K +0.6% Cdn TSX +0.3%

Stoxx Europe 600 +0.1% APAC stocks HIGHER, 10YR TYield = 4.513%

Dollar HIGHER, Gold $1,888, WTI +2%, $92; Brent +2%, $96, Bitcoin $26,703

2) Nasdaq Investor Flows by Bill Bailey

Institutional investors were quite active, but mixed, in last week’s trading as the broader indices traded lower.

Specifically, they were buying into Energy and Financials while selling in Healthcare and Technology

Retail traders were heavy buyers of individual stocks within the tech space and selling financial stocks

index outflows were significant last week as the flows followed the major indices lower with investors getting nervous.

* source: Nasdaq Investor Flows

3) Cash + Bonds seeing more inflows than equities YTD...

* source: Barclays' Emmanuel Cau

4) Not a great recipe for the future: Yields + Debt climbing while Growth Slowing 

"So my long-term thoughts are that we will need QE in some form again, and in big size, in the future to control the rise in debt. Either that or a big change in government spending versus revenues." -Jim Reid, Deutsche Bank

* source: Deutsche Bank

5) THIS WEEK: 

"Inflation trends will be the key focus following an action-packed couple of weeks for central banks. The main releases include the US PCE inflation, flash CPIs in Europe, and the Tokyo CPI. 

The spotlight will also be on the PMIs from China to gauge momentum in the recent positive economic signals. Notable earnings releases will include Micron, Nike and Costco." -Deutsche Bank

* source: Grindstone Intelligence

2) ESG, COMPILED BY NATHAN GREENE

With ESG Under Siege, Neuberger Backs Active Stock-Picking -BNN

-Money managers at Neuberger Berman argue that sustainable investing isn’t going away—no matter the politics. Without talking about any of their competitors, they say the best way to play the market is via actively managed funds, not ESG-labeled index-tracking portfolios. 

-The virtues sought by sustainable investors aren’t possible to identify “in a rules-based, passive strategy” because sustainable investing requires “fundamental judgment.”
ESG data is often patchy and incomplete, requiring money managers and analysts to fill the gaps with their own inputs.

The litigation risks that companies face in an age of ESG - RTRS

-ESG litigation is on the rise, mostly from private litigants or from government agencies intent on pushing back against ESG initiatives. And there are no signs of that changing any time soon. 

-While engaging in "greenhushing" may be one antidote to the problem of increasing ESG litigation, it also deprives companies of the inherent value underlying public pronouncements of an ESG program. Whether it be investors or consumers, many are looking to engage with companies that are deemed to be advancing ESG initiatives. By staying silent, companies miss out on these associations and any attendant benefits that may accrue.

3) MARKETS, MACRO, CORPORATE NEWS

• Retailers lost $112B organized crime wave: ‘Unprecedented levels of theft’-MSN
• US autoworkers strike: when will dealerships run out of cars to sell?-FT
• Australia’s CPI rose to 5.2% in August as attempts to tame inflation falter-GUAR
• Meloni confronts Italian 2024 budget deficit as wide as 4.5%-BBG
• Japanese automakers stand to gain from Detroit’s labor strike-BBG
• Treasury ‘term premium’ gauge positive for first time since 2021-BBG
• China's central bank to use 'precise, forceful' policy to bolster recovery-RTRS
• China property stocks slide to lowest since 2011 as rout extends-BBG
• China's industrial profit posts strong rebound in August-CHVIEW
• Major Evergrande creditor to seek liquidation if no new debt plan soon-CNA
• China Evergrande's Chairman Hui is under police surveillance-RTRS
• Chengdu scraps homebuying limits in certain districts-CAI
• China developer CIFI slumps by record after trading resumes-BBG
• China’s economic malaise hits efforts to raise $41bn chip fund-FT
• ECB’s Holzmann says shocks could force ECB to raise rates again-BBG
• BOJ members differed on hitting price target as YCC was tweaked-BBG
• Senate votes advance short-term funding bill to avoid gov't shutdown-HILL
• Peru is approaching peak copper, for now — as new mines stall-BBG
• Chinese demand drives deals at world's largest coal conference-RTRS 

• The Writers strike is over: WGA votes to lift strike order after 148 days-VAR
• Endeavour at war as Bruce Mathieson backs Bill Wavish for board-AFR
• Star mops up insto leg of $750m raise; Mathieson’s stake unclear-AFR
• Lithium Power International lines up defence as Codelco circles-AFR
• No, thanks! Star’s top investor Bruce Mathieson skips on $750m raise-AFR
• Schott Pharma IPO expected to price at 27 euros per share – bookrunner-RTRS
• Birkenstock gears up for roadshow in next test of IPO market-BBG
• Costco Q4 earnings top estimates, sales hold steady amid high gas prices-MSN
• OpenAI seeks $90 billion valuation in possible share sale, WSJ says-BBG
• ArcelorMittal CEO sees global steelmakers buoyed by China output limits-BBG
• EV maker Fisker rallies after production update, bullish analyst report-RTRS 

• Oil/Energy Headlines: 1) Cushing oil hub's low levels spur quality, operational, price worries-RTRS 2) UK regulators approve plans for new Rosebank North Sea oilfield-FT 3) China may boost Oct fuel exports on robust margins, flight recovery-RTRS 4) Brazil minister says oil and green ambitions are not contradictory-FT 5) Fake coordinates and tanker tricks expose shadowy Russian oil trade-BBG 6) World’s no. 1 stock owner calls out big oil as carbon levels go up-BBG 7) Oil prices climb as markets focus on supply tightness-RTRS