Nasdaq Markets Outlook

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

#marketseverywhere |

JP Morgan AM's Thought of the Week: "As economic tailwinds fade and headwinds build along with tighter monetary policy, investors should continue to diversify."

| driving yields higher | “The Bond Vigilante Are On The March” | "Bond market vigilantes could be making a comeback in the US amid fears over the ballooning government deficit and too-stubborn inflation."

-Ed Yardeni, coined the term "bond vigilantes"

* source: CNBC

| Goldman's Chart of the Week: Financial Conditions Tighten on Higher Long-Term Rates...will it break something?

* source: Goldman Sachs Global Investment Research

| yield sensitive Utilities taking a big hit as yields rise | defensives are top YTD underperformers (Utes, Staples, Healthcare) | markets driven by a small subset of stocks in Communications/Tech space (mega cap growth) | Russell 2K (small caps) in negative territory

| The Great Unwind (monetary + fiscal) / = rising yields | "Revolutionary central bank policy past 15 years…1343 rate cuts, $23tn of asset purchases since GFC (including $11tn during COVID) sent Fed balance sheet to historic 38% of GDP in 2022 (now 31%)." -BofA's Michael Hartnett

* source: BofA's Michael Hartnett, The Flow Show

| Retail sentiment fading...

* source: Piper Sandler, Emily Needell

| THEMES: persistent moderate inflation a risk | yield back-up + dollar rising | Fed = hawkish skip + rate cut expectations dialed back | "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 | consumer confidence weakening

| 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 LOWER, Oil + TYields HIGHER

| property concerns in China continue to grow | Fed's Mester says one more rate hike may be needed - odds of a hike in Nov = 30%, Dec = 50%

DJ -0.3% S&P500 -0.5% Nasdaq -0.5% R2K -0.7% Cdn TSX -0.6%

Stoxx Europe 600 -0.7% APAC stocks LOWER, 10YR TYield = 4.697%

Dollar HIGHER, Gold $1,830, WTI +1%, $89; Brent +0%, $91, Bitcoin $27,555

2) Nasdaq Investor Flows by Bill Bailey

-Institutional selling was, once again, the dominant theme in last week’s trading as the markets finished lower after digesting more inflation data. 

net buyers of tech, but it really was across a large bucket of smaller companies and they were still quietly de-risking in the larger/mega caps that have led most of 2023.

-Individual retail traders are back to selling individual stocks. The main exception = consumer discretionary space.

-After a brief break, tepid inflows into index products

* source: Nasdaq

3) 'US Treasuries on course for historic 3rd consecutive year of losses (-4% in ‘23, -17% in ‘22, -4% in ‘21)…has never happened in history of US republic." -BofA's Michael Hartnett, The Flow Show

* source: BofA's Michael Hartnett

4) "While the ISM Manufacturing PMI hit its highest level since November 2022 in September, it wasn't enough to snap the 11 consecutive months below the neutral threshold" -Oxford Economics | “We expect the ISM to resume its downtrend, reflecting the continued headwind from higher bond yields – both domestic and foreign.” -Piper Sandler, Nancy Lazar

* source: Oxford Economics

5) "This was a stressful quarter for investors with few places to hide amidst the market pullback that weighed on all size and style boxes and most sectors. Noteworthy developments in the quarter include the sharp rise in interest rates to new multi-decade highs and a nearly 30% increase in oil prices." -Emily Needell, Piper Sandler

* source: Piper Sandler

6) Lending standards remain tight...

* source: Deutsche Bank

7) THIS WEEK: 

"Apart from the jobs report, key data releases also include the ISM indices. Investors will also focus on wages and business conditions gauges in Japan as well as the PMIs in China this weekend.

Central bank speakers next week include Fed Chair Powell and ECB President
Lagarde." -Deutsche Bank

* source: Grindstone Intelligence

2) ESG, COMPILED BY NATHAN GREENE

Banks behind 70% jump in greenwashing incidents in 2023 -report - Yahoo

-The number of instances of greenwashing by banks and financial services companies around the world rose 70% in the past 12 months from the previous 12 months. European financial institutions accounted for most of those instances, and much of the greenwashing involved claims about fossil fuels.

Kishida Says Japan Pensions With $600 Billion Sign ESG Pact - BNN

-Japanese pension funds managing 90 trillion yen ($600 billion) will join a global initiative for responsible investment, Prime Minister Fumio Kishida said in a speech on Tuesday. 

-The move comes as Kishida seeks to prod asset managers to improve their skills and oversight in a bid to nudge households to invest more of their savings. He also wants more foreign money managers to set up in Japan to boost competition.

3) MARKETS, MACRO, CORPORATE NEWS

• Treasury selloff fuels speculation that bond vigilantes are back-BBG
• Goldman joins Wall Street peers flagging rates risk for stocks-BBG
• Global funds slash China stock positioning to lowest since 2020-BBG
• Fed’s Mester says one more rate hike may be needed this year-BBG
• Australia extends rate pause at Bullock’s first meeting-BBG
• ECB not yet at price target, more work to be done, Lane says-BBG
• BOE’s Mann says UK interest rates may remain permanently higher-BBG
• RBNZ seen delivering hawkish hold ahead of New Zealand election-BBG
• It's official: Gaetz to force vote on McCarthy's speakership-POL
• Democrats don't want to be McCarthy's "cheap date"-AXIOS
• Washington infighting puts US support for Ukraine in doubt-FT
• Asia faces one of its worst growth outlooks in 50 years: World Bank-AFR
• IMF head backs reforms that could give China more voting power-FT
• UK retail inflation falls to lowest level in a year, industry data shows-FT
• China tourism revenue more than doubled over holiday weekend-BBG
• China Evergrande shares soar as trade resumes amid police probe-BBG
• US warned China to expect updated export curbs in October - US official-RTRS
• Apple enforces new check on apps in China as Beijing tightens oversight-RTRS
• US Senators to seek Xi meeting, discuss Micron on China trip-BBG
• EU to assess risks of critical technologies being weaponised -official-RTRS 

• Meta might charge to use Facebook Instagram in Europe. Is it worth it?-FORBES
• Meta floats $14 a month ad-free plan for Instagram, Facebook in EU-RTRS
• GM, Stellantis face $9.5 bln in US fuel economy fines-RTRS
• Exclusive: Boeing sets record 737 production goal for July 2025 -sources-RTRS
• Aurelius latest bidder to join The Body Shop checkout queue-SKY
• JSW in initial talks to cement deal with Germany’s Heidelberg Materials-ECON
• Star hopes to fetch $200m for Brisbane casino and hotel-AFR
• Gina Rinehart shopping for Liontown shares again-AFR
• RM1.15bil Boustead-KLK deal falls through; govt seeks RM2bil 'save' LTAT-EDGE
• Boaz Weinstein raises bid hedge fund sculptor Rithm weighs higher offer-BBG
• GM, Ford furlough another 500 workers due to UAW strike-RTRS
• Birkenstock aims for $10 billion valuation as it strides toward Wall Street-RTRS
• Ally Financial starts job cuts with less than 5% of staff affected-BBG 

• Oil/Energy Headlines: 1) Oil investors turn cautious away from Cushing squeeze-RTRS 2) OPEC+ committee to meet amid rising oil prices, uncertainty over global economy-PLATTS 3) Saudi Arabia may hike Arab Light price for 5th month in Nov-RTRS 4) Oil Flows From OPEC+ Kings Saudi and Russia Rebounded Last Month-BBG 5) Russian Oil Exports to India Bounced Back Strongly in September-BBG 6) Venezuela's September oil exports hit second highest this year-RTRS 7) Drag on Oil Demand in China and US Is Limiting Rally, Citigroup’s Morse Says-BBG