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 | Market Breadth deteriorating: % of stocks trading above their 200dma rolling over and at 41%

* source: Yardeni Research

* source: Grindstone Intelligence

JPM investor survey: limited appetite for equities...

* source: JP Morgan

| "Coming into 2023, gasoline prices were down sharply, boosting consumer real purchasing power. Going into 4Q 2023, gas is moving up significantly, draining that buying power. Food prices are marching higher too – a one-two punch, particularly for lower income consumers."

-Nancy Lazar, Piper Sandler

* source: Piper Sandler

* source: JP Morgan

| Economic Surprise Index: China + US slightly positive but falling, Europe negative but improving...

* source: Goldman Sachs Global Investment Research

| 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 + TYields LOWER | UAW strike against automakers continues

| The case for deteriorating economy:

"Seven forces have swung from being 1H tailwinds, to 4Q headwinds:

1) Student loan repayments,

2) Excess savings,

3) Gasoline prices,

4) Auto production,

5) Consumer services spending,

6) Housing, and

7) Capex.

All add to the evidence we’re tipping into a downturn." -Nancy Lazar, Piper Sandler

* source: Goldman Sachs Global Investment Research

DJ -0.5% S&P500 -0.7% Nasdaq -0.8% R2K +0.1% Cdn TSX -0.4%

Stoxx Europe 600 -0.5% APAC stocks LOWER, 10YR TYield = 4.521%

Dollar HIGHER, Gold $1,905, WTI -0%, $90; Brent -0%, $93, Bitcoin $26,204

NOTABLE HEADLINES

· Hedge funds cut stock leverage at fastest pace since 2020 crash-BBG
· Americans finally start to feel the sting from the Fed's rate hikes-MSN
· Only richest 20% of Americans still have excess pandemic savings-BBG
· Global trade falls at fastest pace since pandemic-FT

2) Will equities keep falling and/or TYields stop rising?

* source: JP Morgan

3) 2022 = yields UP, Dollar UP = Equities Fell. "That relationship is back in full force."

* source: Grindstone Intelligence

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) Financial Conditions tighten in the US

* source: Goldman Sachs Global Investment Research

6) Inflation trends are mostly negative but corporate topline also benefitted from the inflationary spike in the last two years...

* source: JP Morgan

7) "Home prices as measured by both the FHFA and S&P CoreLogic Case-Shiller home price indexes extended their streak of gains in July and the y/y trend in prices improved." -Oxford Economics

* source: Oxford Economics

8) 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

Three-quarters of firms globally are not ready for new ESG rules, KPMG finds - Reuters

-Three-quarters of companies globally are not ready to have their environmental, social and governance (ESG) data audited externally months before new regulations kick in, according to a new report from KPMG published on Tuesday. Stricter European Union, U.S. and global rules are being introduced, mostly in time for the 2024 reporting season, to replace a patchwork of voluntary private sector practices for listed companies to make climate-related disclosures.

-Regulators say external auditing of sustainability-related data - while not as extensive as financial auditing - is crucial for giving investors information free of misleading environmental claims, known as greenwashing. The EU rules will require disclosures be audited while countries adopting the International Sustainability Standards Board's reporting requirements can also demand external checking.

SEC Fines Deutsche Bank Fund Unit for ESG Claims, Money Laundering Allegations - WSJ

-Deutsche Bank’s investment arm agreed to pay $25 million for overstating how it used environmental, social and governance factors in its funds, one of the first cases that questioned ESG claims by money managers. The investment arm, DWS, also settled allegations from the Securities and Exchange Commission that it failed to comply with anti-money-laundering rules for its mutual funds. 

3) MARKETS, MACRO, CORPORATE NEWS

• Long-Treasury ETF plunges record 48% as market meltdown worsens-BBG
• SKorea consumer sentiment hits 4-month low in Sept.-YNA
• Fed’s Kashkari says he expects one more rate hike this year-BBG
• Bank of England studies sweeping reform of forecasting-FT
• Lagarde says ECB rates to stay restrictive as long as needed-BBG
• China Evergrande misses payments on $547 million onshore bond-BBG
• Teetering China property giants undercut Xi’s revival push-BBG
• China property recovery up to a year away, ex-PBOC adviser says-BBG
• China’s economy is set to avoid a Japanese-style deflation-BBG
• Senate nearing bipartisan measure to avert a government shutdown-BBG
• As government shutdown looms, no agreement in sight-WASHPO
• US government shutdown bad for country’s credit, warns Moody’s-RTRS
• Joe Biden & Donald Trump plan rival Michigan trips in scrap for union votes-FT
• US FCC chair seek reinstating net neutrality rules rescinded under Trump-RTRS

• Equinor is said to prefer newcomer as buyer of Nigeria oil field-BBG
• LG Electronics Chief says EV shift will help spur new growth-BBG
• Streaming will transform video games just like Netflix shook up TV-FT
• ‘Dan never shirked the hard decisions’: Albanese on Andrews-AFR
• Thomson Reuters AI copyright dispute must go to trial, judge says-RTRS
• Nissan boss says world ‘needs to move on’ from combustion engine-FT 

• Oil/Energy Headlines: 1) Analysis: Oil price rally set to falter as demand doubts loom-RTRS 2) Funds load up on oil but positions look stretched: Kemp-RTRS 3) Russia still relies on Europe to ship its oil despite price cap breach-BBG 4) Appeals court blocks Biden bid to limit oil drilling auction-BBG 5) Chevron readies new oil drilling push in Venezuela to boost output-RTRS 6) Mideast-Asia oil shipping rates rebound, capped by OPEC+ supply cuts-RTRS