Nasdaq Markets Outlook

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

#marketseverywhere | 

"My interpretation of a month’s worth of client conversations is that almost *anything* that puts a halt to the rise in interest rates would be welcomed and bullish for equities.

This reminds me of late 2022 when investors were similarly wishing for *anything* to pull CPI readings lower."

-Michael Kantrowitz, Piper Sandler

| break out in yields have shook markets...what will it break? | "the last 24 hours saw the relentless bond sell-off continue, with yields rising to fresh multi-year highs on both sides of the Atlantic" -DB's Jim Reid

* source: Grindstone Intelligence

* source: CNBC

| "…markets finally woke up to the higher-for-longer reality" -Emmanuel Cau, Barclays

* source: Barclays' Emmanuel Cau

| "Breadth is weak and getting weaker. Just 12% of S&P 500 stocks are above their 50-day moving average, and two-thirds are below their 200-day." -Grindstone Intelligence

* source: Grindstone Intelligence

| will job market break? | "Tighter bank lending standards (SLOOS) and Fed hike liftoffs lead unemployment by roughly 2 years. Both started to incrementally tighten 2 years ago, so we’re just now entering the time frame when joblessness should be starting to rise." -Piper Sandler, Nancy Lazar

* source: Piper Sandler's Nancy Lazar

| will job market break? | but labor market still tight at per JOLTS

* source: Piper Sandler

| will rising yield cause accidents asks DB's Jim Reid...

"such losses could impact capital adequacy ratios and impact their ability and willingness to lend and extend credit in the economy. This could prolong tighter lending standards which is clearly a risk to the economy, and to financial markets, and raises the risks of accidents elsewhere."

* source: Deutsche Bank, Jim Reid

| Retail sentiment has cratered while Fast Money has been selling...

* source: Barclays' Emmanuel Cau

| 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 | continued strong labor market but will it break as monetary policy tightened | 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 HIGHER, Oil + TYields LOWER | weaker ADP jobs report sends yields lower

| Private payrolls rose 89,000 in September, far below expectations, ADP says -CNBC

DJ -0.0% S&P500 +0.2% Nasdaq +0.6% R2K -0.2% Cdn TSX +0.1%

Stoxx Europe 600 +0.3% APAC stocks LOWER, 10YR TYield = 4.752%

Dollar LOWER, Gold $1,821, WTI -3%, $86; Brent -3%, $88, Bitcoin $27,471

2) Volatility is creeping back up

3) Small caps under pressure | down -14% from summer high and closing in on the YTD lows.

* source: Yardeni Research

4) "Value has caught up with higher rates in Europe, not in the US" -Emmanuel Cau, Barclays

* source: Barclays' Emmanuel Cau

5) Lending standards remain tight...will it trigger a recession and break in jobs market?

* source: Deutsche Bank

6) My colleague Mitch Roy's thoughts: 

"The Fed will likely have to remain restrictive for longer while accepting a higher neutral rate and a potential new inflation target as structural changes around slowbalization, aging demographics, and destabilization fall outside their purview/influence and fiscal backdrops yield greater influence. Corporates and investors alike will have to navigate changing growth and inflation regimes, shifting operating environments, and a repricing of asset classes. Higher costs of capital, less manageable cost structures, and more complex domestic and international landscapes will become the norm, forcing companies and valuations to adapt accordingly."

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

Flaring Ticks Up in Texas Oil Patch, Showing Limits of ESG Pressure - BBG

-After years of declines, flaring is on the rise again in the biggest US oilfield. Producers in the Permian Basin in Texas and New Mexico flared about 97 billion cubic feet of the fuel in the year ended June 30, enough to meet the nation’s entire natural gas needs on a typical day.

-Flaring is one of the oil industry’s biggest direct sources of carbon dioxide emissions, and one that’s often avoidable. Worldwide, the International Energy Agency says the practice added about 500 megatons of carbon dioxide equivalent to the atmosphere last year. That’s why Wall Street investors focused on climate risks have pushed producers to rein it in. 

Recent ESG developments point to progress despite polarized US political climate - Reuters

-Recent developments in ESG issues point to positive momentum in the United States, despite the divisive wave of anti-ESG sentiment in some political circles. 

-Many financial services executives involved in recent U.N. events cited the new IRA as a key driver of sustainable finance, even though the U.N.’s goal of limiting the earth’s rise in temperature to 1.5 °C is proving elusive.

3) MARKETS, MACRO, CORPORATE NEWS

• McCarthy won't seek speakership again-POL
• McCarthy ouster means more turmoil as next shutdown fight looms-BBG
• House members float bipartisan deals after McCarthy goes down-AXIOS
• Biden to announce $9 billion more in student debt relief-RTRS
• Here’s what market strategists are saying about the McCarthy ouster-BBG
• Japan keeps markets guessing yen intervention, warns against sharp falls-RTRS
• Japan bond slump puts more pressure on BOJ to tweak policy-BBG
• Bank of Japan buys $12.7bn of bonds as yields hit highest in a decade-FT
• One in eight US households saw a drop in income last month-BBG
• Hospitality workers, Las Vegas casinos in crunch time for labor talks-RTRS
• Euro zone economy likely contracted in Q3-RTRS
• Euro zone retail sales fall much more than expected in Aug-RTRS
• UK business downturn eases after inflation data, BoE pause – PMI-RTRS
• Japan service activity growth slows down in September – PMI-RTRS
• S. Korea factory activity shrinks again in Sept, mildest slump in 15 months-RTRS
• New Zealand says interest rates may need to stay high for longer-BBG
• Lagarde sticks with ECB’S ‘sufficiently restrictive’ rate stance-BBG
• Treasury's Yellen: US overdependent on China for critical supply chains-RTRS
• China rebukes EU after formal launch of EV subsidy probe-RTRS
• Analysis-Choppy waters as Europe navigates China-US rivalry-RTRS
• Joe Biden and Rishi Sunak seek UK/US trade pact before 2024 elections-RTRS

• EA Elektro-Automatik draws interest from private equity, industrial firms-RTRS
• Meta to lay off employees in metaverse silicon unit on Wednesday-RTRS
• Premier League to revamp TV rights deal ahead of auction-FT
• BP explores $1 billion US pipelines stake sale -sources-RTRS
• IDFC First Bank launches QIP, CNBC-TV18 newsbreak confirmed-CNBC
• Paramount weighs dropping India streaming plan for partnership-BBG
• Airbnb boss lays foundation for longer-term rentals-FT
• QantasLink pilot strike disrupts thousands of WA commuters-AFR
• Superdry in talks with Indian giant Reliance to fashion £25m licensing deal-SKY
• Ford sweetens wage offer in proposal to striking UAW workers-BBG
• Intel to spin out programmable chip unit, hold IPO; shares rise 2%-RTRS
• Amazon reportedly used a secret algorithm to jack up prices-MSN

• Oil/Energy Headlines: 1) Saudis to stick with 1 million-barrel oil supply cut for now-BBG 2) OPEC+ panel unlikely to tweak oil policy at Wednesday meeting, sources say-RTRS 3) Saudi Arabia, Russia to continue voluntary oil cuts-RTRS 4) Russia to decide in November whether to deepen output oil output cuts or raise production – Novak-RTRS 5) Russia's seaborne crude flows rebound to hit a three-month high-BBG 6) Russia may ease ban on diesel exports soon – Kommersant-RTRS