Nasdaq Markets Outlook

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

#marketseverywhere | "The FOMC’s interest rate projections were somewhat more hawkish than expected...raises the bar for rate cuts next year" -Goldman Sachs Global Investment Research, Jan Hatzius 

"the FOMC kept the fed funds rate on hold yesterday, but this pause was accompanied by clear hawkish undertones and both bonds and equities sold off notably in the aftermath." -Deutsche Bank, Jim Reid 

"The new dots were more hawkish than expected with the median dot for 2024 rising by ~50-bps, implying the Fed expects to cut less next year and keep rates higher for longer." -Piper Sandler, Peter Naso 

"Higher Rates Not Just for Longer, but Maybe Forever" -WSJ

Fed "hardens commitment to ‘higher for longer’ interest rates" -FT

* source: Piper Sandler

* source: CNBC

* source: Oxford Economics

* source: CNBC

Yesterday's losses led by Tech + Communications

Defensive sectors outperformed (Staples, Utes, Healthcare)

"the longer we have such high rates, the more likely there is to be an accident. Economy-wide debt remains at near-record highs as a share of GDP, with delinquencies and corporate defaults rising...may eventually be the tipping point to a hard landing" -DB, Jim Reid

* source: Deutsche Bank

| OTHER THEMES: persistent moderate inflation a risk | yield back-up | Federal Reserve hawkish skip and rate cut expectations dialed back | IPO market to improve? | volatility eerily quiet | "this year has been all about owning quality growth stocks" | wide gap between large cap and small cap performance | monetary tightening = equities compete with cash & bonds | oil prices climbing - global economic impact? | drag on the economy = auto strikes, government shutdown, student loan payments ... 

-by Shon Wilk, Nasdaq

1) KEY TAKEAWAYS

1) Equities extending yesterday's losses / Oil + TYields HIGHER / US dollar index continues to climb and closing in on the highs of the year 

| UAW strike against automakers continues, no resolution / threatens to expand strike

| AAII Weekly Retail Sentiment: Bullish fell to the lowest level since early June, Bearish ticked up, and Neutral ticked down

DJ -0.3% S&P500 -0.9% Nasdaq -1.0% R2K -1.1% Cdn TSX -0.8%

Stoxx Europe 600 -1.1% APAC stocks LOWER, 10YR TYield = 4.472%

Dollar HIGHER, Gold $1,916, WTI +1%, $91; Brent +1%, $94, Bitcoin $26,396

2) strong jobs market | "Initial jobless claims came in at 201K, well below a Dow Jones forecast of 225K...lowest level since January...lowest volume of new unemployment claims since January." -CNBC

* source: Oxford Economics

3) A bifurcated market: Small Cap (S&P600) + Mid Cap (S&P400) P/Es disconnected from Large Cap (S&P500) P/Es

* source: Yardeni Research

4) "Small caps continue to breakdown and have now retraced most of this summer’s rally." -Piper Sandler, Peter Naso

* source: CNBC

* source: Yardeni Research

5) "The valuation gap between the top 7 stocks and SPW is at the highest level since the Tech Bubble" -BofA's Savita

* source: BofA's Savita

6) FOMC meeting highlight of the week

* source: Grindstone Intelligence

2) ESG, COMPILED BY NATHAN GREENE

US SEC cracks down on funds "greenwashing" with new investment requirement - Reuters

-On Wednesday the SEC adopted a new rule cracking down on so-called "greenwashing" and other deceptive or misleading marketing practices by U.S. investment funds. The changes to the two decades-old, "Name Rule" requires that 80% of a fund's portfolio matches the asset advertised by its name. 

-Funds would also be required to define the terms they use and explain the criteria for selecting investments in their disclosures.

Rishi Sunak defies critics and presses on with net zero U-turn - Guardian

-In a press conference on Wednesday, the prime minister announced a flurry of rollbacks on climate targets – pushing the ban on purchasing new petrol cars from 2030 to 2035 and delaying the target of eliminating gas boilers. 

-The move was condemned by industry figures, including the chair of Ford UK, as well as some Conservatives including Boris Johnson and the former environment minister Zac Goldsmith.

3) MARKETS, MACRO, CORPORATE NEWS

• Federal Reserve hardens commitment to ‘higher for longer’ interest rates-FT
• Bank of England on brink of rate hike pause after inflation surprise-RTRS
• Riksbank hikes Swedish rate with door kept open to act again-BBG
• Norway raises rate again and signals another move in December-BBG
• SNB surprises with rate pause as tightening tames inflation-BBG
• Little chance of interest rate cut before March; further hike is possible-IND
• ECB’s Nagel says too soon to declare rates reached plateau-BBG
• The Fed’s dream of a soft landing is facing a triple threat-BBG
• UAW, Detroit Three automakers in standoff as wider strike looms-RTRS
• UAW negotiator says new Stellantis offer doesn’t look good-BBG
• China's economic woes embolden calls for deeper reforms-RTRS
• Japan’s Kishida to outline economic support steps next week-BBG
• Fall in Korean exports moderates in hopeful sign for economy-BBG
• New Zealand’s economy grew more than expected in second quarter-BBG
• Bond traders see yields marching higher after September Fed meeting-BBG
• Japan may intervene on yen again, BOJ should ditch easy policy-RTRS
• China scrutinises quant strategies market weakness stokes public anger-RTRS
• Foreign investors still shunning China despite signs of upturn-FT
• Congress is already bracing for a government shutdown-AXIOS
• Centrist Dems and McCarthy’s allies are in secret talks to strike a deal-POL
• Biden admin forgives $37 million student debt for defrauded borrowers-CNBC
• Brussels considers defending EU nations in Ukraine grain dispute-FT

• Hollywood studios, writers near agreement end strike, finalize deal Thurs-CNBC
• Cleveland-Cliffs clashes with U.S. Steel as sale process gets underway-RTRS
• Stellantis makes new contract offer auto workers prepare expand strike-KSTP
• US court upholds Roche win patent case blockbuster hemophilia drug-RTRS
• LSE Group chief hits back at ‘clickbait’ criticism of the City-FT
• AB InBev CEO: US sales stabilized post-backlash, Mexico growing-BBG
• Berry nice! Costa board set to sign Paine Schwartz’s lowered $3.20 bid-AFR
• AusSuper spoils Brookfield, EIG’s $18.7b Origin hopes-AFR
• Whitehaven rebukes activist investor pushing back on $5b mine buy-AFR
• Google discussed dropping Broadcom as AI chips supplier-RTRS
• Hollywood studios, writers inch closer to deal to end strike-BBG
• US employers to see biggest healthcare cost jump in a decade in 2024-RTRS
• Amazon scraps planned merchant fee with antitrust suit looming-BBG

• Oil/Energy Headlines: 1) Chevron and unions reviewing new plan to end LNG strikes-BBG 2) Goldman raises brent oil forecast to $100 as rally builds-BBG 3) Wheat prices fall as bumper Russian crop replaces Ukrainian supplies-FT 4) Emptying oil tanks at key US storage hub signal tight market-BBG 5) Hedge funds add fuel to oil price rally with bets on rise above $100-FT 6) Oil companies cautious about drilling as energy transition looms-RTRS