Nasdaq Markets Outlook

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

#marketseverywhere | "...a modestly positive inflation-adjusted long-term interest rate—which is what the U.S. finally has—is no great threat to prosperity. More normal yields will discipline markets in ways that could boost growth over time. 

Higher real rates are forcing businesses to invest in projects that will generate real returns. People take more care when money isn’t free: fewer investments in SPACs, NFTs and other exotic assets stirred up by low rates and QE; but more investment in areas that can increase productivity and real wages."

-The Wall Street Journal Editorial Board; Welcome Back, Bond Market

* source: Yardeni Research

The Great Unwind | "history tells us that central banks have never sold assets/ allowed their balance sheets to run off as much as they are currently doing. And if conditions remain orderly, this shrinkage is set to continue for some time yet." -Deutsche Bank, Jim Reid

* source: Yardeni Research

| "Energy prices power PPI to robust gains throughout Q3" -Oxford Economics | "Wholesale inflation rose 0.5% in September, more than expected" -CNBC

* source: Oxford Economics

| More Dovish Fedspeak... | Nov + Dec rate hike odds collapsing | Fed officials head toward another pause after bond yields surge -BBG

*BOSTIC: I DON'T THINK WE NEED TO INCREASE RATES ANYMORE

*KASHKARI: *

-Inflation is headed down

-Reason for rise now in 10-year yield is a bit perplexing; one story is it is higher-growth expectations

-Seeing higher long-term Treasury yields, but not higher inflation expectations

* source: JP Morgan

| Small business: lending standards are tightening and small biz feeling the pressure

* source: Oxford Economics

* source: JP Morgan

| Earnings: "Resilient earnings so far provide a fundamental backstop to equities vs. the pressure from rising rates. A more mixed Q3 economy means results should be more mixed too. They could still be enough to help stabilise the market post pull-back, but misses are likely to be punished as lofty ‘24 estimates remain intact." -Barclays' Emmanuel Cau

* source: Barclays' Emmanuel Cau

| 2022 was the year of the 'average' stock. 2023 is not.

* source: Grindstone Intelligence

| Bond volatility is trending above average...does not help with risk assets...

* source: Deutsche Bank, Jim Reid

1) KEY TAKEAWAYS

1) Equities HIGHER / Oil + Dollar + TYields LOWER

DJ +0.3% S&P500 +0.3% Nasdaq +0.5% R2K +0.5% Cdn TSX +0.4%

Stoxx Europe 600 +0.3% APAC stocks HIGHER, 10YR TYield = 4.608%

Dollar LOWER, Gold $1,868, WTI -1%, $85; Brent -1%, $87, Bitcoin $27,103

2) Nasdaq Investor Flows:

we see retail investors as a notable source of support as they were willing to step in and buy last week (especially Financials and Consumer Cyclicals)

ongoing hesitation from the long-only institutional community to participate in buying stocks at large. (picking spots across various sectors while continuing their profit-taking and de-risking of technology names)

* source: Nasdaq Investor Flows, prepared by Bill Bailey

3) Equities need earnings for support: "In the end, if earnings expectations roll over again, even with lower yields, P/E multiples are likely to get under pressure...a very strong correlation between EPS momentum and equity valuations." -JP Morgan

* source: JPMorgan

4) Housing affordability is collapsing... | worst it has been since 1984 -CNN

* source: Bloomberg, prepared by Gavin Zaentz

* source: CNBC

5) YTD Performance:

* source: Grindstone Intelligence

6) Food for thought...

* source: BofA

7) THIS WEEK:

* source: Grindstone Intelligence

2) ESG, COMPILED BY NATHAN GREENE

Use of weather derivatives surges as extreme climate events rock the globe - Reuters 

-On the Chicago Mercantile Exchange, average open interest in weather futures and options was four times higher in the January to September period than a year earlier, and 12 times higher versus 2019. 

-Weather derivatives let buyers hedge against the risk that the weather will damage their business. Unlike insurance, where companies must prove they have suffered a loss, they pay out based on indexes. These might track the temperature in Paris or rainfall in New York.

Deutsche Bank’s DWS Links Real Estate Turmoil to ESG Debt Market - BNN

-Real estate has quietly morphed into a huge force in Europe’s ESG debt market, and that’s left debt investors targeting environmental, social and good governance goals particularly vulnerable to higher interest rates and sudden droughts in issuance.

3) MARKETS, MACRO, CORPORATE NEWS

• Fed’s Daly says neutral interest rate could be higher than pre-pandemic-BBG
• Higher rates may be needed to curb inflation, Fed’s Bowman says-BBG
• ECB has long road on disinflation but in a good place now: Knot-RTRS
• Euro zone consumers see inflation slightly above ECB target for years-RTRS
• Bank of England flags concerns longer mortgages, rise in credit card use-TG
• BOJ mulls raising inflation outlook to near 3% for FY 2023-KYO
• Australia in ‘third phase’ of policy tightening, RBA’s Kent says-BBG
• Israel pounds Gaza and prepares for ground operation-FT
• Israel-Hamas conflict adds dangers for Ukraine’s war effort-BBG
• Volodymyr Zelenskyy to shore up Ukraine support amid Israel-Hamas war-FT
• EU aid to Palestinians will ‘not be cancelled’ as decision reversed-TG
• Fragile global economy faces new crisis in Israel-Gaza war-NYT
• Yellen sticks to view U.S. economy headed for soft landing-RTRS
• Japan's manufacturers' sentiment weighed by overseas risks-RTRS
• UK wage growth cools as job cuts mount and firms cap costs-BBG
• Global hedge funds push back against China draft rules-BBG
• Shifting bond yield curve scrambles market’s recession signal-BBG
• US House Lawmakers consider empowering interim speaker advance aid-BBG
• "Squad" comments on Hamas reignite Dems’ Israel tensions-AXIOS
• US agencies take new steps in crackdown on ‘junk fees’-FT 

• Walgreens names former Cigna executive Tim Wentworth new CEO-BBG
• Exxon in talks to pay more than $250 a share for Pioneer-BBG
• Blackstone eyes leading role in Disney India reel-ECON
• Teck to balance valuation with ‘execution risk’ in coal sale-BBG
• Wintershall in talks to sell Adnoc Gas project stake to PTT-BBG
• Knorr-Bremse Group likely buy Escorts Kubota's railway business-CNBC
• Birkenstock valued at $8.6bn after pricing IPO in middle of range-FT
• Exxon nears $58 billion deal to buy Pioneer in big oil bet-BBG
• Samsung’s profit slide slows in sign of a chip market bottom-BBG

• Oil/Energy Headlines: 1) US, Venezuela near deal on sanctions relief for steps toward fair elections-BBG 2) Russia, Saudi Arabia discuss oil market, prices amid Israel-Hamas war-RTRS 3) OPEC’s spare oil buffer can help market weather Mideast storm-BBG 4) OPEC+ Sep output up 330,000 b/d as Nigeria, Iran balance Russia-Saudi cuts: Platts survey-PLATTS 5) G-7 Price Cap on Russian oil tested as India pays record premium-BBG 6) Saudi, Russia supply cuts disrupt oil, US dollar relation-RTRS 7) An oil tanker adrift in Indian ocean is latest dark fleet menace-BBG