Nasdaq Markets Outlook

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

Quality Matters | Piper Sandler: "While markets have ebbed and flowed all year, quality leadership has remained." 

"The top factors YTD all have a quality bias. The “Magnificent 7” are overexposed in aggregate to those top performing quality factors." -Piper Sandler

"On the flip side, high risk/junk factors continue to be weak."  

"The bid to higher quality is nearly perfectly playing out at the index level with S&P Large Growth up the most and Small Value at the bottom YTD."

waiting for the recovery phase? | "Admittedly, the last few years have not felt well-defined from a “cycle” perspective, with asynchronous upturns and downturns during and after COVID-19"

* source: BofA's Savita

1) KEY TAKEAWAYS

1) Equities + TYields HIGHER | CPI on Wed in focus

| THEMES: geopolitical scrutiny on some tech names + yield back-up + energy prices rising + peak disinflation? + UAW strike + hedging costs climb + market breadth poor

| Japan hinting that the era of negative rates may be over

| “The 4 big drivers of consumer spending are: 1) Income (jobs, wages, govt support … think student loans), 2) Excess savings, 3) Inflation (high prices squeeze real purchasing power, and vice versa), and 4) Banks’ willingness to lend. Today, all 4 risk slowing consumer spending sharply.” -Nancy Lazar, Piper Sandler

DJ +0.2% S&P500 +0.6% Nasdaq +0.9% R2K +0.6% Cdn TSX +0.4%

Stoxx Europe 600 +0.3% APAC stocks MIXED, 10YR TYield = 4.290%

Dollar LOWER, Gold $1,928, WTI +1%, $88; Brent +1%, $91, Bitcoin $25,701

NOTABLE HEADLINES:

• Fear of stock market dive creeps back as hedging costs climb-BBG
• Wall street fears a too-hot economy as recession bets plunge-BBG
• Earnings estimates are rising, a welcome sign for 2023 market rally-WSJ

2) This week: US CPI (Wed) + PPI (Thurs) + UMich consumer expectation survey (Fri) + ECB decision (Thurs) + labour market / GDP data in the UK. G20 summit kicks off this Saturday.

* source: Grindstone Intelligence

3) Investors = conservative bias | sentiment moderating | equity inflows have stalled | "Less than half of S&P 500 stocks are in uptrends, whether you look at 20, 50, 100, or 200-day average prices" -Grindstone Intelligence

* source: Grindstone Intelligence

4) relationship between equity valuation and yields (monetary policy): "S&P 500 P/E multiple and real yields diverged during the Dot Com bubble"

Another disconnect?

S&P 500 P/E multiples closely tracked the path of real rates until recently

* source: Goldman Sachs Global Investment Research

5) Last week:

Energy (rising oil prices) + Utilities (yield oriented defensive) finished higher | Major indexes lower with Small Cap R2K top underperformer

* source: Piper Sandler

* source: Goldman Sachs Global Investment Research

6) recession or no recession? | "fewer S&P500 companies discussing “recession” on earnings calls for 4th straight quarter" -Factset Insight

* source: Factset Insight

7) where will earnings go? | "Quarterly path of S&P 500 EPS growth, Consensus expects year/year EPS growth troughed in 2Q and will be +9% by 4Q"

* source: Goldman Sachs Global Investment Research

8) "Credit Still Flowing - Management concerns about bank credit availability have faded significantly"

* source: Goldman Sachs Global Investment Research

2) ESG, COMPILED BY NATHAN GREENE

G20 agrees to pursue tripling renewables capacity but stop short of major goals - Reuters

On Saturday, G20 leaders agreed to pursue tripling renewable energy capacity globally by 2030 and accepted the need to phase-down unabated coal power but stopped short of setting major climate goals.

The world's 20 major economies disagreed on commitments to reduce fossil fuel use, cut greenhouse gas emissions and increase renewable energy targets. One such sticking point was a proposal by Western countries to triple renewable energy capacity by 2030 and cut greenhouse gas emissions by 60% by 2035, which was opposed by Russia, China, Saudi Arabia and India during sherpa level meetings.

Scandinavian Firms Show Large ESG Gaps on Cusp of New EU Rules - BNN

According to a report published Friday, the largest Scandinavian companies are disclosing just over half of the key information they will have to report when the new mandatory EU ESG regulation takes effect at the start of next year.

3) MARKETS, MACRO, CORPORATE NEWS

• Crunch time for Biden and US economy as auto industry strike looms-FT
• Auto workers’ strike could hit next week - Biden’s policies in the balance-POLI
• An important shift in Fed officials’ rate stance is under way-WSJ
• China eases rules for insurers buying stocks in support measure-BBG
• Three Chinese cities lift house-buying curbs-RTRS
• Meloni tells China that Italy plans to exit belt and road-BBG
• Delhi G20 summit confirms isolation of Russia, Macron says-RTRS
• Iran, US on verge of prisoner swap under Qatar-mediated deal-RTRS
• Japan PM says he plans cabinet reshuffle, 'drastic' economic measures-RTRS
• Meta is developing a new, more powerful AI system-RTRS
• AstraZeneca boss Sir Pascal Soriot looks to step down-MONEY
• Kingspan said to make rebuffed proposal for tie-up with Carlisle-BBG
• Top US chipmakers, tech firms to attend Vietnam meeting as Biden visits-RTRS
• Inside the Glazer family’s faltering fight to sell Man Utd-LT
• Changes to bargaining declarations and determinations-FWC
• Chevron asks regulator to intervene in Australia LNG strikes-BBG
• Walmart explores buying majority stake in ChenMed-BBG
• J.M. Smucker nears roughly $5 bln deal to buy Hostess Brands-RTRS
• Uber working on TaskRabbit-like service in potential expansion-BBG
• Vietnam Air, Boeing agree $7.8 billion deal for 737 Max jets-BBG

Oil/Energy Headlines: 1) Major Mediterranean storm kills at least 25 in eastern Libya-RTRS 2) Libya closes four oil ports as NOC declares state of alert before hurricane-PLATTS 3) G20 agrees to pursue tripling renewables capacity but stop short of major goals-RTRS 4) G20 ‘missing in action’ on fossil fuels even as it boosts green energy goals-FT 5) Russia refineries cut runs in early September for seasonal works-BBG 6) Iran, US on verge of prisoner swap under Qatar-mediated deal-RTRS