Nasdaq Markets Outlook

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

last week was an ugly one as markets digested "higher for longer rates" + rising oil prices ... defensives outperformed

US stocks flash recession warning as small caps and industrial stocks fall -BBG

"recent selloff has wiped out YTD gains in some of the most vulnerable areas of the market (i.e. smaller caps and less profitable names)."

-Piper Sandler

* source: Piper Sandler

* source: Goldman Sachs Global Investment Research

Large & High Quality Leadership

"the most institutionally owned stocks are maintaining their outperformance as the most shorted make new relative lows."

* source: Piper Sandler

Over the past year, high interest coverage stocks have dominated...

...higher quality stocks continue to outperform and stocks that one would expect to outperform after a sustained market bottom are largely NOT doing so"

-Piper Sandler, Michael Kantrowitz

* source: Piper Sandler

"the oil price move so far has been limited to +$20—compared to +$40 in the first half of 2008 and +$45 in the first half of 2022."

-Goldman Sachs Global Investment Research

* source: Goldman Sachs Global Investment Research

| normalizing monetary policy | "we’re “only” now at normal historical levels, despite the fact inflation is still elevated and record peacetime deficits are predicted for the rest of your careers however old you are." 

-Jim Reid, Deutsche Bank

* source: Deutsche Bank, Jim Reid

| THEMES: persistent moderate inflation a risk | yield back-up | Federal Reserve hawkish skip and 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 with cash & bonds | oil prices climbing - global economic impact? | drag on the economy = auto strikes, government shutdown, student loan payments ... | continued strong labor market

-by Shon Wilk, Nasdaq

1) KEY TAKEAWAYS

1) Equities LOWER / Oil + TYields HIGHER / US dollar index continues to climb and closing in on the highs of the year

| Property concerns in China continue: Evergrande debt setback, Oceanwide blow rattle China property stocks -RTRS

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

* source: CNBC

DJ -0.2% S&P500 -0.2% Nasdaq -0.1% R2K -0.0% Cdn TSX -0.4%

Stoxx Europe 600 -1.1% APAC stocks MIXED, 10YR TYield = 4.515%

Dollar HIGHER, Gold $1,923, WTI +0%, $90; Brent +0%, $94, Bitcoin $26,114

2) Performance: Some recent outperformance with defensives

A bifurcated market as large cap (only a handful) > small caps...

some recent outperformance with Value stocks but YTD (handful of) growth stocks dominate

* source: Goldman Sachs Global Investment Research

3) 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

4) Equity volatility has picked up over the last several days as bond yields are breaking to new highs...

* source: BofA

5) Cattle prices continue to break out, too!

* source: Grindstone Intelligence

2) ESG, COMPILED BY NATHAN GREENE

As disasters spike, superpowers face mounting calls to forge climate deal - WP

-Leaders of some of the world’s top climate institutions are ratcheting up pressure on the United States and China to forge an agreement on confronting global warming, fearing that the strained relations of these two superpowers could derail progress at international negotiations in Dubai.

Shocked Green Fund Managers Say UK Shift Risks Investment Plans - BNN

-Some of the world’s biggest green investors are voicing dismay and bewilderment as they struggle to digest the UK government’s stated intention to wind back key climate commitments.

-“It was a complete shock,” said Ian Simm, founder and chief executive of London-based Impax Asset Management Group. Simm continued that the takeaway is there’ll now “be fewer developers of projects in the green space,” which means “less deal flow for us.” 

3) MARKETS, MACRO, CORPORATE NEWS

Stocks flash recession warning as trouble spreads to industrials-BBG

• China developers drop most in 9 months on Evergrande woes-BBG
• China central-bank adviser proposes structural reforms revive economy-RTRS
• Senior Nomura banker barred from leaving mainland China-FT
• Millions to take to skies as China gears up for long golden week-BBG
• Hollywood screenwriters reach tentative deal to end strike-BBG
• ECB’s Villeroy says fuel jolt won’t affect 2% inflation in 2025-BBG
• German business sentiment worsens in September -Ifo-RTRS
• Japan eyes long-term tax breaks for chips, batteries, biotech-NIKKEI
• Industrial production down for 15th straight month in August-FOCUSTW
• Australia warns of impact if China suffers sharper slowdown-BBG
• Writers Guild reaches tentative agreement with studios and streamers-HOL
• Tyson and Perdue are facing child labor investigations-NYT
• Germany’s ProSieben deepens ties with Berlusconi media empire-FT
• Star Entertainment locks in debt package, preps $750m equity raising-AFR
• Italy offers banks get-out clause to controversial windfall tax-BBG
• Victoria plc’s audit nightmare-FT
• SoftBank Corp. to seek over $800 million via bond-type stock-BBG
• Amazon to invest up to $4bn in AI start-up Anthropic-FT

Oil/Energy Headlines: 1) Oil resumes rally with hedge funds helping fuel move higher-BBG 2) Russia dodges G7 price cap sanctions on most of its oil exports-FT3) Russia exempts gasoils, bunker fuel from export ban-BBG 4) Shale Tycoon Hamm wants end of ‘roller coaster’ US energy plans-BBG 5) Macron says France to ask oil industry to sell fuels at cost-BBG