Daily Markets: Investors Continue to Digest Inflation, Earnings Reports

Today’s Big Picture

Asia-Pacific equity indexes ended today’s session up across the board as these markets followed yesterday’s U.S. market reaction to the slightly softer CPI print. China’s Shanghai Composite gained 1.69%, India’s Sensex rose 1.95%, Australia’s ASX All Ordinaries advanced 2.86%, Japan’s Nikkei jumped 2.98%, and South Korea’s KOSPI and Taiwan’s TAIEX closed 3.37% and 3.73% higher, respectively. Hong Kong’s Hang Seng had another very strong day, up 7.74% on a broad market rally on covid reopening speculation, led by Technology Services and Finance. While Hong Kong has had a strong week, up 12.95% since last Friday, it sits at 0.63% ahead for the trailing month and down roughly 12% for the trailing 3- and 6-month period.

By mid-day trading, major European equity indices are up across the board and U.S. futures point to a positive open although at least at the time of writing, VIX futures are also higher. The U.S. bond market is closed to observe Veterans Day.

Following yesterday’s market surge that followed a softer than expected October Consumer Price Index report and reignited hope that the Federal Reserve would slow the pace of interest rate hikes, we see little fresh economic data and even fewer earnings reports today. Peering inside that report, consumers are still facing double-digit increases in food and energy prices while apparel and used car costs softened in October. What we also saw soften yesterday was traders’ rejection of crypto as both Bitcoin and Ether had strong rallies (see more below) as they realized that issues with FTX had to do more with corporate governance than the integrity of blockchain technology.

The word of the day is likely “digestion” as investors continue to reflect on the October CPI report and also prepare for the next phase of corporate earnings that focuses on retailers. That begins next week, and the aggregate findings will likely test expectations for the 2022 holiday shopping season. The softer-than-expected finding in the October Consumer Price Index report will also be tested as the investment community picks over the Producer Price Index for October.

Also early next week, U.S. President Biden and China’s President Xi Jinping are expected to meet ahead of the G20 summit in Indonesia, the first in-person meeting between the two leaders since Biden took office. Likely topics include tensions over Taiwan, the ongoing Russia-Ukraine War, ongoing U.S. tariffs on China, and the more recent chip and chip equipment restrictions on exports to China.

As we get closer to the Thanksgiving holiday in the U.S., Wall Street will be looking for a definitive outcome to the 2022 midterm elections and what that likely means for the Biden administration. There is a possibility that Georgia could once again hold the key to control of the Senate given the runoff that is scheduled for December 6.

Data Download

International Economy

China eased some of its strict COVID rules, including shortening quarantines by two days to five days for close contact with infected people and for inbound travelers. The requirement for three further days in home isolation after centralized quarantine remains. China also removed a penalty for airlines for bringing in too many cases.

Producer prices in Japan jumped 9.1% year-on-year in October, slowing from September’s upwardly revised 10.2% gain but posting above expectations for a sharper drop to 8.8%, as high commodity prices and a weak yen continued to inflate input costs for companies.

Preliminary estimates showed the UK economy expanded 2.4% year-on-year in the third quarter of 2022, the lowest reading since the contraction in Q1 2021, but slightly above the 2.1% consensus forecast. Industrial Production in the United Kingdom contracted by 3.1% in September slowing from the 4.3% decline in the prior month. Manufacturing Production during September decreased 5.8% YoY, better than the expected contraction of 6.6%.

Domestic Economy

At 11 AM ET, the Preliminary reading of the Michigan Consumer Sentiment Index for November will be released. At 59.5, the headline figure is thought to be little changed vs. October’s 59.9 reading, but given the focus on inflation and the Fed, we expect the Inflation Expectations component to receive far more attention. The component registered 5% in October.

Markets

Yesterday’s improving CPI print was enough for investors to see light at the end of the Fed rate hike tunnel as they bid up just about everything they could get their hands on. The Dow was up 3.70%, the S&P 500 gained 5.54%, the Russell 2000 popped 6.11% and the Nasdaq Composite had a stunning 7.35% day. Sectors were all positive, led by Technology up over 8% followed by Real Estate and Consumer Discretionary both up over 7%. Relative laggers included Energy, Consumer Staples, and Health Care, all rising less than 3%.

Even crypto had a strong day, with Bitcoin and Ether rebounding 10.66% and 18.26%, respectively. No word yet if that light is actually the end of the tunnel or just an oncoming train. Here’s how the major market indicators stack up year-to-date:

  • Dow Jones Industrial Average: -7.22%
  • S&P 500: -16.99%
  • Nasdaq Composite: -28.96%
  • Russell 2000: -16.81%
  • Bitcoin (BTC-USD): -62.22%
  • Ether (ETH-USD): -64.81%

Stocks to Watch

Before trading kicks off for U.S.-listed equities, there are no corporate earnings scheduled, a nice break before the wave of retailer earnings, including those from Walmart (WMT), Kohl’s (KSS), Target (TGT), and others, comes next week.

Shares of Duolingo (DUOL) fell in after-market trading last night after the company posted a downside surprise loss for the September quarter despite revenue rising more than 50% to top consensus forecasts. Total bookings for the quarter rose 41% YoY to $102.7 million, and subscription bookings jumped 42% YoY to $78.9 million. Paid Subscribers totaled 3.7 million exiting September, up 68% YoY. For 2022, Duolingo sees revenue of $364-$367 million vs. the $365.35 million consensus with total bookings between $414-$417 million.

Shares of digital platform Doximity (DOCS) soared in after-market trading last night following better than expected September quarter results and revenue guidance that bookended expectations.

While September quarter results at Beazer Homes (BZH) easily beat consensus expectations, the homebuilder also reported its net new orders for the quarter fell 34.1% YoY. Beazer also shared its cancellation rate for the quarter was 32.8%, up from 11.7% in the previous year, reflecting the weakening in housing demand as a result of the sharp increase in mortgage rates. Exiting the quarter the dollar value of homes in its backlog was $1.1 billion, representing 2,091 homes, compared to $1.3 billion or 2,786 homes this time last year.

Valmont (VMI) announced the FAA granted it a nationwide Beyond Visual Line of Sight waiver. That waiver gives Valmont the ability to fly their multi-hour capable unmanned drones for commercial inspections of utility lines across the nation at a moment’s notice, eliminating the need to wait for geographic approval from the FAA.

China’s National Medicine Products Administration accepted AstraZeneca’s (AZN) application for expanded approval of Soliris to treat adults with refractory generalized myasthenia gravis in patients who are anti-acetylcholine receptor antibody positive.

King County Superior Court Judge Ken Schubert in Washington set Thursday, November 17, for a preliminary injunction hearing on Albertsons (ACI) plan to pay a $4 billion dividend in conjunction with its planned sale to Kroger (KR).

IPOs

Readers looking to dig more into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

Once again it is Friday and that means no companies are expected to report quarterly results after equities stop trading today. Those looking for more on which companies are reporting when, head on over to Nasdaq’s Earnings Calendar.

On the Horizon

Monday, November 14

  • Eurozone: Industrial Production – September

Tuesday, November 15

  • Japan: 3Q 2022 GDP
  • China: Industrial Production, Retail Sales – October
  • UK: Unemployment Rate – September
  • Eurozone: 3Q 2022 GDP
  • Eurozone: ZEW Economic Sentiment – November
  • US; Empire State Manufacturing Index – November
  • US: Producer Price Index – October

Wednesday, November 16

  • Japan: Core Machinery Orders – September
  • UK: Consumer Price Index, Producer Price Index – October
  • US: Weekly MBA Mortgage Applications
  • US: Retail Sales – October
  • US: Import/Export Prices – October 8:30
  • US; Industrial Production & Capacity Utilization – October
  • US: Business Inventories – September
  • US; NAHB Housing Market Index – November
  • US: Weekly EIA Crude Oil Inventories

Thursday, November 17

  • UK: Car Registrations – October
  • Germany: Car Registrations – October
  • Eurozone: Consumer Price Index -October
  • US: Weekly Initial & Continuing Jobless Claims
  • US: Housing Starts & Building Permits – October
  • US: Philadelphia Fed Index – November
  • US: Weekly EIA Natural Gas Inventories

Friday, November 18

  • UK: Retail Sales – October
  • US: Existing Home Sales – October

Thought for the Day

“The illusion that times that were better than those that are, has probably pervaded all ages.” ~ Horace Greeley

Disclosures

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

link

Leave a Reply

Your email address will not be published. Required fields are marked *