Today’s Big Picture

Asia-Pacific equity indexes ended today’s session up across the board except for Australia’s ASX All Ordinaries, which closed 0.70% lower. Japan’s Nikkei eked out a 0.10% gain, South Korea’s KOSPI rose 0.23%, India’s Sensex 0.40%, China’s Shanghai Composite 1.64% and Taiwan’s TAIEX 2.62%. Hong Kong’s Hang Seng set the pace, up 4.11% on another broad rally, again led by Finance and Technology Services names with Communications and Energy Minerals lagging.

By mid-day trading, major European equity indices are mixed and U.S. futures point to a positive open later this morning with Nasdaq eMinis signaling some tech strength today.

We could see that expectation change as we receive quarterly earnings from Home Depot (HDand Walmart (WMTas well as the October Producer Price Index. Earnings from Home Depot and Walmart often serve as a barometer of consumer spending as well as an indicator of how good a job retailers are doing at managing bloated inventories. Investors will be looking to see the impact of those efforts on profit margins as well as how company guidance covering the holiday shopping season compares to the National Retail Federation’s +6%-8% YoY forecast.

The question yet to be answered by the October Producer Price Index (PPI) is whether it confirms the October Consumer Price Index (CPI) that showed inflation pressures have started to ease. The headline figure for October is expected to fall to 8.2% YoY from September’s 8.5% figure, while the core reading is forecasted to remain unchanged at 7.2%. If the PPI data joins the October CPI in coming in softer than expected, the notion the Fed is likely to boost interest rates by a smaller amount at its December monetary policy meeting compared to the last few rate increases is likely to solidify. If not, we estimate that the CME FedWatch Tool will swing back to showing a greater likelihood for another 75-basis point rate hike in December.

Previously, we’ve shared that there are several weeks to go until the Fed concludes that next meeting on December 14 with a lot more inflation data to be published. Until we see a clear pattern of slowing inflation emerge, odds are each of those data points will bring some degree of uncertainty and market volatility with it. We also have to remember that just because the Fed eventually downshifts the size of its rate hikes doesn’t mean it’s done increasing rates overall. Federal Reserve Governor Christopher Waller sent a clear message over the weekend when he said, “We’ve still got a ways to go. This isn’t ending in the next meeting or two.” The question we wrestle with is to what degree expectations have factored in the full impact of still increasing interest rates on the economy and 2023 earnings expectations.

And at some point today, the world’s population is expected to reach 8 billion people, with the latest 1 billion added in the last 12 years. For those wondering how quickly it will hit 9 billion, that’s not expected until 2037. 

Data Download

International Economy

Preliminary data showed the Japanese economy unexpectedly shrank 0.3% QoQ in 3Q 2022, missing the market consensus of 0.3% growth and reversing from an upwardly revised 1.1% rise in 2Q 2022. 

The impact of rising COVID infections and strict restrictions impacted China’s October Retail Sales, which fell 0.5% YoY vs. the 2.5% YoY gain in September. China’s industrial production expanded 5.0% YoY in October, less than the market consensus of a 5.2% increase and slower than September’s 6.3% rate.

The unemployment rate in the UK edged higher to 3.6% in the three months to September of 2022 from 3.5% in the previous period, which was a new low since 1974.

The Eurozone economy expanded 2.1% YoY during the September quarter, in line with the first estimate. While it marked the sixth straight quarter of expansion, it was also the weakest. On a QoQ basis, the Eurozone economy expanded 0.2% in the September quarter, also matching the first estimate.

The ZEW Indicator of Economic Sentiment for the Euro Area improved to -38.7 in November from -59.7 in October. For context, the November reading was the highest reading since June. The indicator of the current economic situation increased by 5.5 points to -65.1, while inflation expectations fell by 16.4 points to -52.2.

OPEC reduced its forecast for global oil demand for the fifth time since April, saying the world economy has entered a period of “significant uncertainty and rising challenges” for global crude supplies. Citing downside risks that include high inflation, monetary tightening by major central banks, high sovereign debt levels in many regions, tightening labor markets, and persisting supply chain constraints OPEC+ now sees this year’s growth at 2.55 million barrels per day (bbl/day), down 100K bbl/day from its previous forecast. Next year, it sees oil demand rising by 2.24 million bbl/day, also 100K bbl/day lower than its prior outlook.

Domestic Economy

In addition to the October Producer Price Index report, the November Empire State Manufacturing Index will also be reported at 8:30 AM ET. The November figure is expected to rebound to -5.0 vs. October’s -9.1 print. 

Markets

Markets traded off slightly on the evolving macroeconomic picture. The Dow fell 0.63%, the S&P 500 dropped 0.89% and the Nasdaq Composite and Russell 2000 closed 1.12% and 1.14% lower, respectively. Sectors were down across the board except for Healthcare which was essentially flat with a nominal gain of 0.03%. Real Estate took the biggest hit yesterday, down over 2.60%, followed by Consumer Discretionary and Financial names, each down over 1.50%. Netflix (NFLX) continued to make up ground after losing 14.72% between October 26 and November 9 as yesterday’s 3.15% gain puts it just slightly ahead of the October 26 closing price.

Here’s how the major market indicators stack up year-to-date:

  • Dow Jones Industrial Average: -7.71%
  • S&P 500: -16.97%
  • Nasdaq Composite: -28.44% 
  • Russell 2000: -17.11%
  • Bitcoin (BTC-USD): -64.13%
  • Ether (ETH-USD): -66.33%

Stocks to Watch

Before trading kicks off for U.S.-listed equities, Energizer (ENR), Evoqua Water (AQUA), Krispy Kreme (DNUT), Home Depot, and Walmart are all expected to report their latest quarterly results. 

Apple (AAPL) is offering a “very special Mac campaign” – a discount of as much as 10% off its 14-inch and 16-inch MacBook Pros with M1-based chips, according to businesses and Apple retail employees. Businesses that buy 5 to 24 MacBook Pros in any combination of screen size and configuration will get 8% off, while bulk purchases of 25 units or more will get a 10% discount. The deal runs through Dec. 24.

Paysafe’s (PSFE) prepaid eCash solution “paysafecard” is now accepted as a new alternative payment option on Microsoft’s (MSFT) Microsoft.com and Xbox.com in U.S. and eight additional countries in Europe. 

Specialty alloy-based materials company Carpenter Technology Corporation (CRS) announced it will increase base prices by an average of 7%-12% on new, non-contract orders across the majority of its premium products. The increases will be effective with new orders placed after November 15.

In response to the current macro environment, gene sequencing company Illumina (ILMNannounced it is reducing its headcount by ~5%. As of January of this year, the company had 9,825 employees.

Tencent (TCEHY) has reportedly begun a new round of layoffs across its video streaming, gaming, and cloud businesses.

Bloomberg reports Credit Suisse Group AG (CS) started cutting senior bank jobs in Asia as it carries out plans to reduce its global headcount by 9,000.

In response to slowing macroeconomic conditions that have impacted demand in recent weeks, FedEx Freight, the less-than-truckload arm of FedEx (FDX), will furlough an undetermined number of drivers starting in early December. The furloughs are scheduled to last about 90 days, during which time affected workers will continue to receive health benefits and will be allowed to file for unemployment benefits in their respective states of residence.

Reports indicate Estée Lauder (EL) is nearing a deal to buy Tom Ford for roughly $2.8 billion. Tom Ford’s beauty business is considered to be an ultra-prestige brand.

IPOs

Defense and tactical system manufacturer KWESST Micro Systems (KWE) is expected to start trading in the week ahead. Readers looking to dig more into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

Advance Auto (AAP) and Varex Imaging (VREX) 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

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

“Keep calm when things don’t go according to your expectations! Beautiful things always meet friction.” ― Ernest Agyemang Yeboah

Disclosures

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

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