Daily Markets: After Fed Rate Hike, Inflation and Global Growth Concerns Remain


The big picture today

Asia-Pacific equity indices ended today’s session lower, except for South Korea’s KOSPI and Japan’s Nikkei, which gained 0.16% and 0.40% respectively. Australia’s ASX All Ordinaries ended the day mostly flat, down 0.03%, China’s Shanghai Composite fell 0.61%, Taiwan’s TAIEX fell 1.00% and India’s Sensex fell of 1.99%. Hong Kong’s Hang Seng led the way, down 2.17% on the day.

By midday, major European equity indices are down sharply across the board and US futures are pointing to an ugly open later this morning. This reversal from yesterday’s post-Federal Reserve monetary policy rally comes as 10-year Treasury yields and 2-year Treasury yields resumed their ascent and other central banks raised their interest rate earlier this morning. These hikes include the Bank of England raising interest rates this morning by 25 basis points to 1.25%, marking its fifth consecutive increase, and the Swiss National Bank raising rates to -0.25% from -0 .75%.

The sobering realization that even the Fed is waiting to see flattening inflation data is also hitting equities, meaning inflationary pressures will not ease overnight and will remain a significant headwind for economy during the second half of 2022. this realization, natural gas prices rise this morning as Russia again cuts gas volumes to Italy and Germany.

Data download

International economy

The Bank of England (BoE) interest rate decision was announced at 7:00 a.m. ET, with the bank raising rates by 25 basis points (0.25%) to take the lending rate to 1 .25%. Given that the current inflation rate in the UK is 9.0%, it remains to be seen how effective this and subsequent increases will be in putting pressure on demand for the country’s goods and services. Given Russia’s recent moves to curtail energy sales to various European countries, we believe central bank actions will do little to curb rising prices. The next rate announcement is scheduled for August 4.

11:00 p.m. ET tonight, the Bank of Japan (BoJ) will release its own update to its key rate which is expected to remain unchanged at -0.10%, which it has been since January 2016.

Domestical economy

At 8:30 a.m. ET, we’ll have the latest reading on weekly initial and continuing unemployment claims with the EIA’s weekly natural gas inventory report to follow at 10:30 a.m. ET.

Additionally, at 8:30 a.m. ET, May housing starts and building permits data will be released, and expectations are looking for 1,730,000 housing starts versus 1,724,000 in April. Readers looking to parse the data should look at single-family and multi-family data for the month, which have run at 1100-1200K and 540-625K, respectively, in recent months. As interest rates have risen in recent months, we have seen a pronounced slowdown in mortgage application volumes, which could lead to a weaker-than-expected print for May housing starts numbers.

After yesterday’s weaker-than-expected June Empire State Manufacturing Index, we’ll see how the June print for the Philadelphia Fed Manufacturing Index compares to the consensus forecast of 0.5% and its 0.5% reading. May by 1.1%.

Markets

Stocks ended higher yesterday, recouping some of their recent losses as the Federal Reserve signaled it would accelerate interest rate hikes to curb inflation. The Fed also cut its GDP forecast for 2022 to +1.7% from +2.8% in March. What the Fed expects from GDP in the second half of 2022 remains an open question, given the print of -1.5% for the March quarter and the Atlanta Fed’s GDP now at 0.0% for the second trimester. The Nasdaq Composite ended yesterday up 2.50%, while the S&P 500 gained 1.46% and the Dow Jones Industrial Average gained 1.00%. Ten of the 11 S&P sectors ended higher, led by consumer discretionary and its 3% gain on the day. The only decline was the energy sector, which fell about 3%. Including yesterday’s moves, here’s how the major market indicators stack up year-to-date:

  • Dow Jones Industrial Average: -15.60%
  • S&P 500: -20.48%
  • Nasdaq compound: -29.06%
  • Russell 2000: -23.82%
  • Bitcoin (USD-BTC): -53.07%
  • Ether (ETH-USD): -67.64%

Stocks to Watch

Prior to the start of trading for stocks listed in the United States, Jabil (JBL) and Kroger (KR) should publish its quarterly results.

KLA Corp. (KLAC) reaffirmed guidance for current quarter EPS of $4.93-$6.03 versus consensus of $5.48 with revenue in the range of $2.30-2.55 billion versus consensus of $2.42 billion. KLA also announced a $6 billion share buyback authorization, which includes an accelerated share buyback of approximately $3 billion to be completed over the next 3-6 months, with the remaining amount to be repurchased at over the next 12 to 18 months.

Revlon (REV) announced this and certain of its subsidiaries have filed voluntary Chapter 11 reorganization petitions with the United States Bankruptcy Court for the Southern District of New York.

Sony (SONY) and Honda engine (HMC) have signed a joint venture (JV) agreement to create a new company that will focus on the sale of high added value electric vehicles (EVs) and provide services for mobility. The JV aims to sell its electric vehicles and mobility services in 2025.

On its Capital Markets Day, Ferrari (racing) announced its 2022-2026 strategic plan which foresees 15 new product launches between 2023 and 2026 and reaffirmed that the first all-electric Ferrari will be unveiled in 2025

Unilever (UL) and Genomatica, a biotechnology and sustainability leader, launched a company to develop plant-based ingredients using biotechnology as alternatives to palm oil and fossil fuel-derived cleansing ingredients.

Financial LPL (LPLA) launched LPL Private Client Services Network, a program that provides LPL-affiliated advisors with access to vetted companies that can help meet the sophisticated and complex needs of advisors’ affluent clients.

Montauk Renewables (MNTK) is expected to join the Russell 3000 Index following the conclusion of the annual 2022 Russell Indices Replenishment effective with the market opening on June 27.

Prudential Bancorp (PBIP) shareholders approved an acquisition of the company and its subsidiary, Prudential Bank, by Fulton Financial (FULT).

IPOs

No new IPOs are expected to begin trading this week. Readers interested in learning more about the timing of upcoming IPOs should visit Nasdaq’s Most Recent and Upcoming IPOs page.

After today’s market close

Adobe (ADBE) is expected to release its latest quarterly results after the shares halted trading today. Those interested in learning more about which companies release their reports when head to the Nasdaq earnings calendar.

on the horizon

friday june 17

  • Euro zone: Consumer price index – May

Thought of the day

“I don’t wait for the calendar to know when I should live my life.” ~ Gene Simmons

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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