Daily Markets: Stocks could be on hold until Powell speaks


The big picture today

Asia-Pacific stock markets ended today’s session higher across the board except for the Japanese Nikkei, which closed down 0.21%. Hong Kong’s Hang Seng led the way, up 2.16% on a broad rally led by consumer services and consumer durables. China’s Shanghai Composite closed mostly flat, gaining just 0.05%, Australia’s ASX All Ordinaries rose 0.52%, India’s SENSEX rose 0.67%, and Taiwan’s TAIEX and KOSPI South Korean gained 1.16% and 1.61% respectively.

At midday, European equity indices are mostly up, with only Czech Republic markets down slightly. U.S. futures point to a slightly positive market open later this morning, but several new economic data releases ahead of the market open could alter that outlook, which may explain why stock futures and VIX are up , at least at the time of writing. Barring shocking or unexpected findings, we’ll likely see the stock market in a waiting pattern until it hears what Fed Chairman Powell has to say at 1 p.m. ET. Powell will deliver a speech at the Brookings Institution, which may confirm recent official indications from the Fed that the Fed may opt for lower rate hikes going forward. What he says about the potential terminal rate will likely have a much bigger impact on the stock market and the yield curve.

Data download

International economy

Housing starts in Japan fell 1.8% year-on-year in October, missing the expected decline of 1.3%.

China’s NBS manufacturing PMI fell to 48.0 in November from 49.2 the previous month, missing the market forecast of 49.0. It was the second consecutive month of contraction in factory activity and the fastest pace since April, amid a new wave of COVID cases and tight restrictions in some major cities. The NBS non-manufacturing PMI fell to 46.7 in November 2022 from 48.7 a month earlier.

The annual inflation rate in the eurozone fell to 10% in November from a record high of 10.6% in October, beating market forecasts of 10.4%, according to preliminary estimates. The rate of increase in energy (34.9% vs. 41.5%) and services (4.2% vs. 4.3%) costs slowed compared to October, while food, alcohol and tobacco increased at a faster rate (13.6% versus 13.1%). The annual core inflation rate, which excludes energy, food, alcohol and tobacco prices, remained stable at a record high of 5% in November, in line with forecasts .

As Russia bombarded Ukraine’s energy infrastructure, the North Atlantic Treaty Organization (NATO) doubled down on its wish to one day make Ukraine a member of the military alliance.

Domestical economy

We have a big day of economic data that includes the usual weekly Wednesday data like the MBA Mortgage Demand Index and Crude Oil Inventory data from the Energy Information Administration. Ahead of Fed Chairman Jerome Powell’s presentation later in the afternoon, we expect labor market data from ADP’s November Employment Changes Report and reports of October JOLTS job openings come under scrutiny, as does the second revision of Q3 2022 GDP.

Following Powell’s comments, the latest Fed Beige Book will be released at 2 p.m. ET. No doubt market watchers will weigh what he says against Powell’s comments as they seek to triangulate the likely outcome of next week’s Fed monetary policy meeting.

The House of Representatives is expected to vote today on legislation to avert a railroad strike.

Markets

On the surface, markets looked somewhat down yesterday with the Russell 2000 up 0.31%, the Dow Jones unchanged, the S&P 500 down just 0.16% and the Nasdaq Composite down 0.59% . The sectors were mixed, led by real estate up 1.67% and energy up 1.51%, but offset by utilities and technology, down 0.74% and 0.98 %, respectively. Apart Crowd (CRWD) dropping 18% on reduced fourth-quarter revenue and lower guidance, there were no big surprises in individual names yesterday. What we have seen are various large-cap names struggling in certain sectors. For example, Consumer Discretionary saw names like Best Buy (BBY), Chipotle Mexican Grill (CMG)and General Motors (GM) show gains on the day only to be offset by losses in Amazon (AMZN), McDonald’s (MCD)and Tesla (TSLA).

Here’s how the major market indicators stack up since the start of the year:

  • Dow Jones Industrial Average: -6.84%
  • S&P 500: -16.96%
  • Nasdaq compound: -29.79%
  • Russell 2000: -18.45%
  • Bitcoin (USD-BTC): -64.56%
  • Ether (ETH-USD): -67.03%

Stocks to Watch

Prior to the start of trading for stocks listed in the United States, Frontline (FRO), Hormel Foods (HRL), and Petco Health and Wellness (WOOF) will be one of a handful of companies to release their latest quarterly results.

Revenue for the quarter from October to Hewlett Packard Enterprises (HPE) rose 7% year-on-year to $7.87 billion, well ahead of the consensus of $7.39 billion. However, EPS for the quarter only matched expectations at $0.57. Compute and Intelligent Edge saw particularly strong revenue growth, each up more than 20%. Ahead of its HPE Discover Frankfurt event which will focus on hybrid cloud transformation strategies, HPE reaffirmed its 2022 EPS guidance of $1.96-$2.04 from consensus of $2.00 and released guidance EPS up for the current quarter by $0.50 to $0.58 compared to the market consensus of $0.49.

Whereas CrowdStrike (CRWD) announced October quarter results that beat consensus expectations for revenue and EPS, the company issued a mixed guidance for the current quarter. While EPS for the January quarter is expected to be $0.42 to $0.45 versus consensus of $0.34, the company shared revenue guidance for the quarter of 619.1 to 628.2 million versus the consensus of $634.2 million. As Crowdstrike explained, “Total net new ARR was below our expectations as increased macro headwinds lengthened sales cycles with smaller customers and caused some larger customers to seek release dates. beginning of subscription in several phases, which delays the recognition of the ARR until the next quarters. In response, CRWD shares fell in spare parts trading last night, dragging other cybersecurity stocks lower.

Despite the release of October quarter results that easily exceeded consensus expectations, Intuit (INTU) issued lower revenue and EPS guidance for its January quarter. As the company explains, Credit Karma saw continued deterioration across all verticals in the final weeks of the first quarter. For its January quarter, Intuit forecasts EPS of $1.41-$1.45 versus consensus of $2.06 with revenue in the range of $2.8-2.9 billion, below consensus of $3.06 billion.

IPOs

As we head into the holiday season, the short-term IPO schedule is quite light. Readers who want to dig deeper into the schedule of upcoming IPOs should visit Nasdaq’s Latest and Upcoming IPOs page.

After today’s market close

Box (BOX), Credo Technology Group (CRD), Five Below (FIVE), Okta (OKTA), PVH (PVH), Salesforce (CRM), Snowflake (SNOW), Splunk (SPLK) and Victoria’s Secret (VSCO) are among the names that are expected to report their 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

Thursday, December 1

  • Japan: Manufacturing PMI at Jibun Bank Japan – November
  • Taiwan: S&P Global Taiwan Manufacturing PMI – November
  • China: Caixin China General Manufacturing PMI – November
  • Eurozone: S&P Eurozone World Manufacturing PMI – November
  • JPMorgan Global Manufacturing PMI – November
  • United States: Challenger Job Cuts Report – November
  • United States: Initial and Continuing Weekly Unemployment Claims
  • United States: Personal income and expenses – October
  • United States: PCE price index – October
  • United States: S&P Global Manufacturing PMI – October
  • United States: ISM manufacturing index – November
  • United States: Construction spending – October
  • United States: EIA Weekly Natural Gas Inventories

Friday, December 2

  • Germany: Import/Export – October
  • Euro zone: PPI – October
  • United States: employment report – November

Thought of the day

“Smile! We’re halfway through Friday. ~ Anonymous

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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