Daily Markets: Markets continue to react to the latest rate hike

The big picture today

Asia Pacific equity indices ended today’s session lower as the global central bank’s aggressive stance and recession fears dominated investor sentiment this week. China’s Shanghai Composite fell 0.66%, Taiwan’s TAIEX and Hong Kong’s Hang Seng lost 1.16% and 1.18% respectively, while India’s Sensex fell 1. , 73% and South Korea’s KOSPI closed down 1.81%. Australia’s ASX All Ordinaries led the way, with a 1.92% drop on overall market weakness highlighted by the names of technology and consumer services. Markets in Japan are closed today to celebrate the autumn equinox as we officially transition into autumn. In the middle of the trading day, European equity indices are down across the board and US futures indicate a rough opening later this morning.

As we close another tumultuous week for equities amid growing fears that the Federal Reserve might overshoot its plans to bring inflation back to its 2% target, investor sentiment has worsened amid falling expectations for the economy and profits. Meanwhile, higher interest rates will weigh on the valuations of both the stock market and individual stocks. So far Goldman Sachs has reduced its target for the S&P 500 to 3,600 and Bank of America expects the S&P 500 to trade between 3,300 and 3,500.

These and other revised forecasts will further weigh on investor sentiment, which is increasingly favoring cash vs. bonds and stocks, as evidenced by inflows of $ 30.3 billion in cash vs. outflows of $ 7.8 billion to global equity funds for the week ending September 21. And with the CNN Money Fear & Greed index recording “Fear”, there is further room to go down to “Extreme Fear”. As we move from the fallout from September Fed monetary policy meeting to September earnings season, sentiment is likely to give way to a “show me” mood for stocks as investors prepare for a weaker outlook. expected.

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International economy

The S&P Global Eurozone Flash Manufacturing PMI fell to 48.5 in September from 49.6 in August, missing the consensus of 48.7. This marked the third consecutive contraction in industrial activity and the largest since June 2020. The September flash services PMI followed suit, falling to 48.9 in September versus 49.8 in August and the consensus of 49. 0 with the report showing that both input and output cost inflation is accelerating.

The S&P Global / CIPS UK Flash Manufacturing PMI Index rose to 48.5 in September from 47.3 the previous month and above market expectations of 47.5. However, the data was still well below the 50 expansion-contraction line and showed continued weakness in new orders. The Flash Service PMI for September fell to 49.2 versus 50.9 in August and the expected reading of 50. According to the report, the slowdown reflected the cost of living crisis and growing economic uncertainty.

Following Russian President Vladimir Putin’s call for “partial mobilization”, the EU member looks to the eighth round of sanctions against Russia. The indications point to a number of measures under consideration, however, the key to the next steps will be a consensus among the 27 EU Member States.

Domestic economy

At 9:45 am ET, S&P Global (SPGI) will release its manufacturing PMI and Flash services for September and we strongly suspect that key data and underlying details will be priced against the Atlanta Fed’s GDPNow model for the current quarter and the Fed’s recently updated economic forecast. The latest for those respective dataset predicts 0.3% of GDP in the current quarter and 0.2% for the whole of 2022.

At 2 p.m. ET, Fed Chair Powell will deliver an opening commentary at a Fed Listens event titled Transitioning to the Post-pandemic Economy. Vice President Lael Brainard and Governor Michelle W. Bowman will moderate conversations with leaders from organizations including nonprofits, small businesses, manufacturing, supply chain management, hospitality, and the housing and education sector . So, soon after following the Fed’s latest monetary policy meeting on Wednesday and Powell’s post-meeting comments, we highly doubt there will be a return to those comments, especially given the scarce data available in the past 48 hours.

The US Senate will vote on the continued resolution to fund the government until December 16, Tuesday, September 27.

Pfizer (PFE) and the U.S. government has decided to reduce the number of COVID-19 vaccines the U.S. government will donate to other countries this year to 600 million doses from 1 billion.

Bloomberg reports that California is engaging in a plan that will make it the first US state to phase out gas furnaces and water heaters in homes.

Markets

Markets continue to react to latest rate hike and President Powell’s post-announcement comments: the Dow fell 0.35%, the S&P 500 fell 0.85%, the Nasdaq fell 1.37% and the Russell 2000 fell 2.26%. Investors assessed the long-term effects of high rates on the development of new companies and the company’s current expansion plans. The only positive sector was Healthcare as Eli Lily (LLY) increased by 4.85% on a new FDA approval for a new lung cancer treatment and Merck & Co (MRK) gained 3.53% when they expanded a phase 2 study of a new melanoma drug. Here’s how the top market indicators stack up from the start of the year:

  • Dow Jones Industrial Average: -17.23%
  • S&P 500: -21.15%
  • Nasdaq composite: -29.26%
  • Russell 2000: -23.29%
  • Bitcoin (BTC-USD): -28.21%
  • Ether (ETH USD): -64.04%

Actions to watch

Prior to the commencement of trading for US listed shares, no company should report the most recent quarterly results and guidance.

Wholesale Costco (COST) reported an August quarter earnings of $ 4.20 per share, a few pennies ahead of the consensus of $ 4.17. Revenue for the quarter also slightly exceeded consensus expectations, settling at $ 72.09 billion versus consensus $ 72 billion. Comparable sales for the quarter, excluding the impact of gasoline and foreign exchange price changes, increased 10.4% yoy with U.S. comps sales up 9.6%, beating forecast consensus of 9.3%. Ecommerce increased 8.4% on an adjusted basis. As of the quarter, Costco operates 838 warehouses and aims to open 29 new warehouses vs. 23 new net positions in the last 12 months.

Although CEO Cristiano Amon shared that its design-win pipeline has jumped to $ 30 billion, up from the $ 19 billion figure last shared, the shares of Qualcomm (QCOM) shares traded yesterday.

American Public Education (APEI) published an online guide with FY2022 revenue of $ 600- $ 610 million compared to $ 610 million. the consensus of $ 605.7 million.

IMAX (IMAX) acquired SSIMWAVE Inc., a leader in AI-based video quality solutions for media and entertainment companies.

Apple (AAPL) signed a multi-year contract with the National Football League to sponsor the Super Bowl Halftime Show, starting February 2023 with the American Football League game.

IPO

Readers looking to delve into the upcoming IPO calendar should visit Nasdaq’s latest and upcoming IPOs page.

After the close of the market today

No company should report quarterly results after the stock has stopped trading today. As we approach the end of the quarter, readers should pay attention to both positive and negative earnings pre-announcements. Those looking for more on which companies are reporting when, head to the Nasdaq Earnings Calendar.

On the horizon

Monday 26th September

  • Germany: GDP 3Q 2022 (preliminary)
  • Germany: trade expectations – September

Tuesday 27th September

  • China: industrial profits – August
  • USA: durable orders – August
  • USA: FHFA House Price Index – July
  • USA: S&P Case-Shiller Home Price Index – July
  • USA: consumer confidence – September
  • USA: sale of new homes – August

Wednesday 28 September

  • Germany: GfK Consumer Climate – October
  • United States: Weekly MBA Mortgage Applications
  • United States: Pending Home Sales – August
  • USA: Weekly stocks of EIA crude oil

Thursday 29 September

  • United Kingdom: BoE Consumer Credit – August
  • Eurozone: business and consumer survey, consumer confidence, consumer inflation expectations – September
  • Germany: CPI – September (preliminary)
  • United States: Initial and ongoing weekly claims for unemployment benefits
  • USA: GDP 2Q 2022 – Third estimate
  • USA: weekly EIA natural gas stocks

Friday 30th September

  • Japan: Retail Sales – August
  • China: manufacturing and non-manufacturing PMI – September
  • China: Caixin Manufacturing PMI – September
  • Germany: import / export prices, retail sales – August
  • Eurozone: Consumer Price Index – September
  • USA: personal income and expenditure – August
  • USA: PCE price index – August
  • USA: Chicago PMI – September
  • United States: University of Michigan Consumer Sentiment (final) – September

Thought for the day

“Don’t sell yourself short.” ~ Bruce Springsteen

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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