Today’s Big Picture
Asia-Pacific equity markets finished the day mixed following some U.S. Technology sector earnings disappointments. India’s SENSEX fell 1.31%, Taiwan’s TAIEX declined 0.78%, Japan’s Nikkei dropped 0.57%, Australia’s ASX All Ordinaries gave back 0.20%, and China’s Shanghai Composite closed close to flat, down 0.06%. South Korea’s KOSPI rose 0.37% and Hong Kong’s Hang Seng gained 0.78% in a broad rally led by Communications names. Major European markets are up in midday trading and U.S. Equity futures point to a positive open.
The earnings season continues to unfold as yesterday’s index results pointed to some strained valuations in Technology and softer-than-expected guidance for 2H 2023. This will set the tone for what’s to come over the next few weeks when the pace of earnings reports kicks into a higher gear.
Investors should expect some action today in Technology names as it is not only an options expiration date, but the extraordinary Nasdaq Composite and Nasdaq 100 index rebalance is scheduled for today. Portfolio managers tracking these indexes have been busy preparing for the changes, announced on July 11 and effective Monday the 24, but today is the last day to implement those announced changes. Highflyers Microsoft (MSFT), Apple (AAPL), Nvidia (NVDA), Amazon (AMZN), and Tesla (TSLA) will see their index weights reduced and the aggregate excess weight will be redistributed among the remaining names in the indexes. Names expected to be added to significantly include Starbucks (SBUX), Mondelez (MDLZ), Booking Holdings (BKNG), and Broadcom (AVGO), among others.
Data Download
International Economy
The annual inflation rate in Japan edged up to 3.3% YoY in June from 3.2% in May but less than market forecasts of 3.5%. The core consumer price index, which excludes fresh food but includes fuel costs, rose 3.3% YoY in June, accelerating slightly from a 3.2% gain in May
Retail sales in the UK rose by 0.7% MoM in June, up from the downwardly revised 0.1% increase for the prior month and far better than the expected reading of +0.2%. The June figure marked the third straight month of growth in retail trade and the steepest pace in the sequence. On a yearly basis, retail trade dropped by 1.0%, the 15th consecutive month of decline, however, the figure was better than the forecasted 1.5% drop.
India, the world’s biggest rice exporter, has banned exports of non-basmati white rice, effective immediately, to ensure adequate availability in the country and rein in soaring domestic prices. The move comes at a time when the onset of the El Niño weather pattern threatens to tighten supplies, potentially pushing rice prices even higher.
Domestic Economy
We have a very quiet domestic economic calendar today and the next update for the Atlanta Fed GDPNow model, which currently sees 2.4% for the June quarter, will be updated next on Wednesday, July 26. That’s the same day the Fed will conclude its next monetary policy meeting, after which it is expected to announce another 25-basis point rate hike.
Markets
As noted, Technology earnings disappointed yesterday as both that sector and Communication Services fell 2.00%. Additionally, Consumer Discretionary (-3.41%) was hit after traders reacted to lower-than-expected results from Amazon [-3.99%] and Tesla [-9.74%]. All other sectors except for Real Estate (-0.34%) were higher. This was reflected in the broad indexes as the Dow (0.47%) was the only index to post a gain. The S&P 500 fell 0.68%, the Russell 2000 dropped 0.89% and the Nasdaq Composite closed 2.05% lower. Helping the Dow post gains yesterday was Johnson & Johnson (JNJ) [6.07%] as the company posted a strong quarter and lifted guidance for 2023.
Here’s how the major market indicators stack up year-to-date:
- Dow Jones Industrial Average: 6.27%
- S&P 500: 18.11%
- Nasdaq Composite: 34.37%
- Russell 2000: 11.69%
- Bitcoin (BTC-USD): 79.58%
- Ether (ETH-USD): 57.88%
Stocks to Watch
Before U.S. equity markets begin trading today, American Express (AXP), AutoNation (AN), Comerica (CMA), and Sensient (SXT) are expected to report their quarterly results.
Capital One (COF) reported mixed June quarter results with better-than-expected EPS offset by a modest shortfall in its top line for the period. Net interest income slipped from the prior quarter and net charge-offs rose as credit reverted to more normal levels after the pandemic. Total deposits stood at $343.7 billion exiting the quarter down from $349.8 billion at the end of the March quarter.
June quarter results at CSX (CSX) came in as expected with the company benefitting from lower fuel prices while a decrease in intermodal volumes more than offset the effects of volume growth in coal and merchandise. Notable areas of volume weakness for the company included chemicals (-3%), ag/food products (-2%), and forest products.
Coatings company PPG Industries (PPG) delivered better-than-expected top and bottom-line June quarter results and issued in-line guidance for both the current quarter and 2023. In discussing its forward view, the company shared it anticipates “the global macroeconomic environment will remain generally consistent with the second quarter including continued tepid global industrial production, along with some incremental slowing in U.S. architectural residential repaint due to significantly lower existing home sales."
Shares of SAP SE (SAP) sank yesterday after the company released second-quarter results and lowered the high-end of its revenue forecast for the rest of the year. For this year, it now expects cloud and software sales between €27.0-€27.4 billion compared to the previous forecast of €26.9-€27.4 billion with cloud revenue in the range of €14.0- €14.2 billion. Previously SAP saw its 2023 cloud revenue in the range of €14.0-€14.4 billion vs. €11.43 billion in 2022.
AbbVie (ABBV) announced an expert panel of the EU drug regulator, the European Medicines Agency (EMA), endorsed conditional marketing authorization for epcoritamab, a treatment it co-developed with Danish biotech Genmab (GMAB) for lymphoma.
IPOs
Near-term the calendar for such activity looks rather thin. Readers looking to dig deeper into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.
After Today’s Market Close
When equities stop trading today, there are no companies expected to report their quarterly results. Those looking for more on upcoming quarterly earnings reports should head on over to Nasdaq’s Earnings Calendar.
On the Horizon
Monday, July 24
- Japan: Flash Manufacturing PMI - July
- Eurozone: Flash Manufacturing and Services PMIs – July
- UK: Flash Manufacturing and Services PMIs - July
- US: S&P Global Flash Manufacturing and Services PMIs – July
Tuesday, July 25
- Germany: Ifo Business Climate Index – July
- UK: CBI Industrial Trends Orders - July
- US: FHFA Housing Price Index – May
- US: S&P Case Shiller Home Price Index – May
- US: Consumer Confidence – July
Wednesday, July 26
- US: Weekly MBA Mortgage Applications
- US: New Home Sales – June
- US: Weekly EIA Crude Oil Inventories
- US: FOMC Rate Decision
Thursday, July 27
- China: Industrial Profits YTD 2023 – June
- Germany: GfK Consumer Climate – August
- European Central Bank Interest Rate Decision
- US: Weekly Initial & Continuing Jobless Claims
- US: 2Q GDP
- US: Durable Orders – June
- US: Pending Home Sales – June
- US: Weekly EIA Natural Gas Inventories
Friday, July 28
- Japan: Consumer Price Index – July
- Eurozone: Business and Consumer Survey – July
- Germany: Consumer Price Index - July
- US: Personal Income & Spending, PCE Price Index – June
- US: Employment Cost Index – 2Q 2023
- US: The University of Michigan Consumer Sentiment Index – July
Thought for the Day
“Perfect moves hold you back from moves at all.” ~Anonymous
Disclosures
- Broadcom (AVGO) is a constituent of the Tematica BITA Digital Infrastructure & Connectivity Index
- Microsoft (MSFT), Apple (AAPL), Broadcom (AVGO) are constituents of the Tematica Research Thematic Dividend All-Stars Index
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Chris Versace
Christopher (Chris) Versace is the Chief Investment Officer and thematic strategist at Tematica Research. The proprietary thematic investing framework that he’s developed over the last decade leverages changing economic, demographic, psychographic and technology landscapes to identify pronounced, multi-year structural changes. This framework sits at the heart of Tematica’s investment themes and indices and builds on his more than 25 years analyzing industries, companies and their business models as well as financial statements. Versace is the co-author of “Cocktail Investing: Distilling Everyday Noise into Clear Investing Signals” and hosts the Thematic Signals podcast. He is also an Assistant Professor at NJCU School of Business, where he developed the NJCU New Jersey 50 Index.
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Mark Abssy
Mark Abssy is Head of Indexing at Tematica Research focused on index and Exchange Traded Product development. He has product development and management experience with Indexes, ETFs, ETNs, Mutual Funds and listed derivatives. In his 25 year career he has held product development and management positions at NYSE|ICE, ISE ETF Ventures, Morgan Stanley, Fidelity Investments and Loomis Sayles. He received a BSBA from Northeastern University with a focus in Finance and International Business.
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