Daily Markets: Investors Hitting Subdued Note Ahead of Central Bank Meeting

Today’s Big Picture

Asia-Pacific equity indexes ended today’s session mixed. Taiwan’s TAIEX declined 0.18%, Japan’s Nikkei fell 0.49%, Hong Kong’s Hang Seng dropped 1.20% and China’s Shanghai Composite lost 1.86% while India’s Sensex eked out a 0.09% gain, South Korea’s KOSPI rose 0.50% and Australia’s ASX All Ordinaries closed up 0.60%. Poor manufacturing PMI results yesterday reverberated through these markets, as did continued reports of companies reengineering supply chains to reduce their reliance on China. By mid-day trading, European equity indices are mixed, and U.S. futures point to a soft open later this morning.

Trading looks to begin on a subdued note given the lack of fresh economic data and earnings reports ahead of the market open. Comments from Federal Reserve Bank of Minneapolis President Neel Kashkari that the Fed needs to press forward with tighter monetary policy until it is clear that very high levels of inflation are moving back down are likely to weigh on stocks this morning. We expect some choppiness ahead of the mini wave of tech company earnings after today’s market close. The tone for overnight and tomorrow's trading will be determined by what NetApp (NTAP), Nvidia (NVDA), Salesforce (CRM), Snowflake (SNOW), and Splunk (SPLK) have to say about chip demand, enterprise spending expectations, supply chains and dollar headwinds.

Data Download

Domestic Economy

Yesterday, the Biden administration reset expectations for economic growth and inflation. The White House Office of Management and Budget now forecasts the economy will grow 1.4% percent, after adjusting for inflation, from the end of the fourth quarter in 2021 to the end of the fourth quarter this year, down from its 3.8% forecast issued in March. Along with that revision, the inflation rate, as measured by the Consumer Price Index, is now expected to come in at 6.6% over the same period vs. the 2.9% rate forecasted in March.

At 7 AM ET, the latest weekly MBA Mortgage Application Index will be published and what it says about new applications will give an indication of what’s next for investors in the housing sector.

The July Durable Orders report will be published at 8:30 AM ET and the consensus view is looking for a 0.8% MoM increase, down from the 1.9% gain posted in June.

Pending Home Sales in July are expected to fall another 22% YoY after falling 20% the prior month.

Markets

Yesterday saw mixed returns as Energy had a strong day, closing up 3.63%, while Real Estate and Health Care declined approximately 1.40% each. The Nasdaq Composite closed essentially flat, down a mere 0.002%, the S&P 500 declined 0.22% and the Dow fell 0.47% while the Russell 2000 gained 0.18% on the day. Notable names included Proctor & Gamble (PG) contributing to the drawdown in Consumer Staples, while Twitter (TWTR) accounted for 39% of the Communications Services sector's 0.86% decline. Caterpillar (CAT) and Deere & Company (DE) combined to account for 84% of Industrial's 0.19% gain. Here’s how the major market indicators stack up year-to-date:

• Dow Jones Industrial Average: -9.44%
• S&P 500: -13.37%
• Nasdaq Composite: -20.86%
• Russell 2000: -14.53%
• Bitcoin (BTC-USD): -53.56%
• Ether (ETH-USD): -54.89%

Stocks to Watch

Before trading kicks off, Brinker (EAT), Dycom (DY), II-VI (IIVI), and Petco Health & Wellness (WOOF) will be among the companies issuing their latest quarterly results and guidance.

Even though Nordstrom’s (JWN) July quarter results came in ahead of top and bottom-line consensus expectations, the company slashed its forward guidance and now sees EPS of $2.30-$2.60 for its fiscal 2023 vs. its prior $3.20-$3.50 guidance and the $3.12 consensus. Exiting the quarter its inventory level was up 9.9% YoY and the management team shared it is taking aggressive action to clear through inventory in 2H22 and targets having its inventory clean and current by the end of the year. This action is expected to result in near-term gross margin pressure.

Sticking with retailers, Urban Outfitters (URBN) missed July consensus EPS expectations even though its revenue for the quarter rose 2% YoY to $1.18 billion, matching the consensus forecast. The increase in Retail segment comparable net sales was driven by low single-digit positive digital channel sales, while retail store sales were flat. By brand, comparable Retail segment net sales increased 8% at the Free People Group and 7% at the Anthropologie Group and decreased 9% at Urban Outfitters. Like other retailers, the company’s total inventory remained “elevated” exiting the quarter and the management team shared it will have to deploy incremental markdowns through the current quarter to sell through the excess inventory.

Toll Brothers (TOL) reported mixed July quarter results with EPS ahead of consensus expectations even though revenue for the quarter rose 10.6% YoY to $2.49 billion, just shy of the $2.52 billion consensus. Delays with municipal inspectors, continued labor shortages and supply chain disruptions, as well as a softer demand environment led the company to revise its home delivery forecast for the year to 10,000-10,300 units down from its prior guidance of 11,000-11,500.

Shares of online luxury fashion marketplace Farfetch (FTCH) are moving higher this morning following reports it reached a deal with Richemont (CFRHF) to acquire a 47.5% in Italian online fashion retailer Yoox Net-A-Porter (YNAP).

Lyft (LYFT) announced it will rent out nearly half of its office spaces in New York City, Nashville, San Francisco, and Seattle, as it doubles down on its "fully flexible" work policy.

And a quick reminder to readers, Tesla (TSLA) will split its stock 3-for-1 after today’s close and begin trading on a split-adjusted basis tomorrow (August 25).

IPOs

As of now, no IPOs are slated to be priced this week. Readers looking to dig more into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

Box (BOX), Guess? (GES), NetApp (NTAP), Nvidia (NVDA), Salesforce (CRM), Snowflake (SNOW), Splunk (SPLK), Victoria’s Secret (VSCO), and William Sonoma (WSM) are expected to report their 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

Thursday, August 25

• South Korea: Producer Price Index – July
• Germany: GDP – 2Q 2022
• Germany: Ifo Business Climate - August
• US: Weekly Initial & Continuing Jobless Claims
• US: PCE Price Index – 2Q 2022
• US: GDP – 2Q 2022
• US: Weekly EIA Natural Gas Inventories
• US: KC Fed Composite Index – August

Friday, August 26

• Japan: Tokyo CPI – August
• Germany: GfK Consumer Climate – September
• France: Consumer Confidence – August
• Italy: Consumer Confidence - August
• US: PCE Price Index – July
• US: Personal Income & Spending – July
• US: Retail Inventories ex-auto – July
• US: Michigan Consumer Sentiment Index (Final) – August

Thought for the Day

“Your setback is just a setup for a comeback.” – Steve Harvey

Disclosures

• Splunk (SPLK) is a constituent of the Foxberry Tematica Research Cybersecurity & Data Privacy Index
• Tesla (TSLA) is a constituent of the Tematica BITA Cleaner Living Index
• Tesla (TSLA) is a constituent of the Tematica BITA Cleaner Living Sustainability Screened Index
• Dycom (DY) is a constituent of the Tematica BITA Digital Infrastructure & Connectivity Index

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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Stocks Economy Smart Investing Earnings Central Banks