Daily Markets: The Fed vs. August Retail Sales and Industrial Production

Today’s Big Picture

Asia-Pacific equity indexes ended today’s session mixed. South Korea’s KOSPI declined 0.40%, India’s Sensex fell 0.68% and, China’s Shanghai Composite lost 1.16% led by Technology. Taiwan’s TAIEX closed essentially flat, gaining a mere 0.08% while Australia’s ASX All Ordinaries gained 0.15%, Japan’s Nikkei rose 0.21%, and Hong Kong’s Hang Seng advanced 0.44%. By mid-day trading, European equity indices are mixed, and U.S. futures point to modest losses when those markets open later this morning, although, at the time of writing, VIX futures are also down so let’s see if the market can unmix that signal.

Like the last two days, we once again have a fresh batch of economic data that could sway both today’s market open and pace of trading. We’re referring to the August Retail Sales report out at 8:30 AM ET and the August Industrial Production report at 9:15 AM. August Retail Sales are expected to flat month over month and up 0.1% excluding autos, while the August Industrial Production data is expected to 0.1% vs. July. Once we again we have a tightrope of sorts for the data to walk — stronger than expected data will be viewed by the market as enabling the Fed to pursue that “go bigger for longer” inflation fighting effort. Should the data for August be far weaker than expected, it increases the risk of stoking recession concerns, especially considering the recent downward revisions in the Atlanta Fed’s GDPNow model for the current quarter. The latest model update on September 9 produced a 1.3% Q3 GDP forecast, down from 1.4% a few days prior and 2.6% on September 1. 

Data Download

International Economy

Exports from Japan rose by 22.1% YoY to JPY 8,061.9 billion in August, less than market consensus of 23.6%. August Imports, however, topped the 46.7% YoY consensus forecast as they rose 49.9% to a fresh high of JPY 10,879.2 billion. 

Wholesale prices in Germany eased for the fourth consecutive month, rising 18.9% YoY in August, down from July’s 19.5% increase. 

Hourly labor costs in the Euro Area rose 4.2% YoY in 2Q 2022, up from 4.0% in 1Q 2022. 

The latest Bank of England Survey showed public expectations for inflation rose to a record 4.9% over the coming year, up from 4.6% in May. Expectations for inflation in five years' time fell to 3.1% from 3.5%, below the survey's long-run average. The survey also revealed public satisfaction with the BoE’s efforts to control of inflation fell to its lowest level since the survey started in 1999. Potential food for thought as the central bank gets ready for its next interest rate decision on September 22.

Domestic Economy

In addition to the August Retail Sales and Industrial Production reports we touched on above, today also brings the usual weekly Thursday data that is initial and continuing jobless claims and EIA Natural Gas Inventories. We’ll also get the September readings for both the Empire State Manufacturing Index and the Philly Fed Index. 

U.S. commuter rail service faces a disruption on Friday if a freight rail strike was not avoided. Amtrak canceled all long-distance trains nationwide starting Thursday, as it prepared for the potential freight-rail strike. Early this morning, the U.S. Department of Labor reported railway workers and companies have come to a tentative labor agreement that would avert a strike.

Yesterday, a U.S. Senate committee approved legislation that would significantly enhance U.S. military support for Taiwan, including provisions for billions of dollars in additional security assistance, amid increased pressure from China. The approval paves the way for a vote in the full Senate, but when such a vote may occur is TBD.

Markets

Yesterday saw markets take a break of sorts as the Dow eked out a 0.10% gain, the S&P 500 and the Russell 2000 rose 0.34% and 0.38%, respectively and the Nasdaq Composite gain 0.74%. Sectors were mixed with Energy and Consumer Discretionary leading the way and Materials and Real Estate providing resistance. For those paying attention, The Merge in the Ethereum platform was concluded successfully and saw Ether advance 3.53%. This had to do with a shift in how coins are mined which will increase the overall speed of the network’s ability to process transactions and decrease the energy demands of the entire network by up to 99%. For a much deeper dive on how the Merge works, check out this article: Ethereum Merge: What the Market Impact and Value Implications Will Be

Here’s how the major market indicators stack up year-to-date:

• Dow Jones Industrial Average: -14.32%
• S&P 500: -17.21%
• Nasdaq Composite: -25.09% 
• Russell 2000: -18.12%
• Bitcoin (BTC-USD): -56.52%
• Ether (ETH-USD): -55.75%

Stocks to Watch

Before trading kicks off for U.S.-listed equities, no companies are expected to report their latest quarterly results and guidance. 

Meta Platforms (META) introduced payment feature in chat on Instagram, allowing businesses to accept payments in direct messages. 

PayPal (PYPL) announced CFO Blake Jorgensen is taking a leave of absence citing health reasons. 

Danaher (DHR) announced its intention to separate its Environmental & Applied Solutions segment to create a new independent, publicly traded company comprised of Danaher's Water Quality and Product Identifications businesses. The transaction is intended to be tax-free to Danaher shareholders and expected to be completed in 4Q23.

As a result of parts and labor shortages, Raytheon Technologies (RTX) now expects delayed delivery for some of its Pratt & Whitney commercial engines.

Bloomberg reports Google (GOOGL) is cutting projects in its experimental group, the latest indication it is responding to economic slowdowns with a tighter belt.

Lear (LEA) announced it has been selected by General Motors (GM) to supply key electrification technologies for the automaker's Ultium global electric vehicle platform.

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

Adobe (ADBE) is expected to report its 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

Friday, September 16

• China: Industrial Production, Retail Sales – August
• UK: Retail Sales – August
• Eurozone: Consumer Price Index - August
• US: University of Michigan Consumer Sentiment Index (Preliminary) – August 

Thought for the Day

“The world is moving, and a company that contents itself with present accomplishments soon falls behind.” ~ George Eastman

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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