Today’s Big Picture
Asia-Pacific equity markets finished the day higher, except for South Korea’s KOSPI which declined 0.41%, and China’s Shanghai Composite which closed 1.34% lower on continued mainland real estate pressures. Australia’s ASX All Ordinaries rose 0.29%, both Hong Kong’s Hang Seng and India’s SENSEX posted gains of just over 0.30%, Japan’s Nikkei advanced 0.48%, and Taiwan’s TAIEX closed 0.85% higher in a mixed day led by Commercial Services names.
European markets are mostly up in midday trading and US equity futures point to a positive open.
Soon after U.S. equities begin trading, S&P Global (SPGI) will publish its Flash August US Manufacturing and Services PMI which is expected to show another month of contraction in the Manufacturing economy while the Services one continued to expand. Those figures as well as the insights on inflation and prospects for the final month of the current quarter will be hashed over ahead of Fed Chair Powell’s comments at Jackson Hole on Friday. While the base case for Powell’s comments is his reiteration of the Fed remaining data-dependent ahead of its September meeting, this morning’s data could alter the word choices used to reiterate that stance.
After today’s market close, investors will be closely watching quarterly results from Nvidia (NVDA) following the meteoric rise this year, largely tied to the promise of AI. The company’s results and guidance from the company will be a litmus test that will indicate if near-term market expectations for the promise of AI have gotten ahead of themselves.
Data Download
International Economy
Flash data showed the au Jibun Bank Japan Manufacturing PMI edged up to 49.7 in August from 49.6 in July, slightly above the market forecast of 49.5 marking the third consecutive month of contraction in factory activity. By comparison, the Flash Services PMI increased to a three-month peak of 54.3 in August, the 12th consecutive month of growth and the fastest since May, lifted by a solid rise in new orders.
The HCOB Eurozone Manufacturing PMI edged higher to 43.7 in August from the three-year low of 42.7 in the previous month, ahead of market expectations of 42.6 but remaining deep in the contractionary territory. However, the August data marked the fourteenth consecutive month of factory activity contraction with new orders extending their decline at one of the fastest paces since the global financial crisis. Flash data revealed the Services PMI contracted for the first time since 2022, dropping to 48.3 in August and missing the market forecasts of 50.5. Backlogs of work declined for a second successive period. On prices, output charges rose at the slowest rate since October 2021, while input inflation picked up due mainly to rising salary pressures.
The Flash S&P Global/CIPS UK Manufacturing PMI fell to 42.5 in August from 45.3 in the previous month, well below expectations of 45, marking the thirteenth consecutive decline in British manufacturing activity. Flash data showed the Services PMI fell to 48.7 in August, returning to contraction territory for the first time since January. New orders for the Services sector dropped to its sharpest pace since November 2022, while output decreased at its joint-fastest in over two and a half years.
Domestic Economy
If it’s Wednesday, and it is, we have the latest weekly data for the MBA Mortgage Applications Index and crude oil inventory data from the Energy Information Administration. In addition to the August Flash PMI data discussed above that will be released shortly after the market open, July New Home Sales data will be released at 10 AM ET.
Markets
Mixed earnings announcements from retailers put a damper on investor enthusiasm yesterday as sectors were mostly lower. A 3.75% and 0.83% gain from Lowe’s Companies (LOW) and Tesla (TSLA) were enough to lift the Consumer Discretionary sector 0.15% as measured by the Consumer Discretionary Select SPDR Fund (XLY) as a wide range of retailer shares saw losses yesterday. Financials took the biggest hit, down 0.94% followed by Energy (-0.77%). Broad indexes were lower except for the Nasdaq Composite which came close to flat with a 0.06% gain. Both the Rusell 2000 and the S&P 500 declined 0.28% and the Dow closed 0.56% lower. In individual names, International Flavors & Fragrances (IFF) gained 3.75% after shares tested YTD lows recently for a cumulative 5.76% gain since last Wednesday.
Here’s how the major market indicators stack up year-to-date:
- Dow Jones Industrial Average: 3.44%
- S&P 500: 14.27%
- Nasdaq Composite: 29.04%
- Russell 2000: 5.09%
- Bitcoin (BTC-USD): 56.54%
- Ether (ETH-USD): 36.13%
Stocks to Watch
Before U.S. equity markets begin trading today, Abercrombie & Fitch (ANF), Analog Devices (ADI), Bath & Body Works (BBWI), Dycom (DY), Foot Locker (FL), Kohl's (KSS), Peloton (PTON), and Williams-Sonoma (WSM) will be among the handful of companies reporting their quarterly results.
Toll Brothers (TOL) reported July quarter results that handily beat consensus expectations as the number of homes delivered in the quarter rose 5% YoY. Exiting July, its backlog of homes was 7,295, down 32% YoY and the value of that backlog was $7.9 billion, down 30% vs. year-ago levels. For the current quarter, the homebuilder sees deliveries of 2,650-2,750 and lifted its 2023 delivery guidance to 9,500-9,600 units, up from 8,900-9,500.
Urban Outfitters (URBN) shares traded higher in after-market trading last night after topping consensus expectations for its July quarter. Comparable Retail segment net sales increased 4.9% with gains in both retail stores and digital channels. By brand, comparable Retail segment net sales increased 26.9% at the Free People Group, 10.6% at the Anthropologie Group, and decreased 14.1% at Urban Outfitters. Based on its assessment of the consumer, management shared that its total company sales growth for the current quarter “could be in the high-single digits.”
Late yesterday, the Teamsters voted by an overwhelming 86.3% to ratify what is being labeled as a “historic” collective bargaining agreement in the history of UPS (UPS). The five-year contract raises wages for full- and part-time workers, creating more full-time jobs. Next up are the negotiations between the UAW and the Detroit Three, better known as Ford Motor (F), General Motors (GM) and Stellantis (STLA).
Reports suggest the Federal Trade Commission is expected to open an in-depth probe on Wednesday of Qualcomm’s (QCOM) purchase of Israeli chipmaker Autotalks, which makes chips for vehicle-to-everything communications, known as V2X.
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
Guess? (GES), NetApp (NTAP), Nvidia (NVDA), and Splunk (SPLK) are slated to report quarterly results after equities stop trading. Those looking for more on upcoming quarterly earnings reports should head on over to Nasdaq’s Earnings Calendar.
On the Horizon
Thursday, August 24
- US: Weekly Initial & Continuing Jobless Claims
- US: Durable Orders – July
- US: Weekly EIA Natural Gas Inventories
Friday, August 25
- Japan: Consumer Price Index – August
- Germany: GDP – 2Q 2023
- Germany: Ifo Business Climate Index - August
- US: The University of Michigan Consumer Sentiment Index (Final) – August
Thought for the Day
“Everything good, everything magical happens between the months of June and August.”—Jenny Han
Disclosures
- Splunk (SPLK) is a constituent of the Foxberry Tematica Research Cybersecurity & Data Privacy Index
- Dycom (DY), Nvidia (NVDA), Qualcomm (QCOM) 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.
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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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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