Daily Markets: Markets in Holding Pattern Ahead of Inflation Updates

Today’s Big Picture

Asia-Pacific equity markets finished the day mixed: South Korea’s KOSPI fell 0.83% in a broad decline led by Consumer Services names, and Taiwan’s TAIEX gave back 0.46%. Japan’s Nikkei closed flat, up a mere 0.01%, Australia’s ASX All Ordinaries gained 0.18%, India’s SENSEX added 0.42% while China’s market management efforts seemed to have some effect as the Shanghai Composite rose 1.29% and Hong Kong’s Hang Seng closed 0.94% higher. European markets are mostly lower in midday trading and U.S. equity futures are pointing to a muted, but higher open.

As we have no market moving economic data or earnings from companies that constitute a significant portion of any major market index, equity markets are in a holding pattern today. This won’t last long, given tomorrow’s second look at 4Q 2023 GDP, Thursday’s January PCE Price Index data, and the rush of February Manufacturing PMI data on Friday. Taken together, those pieces of data could either reaffirm or reshape expectations for the economy, potentially impacting rate cut expectations by the Fed.

Based on the February Flash PMI data from S&P Global and the preponderance of January inflation data that pushed against the softening narrative, this week’s coming data could push rate cut expectations into 2H 2024. So far, the surprising resilience of the U.S. economy has allowed investors to feel comfortable shrugging off those concerns; however, if upcoming data suggests a different picture is on the horizon, we could see investors selling into the gains generated since the market’s late October rally.

Data Download

International Economy

The annual inflation rate in Japan dropped to 2.2% in January from 2.6% in the prior month, pointing to the lowest figure since March 2022. Japan's core consumer price index, which excludes fresh food but includes fuel costs, rose 2% in January, slowing from a 2.3% gain in December and posting the lowest reading since March 2022. However, the January figure came in above market forecasts of 1.8%.

The GfK Consumer Climate Indicator for Germany increased to -29.0 heading into March, from February's 11-month low of -29.6, matching market forecasts.

Domestic Economy

At 8:30 AM ET, January Durable Orders will be published, and the market sees the headline figure falling 4.5% MoM. Nondefense, non-aircraft durable orders, the proxy for capital spending, is expected to inch up 0.1% in January compared to December.

At 9 AM ET, the S&P Case-Schiller Home Price Index for December will be released and the consensus forecast calls for it to rise 6.0% YoY, up from December’s 5.4% figure.

At 10 AM ET, the Conference Board’s February reading for Consumer Confidence will be issued and the market prediction calls for a modest boost to 115.0 compared to 114.8 in January. Also at 10 AM, the February Richmond Fed Manufacturing and Services Index will be published, which will be followed by the Dallas Fed Services Index at 10:30 AM ET.

Markets

Looking at sector returns, Utilities, Communication Services, and Real Estate led equities lower, declining 1.97%, 1.46%, and 1.14%, respectively. The remaining sectors were mixed, led by Energy’s 0.35% gain. From a broad market index perspective, the recent narrative seemed to flip as the Russell 2000 posted a 0.61% gain while the Nasdaq Composite, Dow, and S&P 500 ended the day 0.13%, 0.16%, and 0.38% lower.

Last week saw shares of Palo Alto Networks (PANW) trade-off heavily after their earnings call. Yesterday, news of a noted investor purchasing what looked like 100 of the 200 strike January 2025 expiration call option contracts piqued traders’ interest, resulting in a one-day gain of 7.33% gain for PANW shares. The Investor? Former Speaker of the House Nancy Pelosi. Here’s how the major market indicators stack up year-to-date:

• Dow Jones Industrial Average: 3.66%
• S&P 500: 6.28%
• Nasdaq Composite: 6.43%
• Russell 2000: 0.09%
• Bitcoin (BTC-USD): 29.85%
• Ether (ETH-USD): 38.35%

Stocks to Watch

American Tower (AMT), AutoZone (AZO), CAVA Group (CAVA), Henry Schein (HSIC), JM Smucker (SJM), Lowe’s (LOW), Macy’s (M), Portillo’s (PTLO), Sealed Air (SEE), and Shift4 Payments (FOUR) are expected to release quarterly earnings before equities begin trading later this morning.

Pre-market breadth is healthy today as 249 names in the S&P 500 have traded hands so far this morning with 177 gainers and 72 decliners. In addition to being one of yesterday’s top gainers, Palo Alto Networks is sitting on top of the premarket leaderboard, on track to open over 5% higher. Shares of Henry Schein (HSIC) are poised to open close to 7% lower after the company’s reported earnings and revenue miss earlier this morning.

Shares of composite materials and decking company Trex (TREX) are moving higher this morning following the company’s beat and raise December quarter. The company sees current quarter revenue between $360-$370 million compared to the $307 million consensus and the $195.75 million booked for the December quarter.

Despite reporting January quarter bottom line results that topped market expectations, shares of Workday (WDAY) were under pressure in aftermarket trading last night. Revenue for the quarter matched expectations of $1.92 billion and the total subscription revenue backlog stood at $20.9 billion, up 27% YoY and compared favorably to $18.45 billion exiting the prior quarter. Alongside those results Workday shared it will acquire HiredScore, a leading provider of AI-powered talent orchestration solutions.

Unity Software (U) reported December quarter revenue of $609.27 million, up 35% YoY and easily blowing away the $551 million consensus forecast. However, for the current quarter the company only provided guidance for its Strategic Portfolio, which includes its engine, cloud and monetization businesses. That aggregated business is expected to generate revenue of $415-$420 million in the current quarter and $1.76-$1.80 billion for 2024.

Expedia Group (EXPE) announced it is reducing its workforce by approximately 1,500 employees.

American Homes 4 Rent (AMH) will replace Physicians Realty Trust (DOC) in the S&P MidCap 400 effective before the opening of trading on Friday, March 1. Healthpeak Properties Inc. (PEAK) is acquiring Physicians Realty Trust in a deal expected to be completed soon pending final conditions.

IPOs

Social media platform Reddit (RDDT) and connective chip company Astera Labs have each filed with the SEC to raise up to $100 million in initial public offerings.

Readers who want to dig deeper into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

3D Systems (DDD), Agilent (A), Ambarella (AMBA), Axon (AXON), Beyond Meat (BYND), Bumble (BMBL), eBay (EBYA), First Solar (FSLR), Inter Parfums (IPAR), Redfin (RDFN), Splunk (SPLK), Stitch Fix (SFIX), Urban Outfitters (URBN), and Virgin Galactic (SPCE) are expected to report quarterly results after equities stop trading today. Those looking for more on upcoming quarterly earnings reports should head on over to Nasdaq’s Earnings Calendar.

On the Horizon

Wednesday, February 28

• Eurozone: Economic Sentiment & Consumer Confidence - February
• US: Weekly MBA Mortgage Applications
• US: GDP (Second Estimate) – 4Q 2023
• US: Weekly EIA Crude Oil Inventories

Thursday, February 29

• Japan: Retail Sales, Housing Starts – January
• Germany: Retail Sales, Inflation Rate – January
• UK: Bank of England Consumer Credit - January
• US: Weekly Initial & Continuing Jobless Claims
• US: Personal Income & Spending, PCE Price Index – January
• US: Pending Home Sales – January
• US: Weekly EIA Natural Gas Inventories

Friday, Mach 1

• Japan: Jibun Bank Manufacturing PMI (Final) - January
• China NBS Manufacturing & Non-Manufacturing PMI - February
• China: Caixin Manufacturing PMI – January
• Eurozone: HCOB Manufacturing PMI (Final) – February
• UK: S&P Global Manufacturing PMI (Final) - February
• US: S&P Global Manufacturing PMI (Final) – February
• US: ISM Manufacturing Index – February

Thought for the Day

“Whenever you are about to find fault with someone, ask yourself the following question: What fault of mine most nearly resembles the one I am about to criticize?” ~ Marcus Aurelius

Disclosures

• Splunk (SPLK) is a constituent of the Foxberry Tematica Research Cybersecurity & Data Privacy Index
• Beyond Meat (BYND) is a constituent of the Foxberry Tematica Research Sustainable Future of Food Index
• American Tower (AMT) 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.

Other Topics

Stocks Economy Earnings Central Banks