Daily Markets: $2 Trillion Options Expiration Closes Out a Relatively Calm Week
Today’s Big Picture
Asia-Pacific equity indexes ended today’s session mixed. A number of markets ended the day essentially flat as Japan’s Nikkei nudged down 0.04%, Australia’s ASX All Ordinaries eked out a 0.01% gain, Hong Kong’s Hang Seng rose 0.05% and Taiwan’s TAIEX added 0.08%. South Korea’s KOSPI fell 0.61%, China’s Shanghai Composite declined 0.59% and India’s Sensex dropped 1.08%. By mid-day trading, major European equity indices are down across the board and U.S. futures point to a rough open later this morning.
With a blank slate of U.S. economic data today and less than a handful of quarterly earnings reports before markets begin trading today, markets head into the height of August doldrums. This week’s retail earnings effectively closes out this quarter’s reporting season. With the release of the latest Fed minutes, we get a break until next week’s PMI updates as well as Q2 GDP which, if you’ve been following the Atlanta Fed’s GDPNow model, has been moving around a fair bit over the past few weeks, with the latest estimate at 1.6% down from the early August estimate of 2.5%.
Complicating today’s trading is an estimated $2 trillion notional value of options that are expiring today. Expectations are for some turbulence as traders look to unwind or exercise their positions. With ~$975 billion of S&P 500-linked contracts and ~$430 billion of derivatives across single stocks scheduled to expire, odds are a volatile day is on deck.
Data Download
International Economy
The annual inflation rate in Japan rose to 2.6% in July, accelerating from June’s 2.4% YoY increase. The July figure marked the 11th straight month of increase in consumer prices and the fastest pace since April 2014 due primarily to surging fuel and food costs.
Hong Kong announce it will reopen one of its biggest Covid-19 isolation facilities as case numbers hit the highest in more than four months with the increase in daily infections fueled by more transmissible omicron subvariants.
Annual producer inflation in Germany rose to a new record high of 37.2% YoY in July, well above the market consensus of 32% for the month and June’s 32.7% reading. Energy prices, including the distribution of natural gas and electricity, remained the biggest drivers of the year-over-year increase. Excluding energy, producer prices climbed 14.6% YoY in July.
Retail Sales in the UK fell 3.4% YoY in July, the fourth consecutive declines as inflationary pressures continue to sap affordability.
Domestic Economy
As indicated above, today is one of those rare occasions when the U.S. economic calendar shows no data being published today. But speaking of calendars, be sure to mark August 26: That’s the day Fed Chair Powell will be speaking at the annual global central banking conference in Jackson Hole, Wyoming.
Markets
Investors had a little more optimism yesterday as Cisco Systems (CSCO) reported a strong quarter. The Dow was up 0.06%, the Nasdaq Composite and the S&P 500 gained 0.21% and 0.23%, respectively and the Russell 2000 gained 0.68%. Energy was the big gainer, up 2.51%.
Here’s how the major market indicators stack up year-to-date:
- Dow Jones Industrial Average: -6.44%
- S&P 500: -10.12%
- Nasdaq Composite: -17.13%
- Russell 2000: -10.89%
- Bitcoin (BTC-USD): -52.20%
- Ether (ETH-USD): -51.86%
Stocks to Watch
Before trading kicks off for U.S.-listed equities, Buckle (BKE), Deere & Co. (DE), and Foot Locker (FL) will be among the companies issuing their latest quarterly results and guidance.
Semiconductor capital equipment company Applied Materials (AMAT) bested top and bottom line expectations for its July quarter and issued in-line EPS guidance of $1.82-$2.18 for its current quarter vs. the $1.94 consensus.
Shares of Bed Bath & Beyond (BYND) were hammered yet again last night following reports the company hired law firm Kirkland & Ellis to help it address a debt load that’s become unmanageable amid slumping sales.
While Ross Stores (ROST) reported better than consensus bottom line results for its July quarter, revenue for the period fell 4.6% YoY to $4.58 billion, missing the $4.62 billion consensus. Comps sales for the quarter fell 7% YoY, missing the guided fall of 4%-6%. Citing the increasingly challenging and unpredictable macro-economic landscape and today's more promotional retail environment, Ross issued downside guidance for both the current quarter and its full-year relative to consensus expectations.
Keurig Dr Pepper (KDP) is reportedly in talks to acquire VPX, owner of Bang Energy energy drink.
The board of directors at Atlas Corp. (ATCO) formed a special committee of independent directors to evaluate the unsolicited non-binding proposal from Poseidon Acquisition Corp. received by the Board on August 4.
Samsung (SSNLF) broke ground at a new semiconductor R&D complex in South Korea, where it plans to invest about 20 trillion won ($15 billion) by 2028 to drive leadership in chip technology.
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
No companies 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
Monday, August 22
- US: Chicago Fed National Activity Index – July
Tuesday, August 23
- Japan: Flash Manufacturing PMI - August
- Eurozone: Flash Composite PMI - August
- US: S&P Global Flash PMI
- US: New Home Sales
- US: Richmond Manufacturing & Services Indices
Wednesday, August 24
- Eurozone: Consumer Confidence - August
- US: Weekly MBA Mortgage Applications
- US: Durable Orders – July
- US: Pending Home Sales – July
- US: Weekly EIA Crude Oil Inventories
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
“If it is endurable, then endure it. Stop complaining.” ~ Marcus Aurelius
Disclosures
- Deere & Co. (DE) is a constituent of the Foxberry Tematica Research Sustainable Future of Food 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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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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