Daily Markets: Inflation Concerns Intensify as Energy Prices Spike

Today’s Big Picture

Equity indices in Asia traded off today with Japan’s Nikkei falling 1.1%, South Korea’s Kospi losing 1.82% on the day and Hong Kong Hang Seng slumping 0.57%. Equity markets in China remain closed today in honor of Golden Week. 

By mid-day trading, equity indices in Europe were down across the board amid rising inflation fears. Crude U.S. oil also reached its highest level since 2014 and European Natural gas hit fresh highs earlier today. In addition to inflationary pressures following recent manufacturing blackouts in China, surging energy prices are fueling concerns about the potential impact on global manufacturing activity and consumer spending as we head into the winter months. Also weighing on European equities this morning are weaker than expected August German Factory Orders and disappointing August Retail Sales. U.S. futures point to equities moving lower when those markets open later this morning. 

Following yesterday’s IHS Markit U.S. Services September PMI report that pointed to only “fractional” employment growth during the month, investors will be pouring over the September ADP Employment Change Report out before U.S. equity markets open. We suspect investors will be parsing the data in an attempt to fine-tune their expectations for Friday’s September Employment Report. That briefing will be reviewed with a fine-tooth comb as investors and economists alike try to determine if the Fed might begin its bonder tapering in November. 

Data Download

International Economy 

Germany Factory Orders for August fell 7.7% MoM, widely missing the expected 2.1% MoM drop and falling from the +4.9% print in July. 

The IHS Markit Eurozone Construction PMI rose to 50.0 in September, up from 49.5 the prior month. Home building activity rose for a seventh consecutive month, commercial construction ticked lower but infrastructure activity remained weak. Per the report, input cost inflation remained high due to higher raw material prices and widespread supplier shortages.

Eurozone retail sales were unchanged YoY in August 2021, missing the expected 0.4% YoY increase. On a MoM basis, August Eurozone retail sales rose 0.3% following the 2.6% fall in July but missed the consensus forecast that called for a 0.8% gain MoM. 

Domestic Economy

Yesterday, the Atlanta Fed cut its 3Q 2021 GDP. Now, the model forecast to +1.3% from its prior update on October 1 that called for +2.3% GDP. 

Before the market opens, the weekly MBA Mortgage Applications Index will be released and ADP will report its Employment Change report for September, which is expected to show 450K jobs being added, up from 374K in August. After the market opens, the regular weekly EIA data for gasoline and oil stocks will be reported.  

Markets 

Yesterday, equities rebounded on lnews as mega-cap stocks bounced back from recent losses leading the S&P 500 to reclaim 1.1%. The Dow Jones Industrial Average gained 0.9% on the day, while the Nasdaq led the way with its +1.3% move. In a distant fourth, the Russell 2000 increased just 0.5%.  

Stocks to Watch

Earnings Announcements & Guidance

Before U.S. equity markets open this morning, Acuity Brands (AYI), Constellation Brands (STZ) and RMP Inc. (RPM) will be among the companies reporting their quarterly results. 

After last night’s market close, Hovnanian (HOV) cut its fiscal 4Q guidance due to supply chain issues and now sees revenue in the range of $780 to $830 million vs. its prior guidance of $830 to $880 million. The company noted supply chain delays have been even more pronounced in the month. 

September Gross Merchandise Volume (GMV) at The RealReal (REAL) rose 44% YoY to around $127.3 million. The company’s Average Order Value (AOV) was approximately around $481 in September, up 9% YoY. Per the company, watches, women's shoes and women's apparel were the fastest-growing categories in September, which collectively represented approximately half of total GMV. For the September quarter, RealReal’s GMV came in at ~$367.9 million, up 50% YoY and at the upper end of its $365 to $368 million guidance. 

Semiconductor foundry United Microelectronics (UMC) reported its September net sales grew 29.01% YoY to NT$18.75 billion, down modestly from NT$18.79 billion in August. YTD 2021 sales were up 17.02% to NT$153.91 billion. 

Merck (MRK) announced a supply and purchase agreement with Singapore to provide access to its experimental oral COVID-19 antiviral drug

Allison Transmission (ALSN) announced it is accelerating the development of electrification technology for integration into the U.S. Army’s ground combat vehicle fleet including tracked Infantry Fighting Vehicles and the Main Battle Tank. 

Volvo Trucks (VLVLY) received an order for 100 Volvo FM Electric trucks from DFDS, Northern Europe's largest shipping and logistics company. To date, that is the largest commercial order for the company’s electric truck business. 

Reports indicate Restaurant Brands International’s (QSR) Burger King is testing new Impossible nuggets made from plants.   

IBM (IBM) and Honda Motor Europe (HMC) announced a five-year agreement under, which IBM plans to manage and run Honda's finance and procurement operations across Europe. 

IPOs

M&A Activity

Stamps.com (STMP) announced the completion of its acquisition by Thoma Bravo and its shares will be delisted from Nasdaq. 

Dominion Energy (D) announced a definitive agreement to sell Questar Pipelines to Southwest Gas Holdings (SWX), in a transaction valued at $1.975 billion, including the assumption of $430 million of existing debt. 

Dividends and More

J2 Global’s (JCOM) pending spin-out Consensus Cloud Solutions (CCSI) will replace Regis (RGS) in the S&P SmallCap 600 before the opening of trading on Monday, October 11.  

After Today’s Market Close

Levi Strauss (LEVI) and Resources Connection (TGP) are slated to report their quarterly results. Those looking to get a jump on the earnings reports to be had in the coming days should visit Nasdaq’s earnings calendar page. 

On the Horizon

• October 6: ADP Employment Change
• October 7: Jobless claims
• October 8: September Nonfarm Payrolls, Wholesale inventories
• October 12: JOLTs report
• October 13: CPI, FOMC Minutes
• October 14: Weekly jobless claims, PPI, Monthly budget statement
• October 15: Retail Sales, Import & Export Prices, NY Empire State Manufacturing, Michigan Consumer Sentiment (preliminary), Business Inventories
• October 18: Industrial Production, NAHB Housing Market Index, Net Long-term Tic Flows, Foreign Bond Investment, Overall Net Capital Flows
• October 19: Building Permits, Housing Starts
• October 21: Weekly Jobless Claims, Philly Fed Manufacturing Index, Existing Home Sales
• October 22: Markit Service and Marketing PMIs (flash)
• October 25: Chicago Fed National Activity Index, Dallas Fed Manufacturing Index
• October 26: S&P/Case-Shiller Home Price Index, New Home Sales, CB Consumer Confidence
• October 27: Durable Goods Orders, Wholesale Inventories, Durable Goods, Goods Trade Balance
• October 28: Q3 GDP (advance estimate), Weekly Jobless Claims, Pending Home Sales
• October 29: Personal Income & Spending, PCE Price Index, Employment Cost Q3, Chicago PMI, Michigan Consumer Sentiment

Thought for the Day

“People won’t have time for you if you are always angry and complaining.” ~Stephen Hawking

Disclosures

• IBM (IBM) is a constituent of the Foxberry Tematica Research Cybersecurity & Data Privacy Index
• J2 Global (JCOM) 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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