Daily Markets: Market Tries to Sustain Rally

Today’s Big Picture

Asia-Pacific equity indexes ended today’s session up across the board except for China’s Shanghai Composite, which declined 0.13%. India’s Sensex rose 0.94%, Taiwan’s TAIEX gained 1.22% South Korea’s KOSPI advanced 1.36%, Japan’s Nikkei closed 1.42% higher, and Australia’s ASX All Ordinaries was up 1.78%. Hong Kong’s Hang Seng set the pace, up 1.82% on a broad rally led by Technology names. 

By mid-day trading, European equity indices are up across the board and U.S. futures point to a strong open later this morning, potentially continuing the latest market rally. The duration of this latest move higher will hinge on several factors, including how the growing number of earnings reports and forward guidance compare to consensus expectations. In recent months, the market has experienced several bear market rallies, and given the number of headwinds confronting the market and the economy, the probability that this latest move higher does not mean a bottom has been put in shouldn’t be dismissed. It should be noted that the futures curve has priced in a 93.9% chance of the Fed raising rates another 75 basis points in its next meeting and is forecasting rates at around 5% by February 2023. It looks like Fed Chair Powell’s promise of pain has yet to be fully reflected in market expectations despite what the CME FedWatch Tool sees ahead. 

Data Download

International Economy

The ZEW Indicator of Economic Sentiment for the Euro area improved slightly to -59.7 in October from September's 14-year low of -60.7, coming in better than the market consensus of -61.2. The indicator for the current economic situation decreased by 11.7 points to -70.6 while inflation expectations fell by 23.7 points to -35.8. The European Union is expected to unveil a new emergency package to tackle the energy crunch, but it will refrain from immediate gas-price caps amid political divisions and concerns over supply security. 

Domestic Economy

At 9:15 AM ET, the September data for Industrial Production and Capacity Utilization will be reported. While some may focus solely on the headline figures, we expect savvy investors will dig into the report, particularly focusing on the data for the manufacturing sector. 

At 10 AM ET, the NAHB Housing Market Index for October will be reported and the consensus view sees it falling MoM to 43 from 46.

A Bloomberg survey of 42 economists predicts the probability of a recession over the next 12 months now stands at 60%, up from 50% a month earlier. 

Markets

Yesterday saw markets spring back to life as traders responded to bank earnings that point to continued growth, but also increases in reserves for anticipated upcoming loan losses. The Dow rose 1.186%, the S&P 500 gained 2.65%, the Russell 2000 advanced 3.17% and the Nasdaq Composite closed 3.43% higher. Sectors were up across the board, led by Consumer Discretionary names returning over 4%, followed by Real Estate and Technology both rising over 3%. One name that bucked yesterday’s trend was Kroger (KR) which was down 2.43% on worries about its upcoming merger with Albertsons (ACI). Both shares of Fox Corporation (FOXA) were down over 8% and 9%, respectively as the street reacted to news of a proposed recombination with Fox News. Here’s how the major market indicators stack up year-to-date:

• Dow Jones Industrial Average: -16.93%
• S&P 500: -22.83%
• Nasdaq Composite: -31.76% 
• Russell 2000: -22.69%
• Bitcoin (BTC-USD): -57.83%
• Ether (ETH-USD): -63.83%

Stocks to Watch

Before trading kicks off for U.S.-listed equities, Albertsons (ACI), Goldman Sachs (GS), Hasbro (HAS), Johnson & Johnson (JNJ), Lockheed Martin (LMT), State Street (STT), and Truist (TFC) will be among the companies reporting their quarterly results. Readers should remain on guard for earnings pre-announcements, both good and bad, and what they could mean for other companies poised to report in the coming days and weeks. 

XPO Logistics (XPO) issued downside guidance for its September quarter with revenue now expected to be $3.04 billion vs. the $3.1 billion consensus. For its North American LTL (Less-Than-Truckload) segment, the company expects a year-over-year increase in revenue per hundredweight, excluding fuel, of approximately 7% YoY. It continues to call for at least $1 billion of full-year 2022 adjusted EBITDA generated by North American LTL, including up to $50 million of gains on sales of real estate in the December quarter. 

Nordstrom (JWN) reaffirmed its 2023 guidance for EPS of $2.30-$2.60 vs. the $2.37 consensus with corresponding revenue of $15.53-$15.82 billion vs. the $15.65 billion consensus.

Amazon (AMZN) Web Services announced it will invest $5 billion to strengthen Thailand's cloud infrastructure over the next 15 years. This follows announced plans last month for its first cloud data center in UAE and a local hub in Mexico.

Boeing (BA) is reportedly offering a number of 737 MAX jets that had been made for Chinese customers to Air India as it looks to find buyers of about 140 planes that it’s not permitted to deliver.

LG Chem and AVEO Oncology (AVEO) announced they have entered into a definitive agreement under which LG Chem will acquire AVEO for $15 per share in an all-cash transaction with an implied equity value of $566 million.

Ping Identity (PING) shareholders approved the pending acquisition by Thoma Bravo, which is expected to close today. 

IPOs

Shares of biotechnology company Alopexx (ALPX) are expected to start trading on October 19. 

Intel’s (INTC) Mobileye plans to offer 41.0 million Class A shares in an IPO transaction that is targeted pricing between $18-$20 per share.

Readers looking to dig more into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

First Horizon (BHN), Interactive Brokers (IBKR), Intuitive Surgical (ISRG), JB Hunt (JBHT), Netflix (NFLX), and United Airlines (UAL) will be among the companies reporting 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

Wednesday, October 19

• UK: Consumer Price Index, Producer Price Index – September
• Eurozone: Construction output – August
• Eurozone: Consumer Price Index – September
• US: Weekly MBA Mortgage Applications
• US: Housing Starts & Building Permits – September
• US: Weekly EIA Crude Oil Inventories 

Thursday, October 20

• Germany: Producer Price Index – September
• US: Weekly Initial & Continuing Jobless Claims
• US: Philadelphia Fed Index – October 
• US: Existing Home Sales – September 
• US: Weekly EIA Natural Gas Inventories

Friday, October 21

• Japan: National Consumer Price Index – September
• UK: Retail Sales – September 
• UK: Bank of England Consumer Credit – September
• Eurozone: Consumer Confidence – October

Thought for the Day

“My attitude has always been, if you fall flat on your face, at least you're moving forward. All you have to do is get back up and try again.” ~ Richard Branson

Disclosures

• Ping Identity (PING) is a constituent of the Foxberry Tematica Research Cybersecurity & Data Privacy Index
• Ping Identity (PING) is a constituent of the Tematica BITA Data Privacy and Digital Identity Index
• Intel (INTC) is a constituent of the Tematica BITA Digital Infrastructure & Connectivity Index
• Lockheed Martin (LMT), Microsoft (MSFT) are constituents of the Tematica Research Thematic Dividend All-Stars 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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