Today’s Big Picture
Asia-Pacific equity markets ended today’s session down as markets reacted to U.S. PMI showing a mild contraction and a still high PCE index. Taiwan’s TAIEX and China’s Shanghai Composite both declined just under 0.30%, Hong Kong’s Hang Seng fell 0.33% while India’s SENSEX and Australia’s ASX All Ordinaries each declined 0.66% and Japan’s Nikkei was off 1.59% on the day. South Korea’s KOSPI set the pace, down 1.84% led by Industrial Services. By mid-day trading, European equity indices are mixed, and U.S. futures point to a lower open later this morning.
Before U.S. equities begin trading, the November Employment Report will be published. Investors will be looking to see if job creation and wage gains support the growing market narrative that the Fed could slow the pace of rate hikes. That means confirmation of the slower-than-expected private sector job creation found in ADP’s (ADP) November Employment Change Report earlier this week. Investors will also be looking for tamer wage pressures than those found in ADP’s November data that showed the median change in annual pay for Job-Stayers was 7.6% and 15.1% for Job Changers. By the numbers, the consensus forecast has the November Employment report showing 200K non-farm jobs created during the month, down from 261K in October. The year-over-year increase in average earnings is expected to slow to 4.6% from October’s 4.7% figure. Now to see what the data says and whether it supports the market narrative.
The producer price inflation in the Euro Area slowed meaningfully MoM in October to 30.8% vs. September’s 41.9% reading and the all-time high of 43.4% recorded in August. The October figure was also below the market consensus of +31.5%. Despite the decline, the data indicate inflationary pressures across Europe remained high suggesting the further need for continued monetary tightening by the European Central Bank.
In response to the October PCE Price Index coming in at 6.0%, yesterday during an interview New York Fed President John Williams shared it will likely take a “couple of years” to get inflation down to the Fed’s 2% target. Williams went on to say, “My hope is that we will be at our 2% inflation goal by 2025.”
Following yesterday’s November ISM Manufacturing PMI report that revealed the manufacturing economy contracted during the month, the Atlanta Fed’s GDPNow model fell to 2.8% for the current quarter from its prior reading of 4.3%.
December started with a whimper as markets reacted to both PMI and PCE releases. the Dow was down 0.56%, the Russell 2000 fell 0.26% and the S&P 500 was close to flat, down only 0.09%. The Nasdaq Composite had some legs, relatively speaking, and ended the day up 0.13%. Sectors were mixed, with Communication Services leading with a 0.58% gain followed by Healthcare rising 0.29% only to be offset by Financials down 0.58% and Consumer Staples closing 0.45% lower. Investors continue to punish underperforming companies as Salesforce (CRM) fell 8.27% on a poor quarter, lower guidance, and the unexpectedly announced departure of Co-CEO Bret Taylor.
Here’s how the major market indicators stack up year-to-date:
- Dow Jones Industrial Average: -5.35%
- S&P 500: -14.47%
- Nasdaq Composite: -26.61%
- Russell 2000: -16.20%
- Bitcoin (BTC-USD): -63.45%
- Ether (ETH-USD): -65.41%
Stocks to Watch
Before trading kicks off for U.S.-listed equities, Cracker Barrell (CBRL) and Manchester United (MANU) will be among the few companies reporting their latest quarterly results.
October quarter results at semiconductor company Marvell (MRVL) came up short relative to consensus forecasts for its top and bottom line. Of note, while its Data Center segment posted a 26% YoY increase in revenue, that segment revenue fell 3% QoQ. The company also shared that it is seeing a significant slowdown with Chinese customers and estimates its revenue from China-based OEM customers will fall by over 1/3 in the current quarter vs. the October reported quarter. Marvell also warned it sees its data center revenue to down a mid-to-high teens percentage YoY and down in the mid-20% range on a sequential basis. This led Marvell to issue downside guidance for its January quarter with EPS of $0.41-0.51 vs. the $0.62 consensus.
Cloud security company Zscaler (ZS) topped consensus expectations for its October quarter as revenue soared more than 54% higher vs. the year-ago quarter. For the full year fiscal 2023, the company expects revenue in the range of $1.525-$1.53 billion, up ~40% YoY, and calculated billings in the range of $1.93-$1.94 billion, up ~30% YoY. On its earnings call, Zscaler joined CrowdStrike (CRWD) in sharing that it is seeing the lengthening of sales cycles as customers contend with the macro environment.
Ambarella (AMBA) issued downside guidance for its current quarter after reporting better-than-expected bottom-line October quarter results. For it January quarter, the company sees revs of $81-$85 million vs. the $86.4 million consensus and $83.1 million booked in the October quarter.
Ulta Beauty (ULTA) crushed consensus October EPS expectations as its revenue for the quarter climbed more than 17% YoY to $2.34 billion, topping the $2.21 billion consensus. Comp sales for the quarter rose +14.6% driven by a 10.7% increase in transactions and a 3.5% increase in average ticket. The company noted that skin care, fragrance and bath, hair care, and makeup segments all delivered double-digit comp growth vs. the year-ago quarter. For its fiscal 2023, Ulta lifted its EPS forecast to $22.60-$22.90 vs. the prior range of $20.70-$21.20 and the $21.38 consensus. The company also boosted its fiscal 2023 comp sales guidance to +12.6%-13.2% from +9.5%-10.5%.
Stellantis (STLA) entered a strategic partnership with French mobility engineering firm Qinomic to develop a retrofit solution to transform light commercial vehicles with an internal combustion engine to an electric drivetrain.
The attorneys general of California, Illinois, and Washington DC asked a federal court for a preliminary injunction that would prevent Albertsons Companies (ACI) from paying a $4 billion dividend to shareholders ahead of its being acquired by Kroger (KR).
Fortune Brands Home & Security (FBHS) entered into a definitive agreement to acquire the Emtek and Schaub premium and luxury door and cabinet hardware business and the US and Canadian Yale and August residential smart home locks business from ASSA ABLOY (ASAZY), for a purchase price of $800 million.
Bloomberg reports Apple (AAPL) plans to introduce its mixed reality headset as early as next year, with a dedicated operating system now being referred to as “xrOS” and an app store for third-party software. The new software name is a nod to the headset’s mixed-reality capabilities. “XR” stands for extended reality, a term that encompasses both augmented and virtual reality.
As we head into the holiday season the near-term IPO calendar is fairly light so there are no significant IPOs slated to price 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
Once again it is Friday! And that means there are no companies expected to report 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, December 5
- Eurozone: S&P Global Services PMI – November
- Eurozone: Sentix Investor Confidence – December
- Eurozone: Retail Sales – October
- US: S&P Global Services PMI – November
- US: ISM Non-Manufacturing Index – November
- US: Factory Orders – October
Tuesday, December 6
- Japan: Household Spending – October
- Germany: Factory Orders – October
- Eurozone: HIS S&P Global Construction PMI – November
Wednesday, December 7
- China: Imports/Exports – November
- Japan: Leading Indicators – October
- Eurozone: Employment Change Report, GDP – 3Q 2022
- US: Weekly MBA Mortgage Applications
- US: Productivity & Unit Labor Costs – 3Q 2022
- US: Weekly EIA Crude Oil Inventories
- US: Consumer Credit – October
Thursday, December 8
- Japan: GDP – 3Q 2022
- US: Weekly Initial & Continuing Jobless Claims
- US: Weekly EIA Natural Gas Inventories
Friday, December 9
- China: CPI, PPI – November
- US: Producer Price Index – November
- US: University of Michigan Consumer Sentiment (Preliminary) – December
Thought for the Day
“Happy Friday! Here’s to all of us who made it through another week of faking adulthood.” Nana Hoffman
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.