Tuesday, December 12, 2023

Daily Markets: Wall Street Focuses on Fed Speakers, Government Shutdown Date

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Today’s Big Picture

Asia-Pacific equity markets finished the day mixed. Sometimes numbers can produce some interesting patterns, as these markets did today. Hong Kong’s Hang Seng declined 0.33%, Australia’s ASX All Ordinaries and South Korea’s KOSPI gained 0.23% while India’s SENSEX lost 0.22% and both China’s Shanghai Composite and Taiwan’s TAIEX ended the day essentially flat, eking out a 0.03% gain. Japan’s Nikkei closed 1.49% higher on strong earnings from Casio (CSIOY), Nintendo (NTDOY), and cosmetic producer Kao (KAOOY) as well as getting a boost from Energy names. European markets are mostly higher in midday trading, and U.S. equity futures point to a mixed open as Nasdaq 100 names JD.com (JD) and Tesla (TSLA) are coming under some pre-market pressure.
Much like yesterday, we have another wave of corporate earnings on tap before and after the market open, but little in the way of fresh economic data. However, we have another helping of Fed speakers again today as well as another appearance by Fed Chair Powell. While Powell didn’t comment on monetary policy or the economic outlook yesterday, we expect the market will be zeroing in on his 3 PM ET appearance looking to see what comments he has about both.

With the number of days dwindling until the November 17 federal funding deadline, the focus will shift to Washington to see if a short-term funding solution is reached. One potential solution offered by conservatives borrows from recent UAW strike tactics by splitting separate shutdown deadlines by funding some government agencies to through December 7 and others to January 19. Speaker Mike Johnson is expected to present his proposal for funding the government as soon as later today as the House plans to vote on Tuesday. Should the proposal demand immediate cuts, we are likely to see a standoff with Democrats, potentially raising market volatility as we get closer to November 17.

Data Download

International Economy
Japan’s Economy Watchers Survey found service sector sentiment dropped to 49.5 in October from 49.9 in the previous month, missing market forecasts of 50.1, and coming in at the lowest level since January.
China’s consumer prices dropped by 0.2% YoY in October compared with a flat reading the prior month and forecasts of a 0.1% fall. China’s producer prices declined 2.6% YoY in October after a 2.5% fall the previous month, and slightly less than the 2.7% forecasted drop. The October figure marked the 13th consecutive month of producer deflation.
Domestic Economy
In addition to the usual weekly data that are initial and continuing jobless claims as well as natural gas inventories, we have another round of Fed officials making the rounds today.

Energy (-1.25%) continued to trade off as demand expectations moderated further. While Financials (0.12%) ended the day in positive territory, declines in Visa (V) and Travelers Companies (TRV) helped push the Dow 0.12% lower. The S&P 500 (0.10%) and the Nasdaq Composite (0.08%) ended the day close to flat while the Russell 2000 extended its recent trend, finishing down 1.12%. After rallying in pre-market trading, shares of Take-Two Interactive Software (TTWO) were bid up 5.21% ahead of the company’s post-close earnings release.
Here’s how the major market indicators stack up year-to-date:

  • Dow Jones Industrial Average: 2.91%
  • S&P 500: 14.15%
  • Nasdaq Composite: 30.42%
  • Russell 2000: -2.68%
  • Bitcoin (BTC-USD): 115.62%
  • Ether (ETH-USD): 57.82%

Stocks to Watch

Before U.S. equity markets begin trading today, Becton Dickson (BDX), Edgewell Personal Care (EPC), Hanesbrands (HBI), Sony (SONY), Tapestry (TPR), and Utz Brands (UTZ) will report their latest quarterly results.
Entertainment names are seeing a boost this morning as Walt Disney Company (DIS) (more below), Paramount Global (PARA), and Warner Brother Discovery (WBD) are rising into the open while Fair Isaac Co (FICO) is seeing shares come under pressure after the company reported mixed results last night, beating on revenues but missing EPS estimates. Pre-market breadth is on the lighter side as 204 of the 503 names in the S&P 500 are trading this morning with 145 gainers and 59 decliners.
Walt Disney (DIS) reported mixed September quarter results with EPS coming in better than consensus forecasts while revenue, which rose 5.4% YoY, was a tad shy of the market forecast of $21.37 billion. Revenue for the company’s Direct to Consumer business rose 12% YoY to $5.04 billion but its operating loss of $420 million remained drag on Disney’s overall profits for the quarter. Disney+ exited the quarter with 112.6 million subscribers, up 7% YoY, with average monthly revenue per paid subscriber coming in at $7.50 due to higher advertising revenue. Revenue at Parks & Experiences revenue rose 13% to $8.16 billion, while its operating income soared more than 30% higher YoY to $1.76 billion. Management lifted its cost savings target to $7.5 billion, $2 billion more than forecasted earlier this year. Over the next ten years, Disney expects to invest ~$60 billion in its Parks business.

For its first earnings report as a public company, Arm Holdings (ARM) posted stronger than expected top and bottom line results. That was more than offset, however, by the company issuing only in-line guidance for the current quarter and the balance of its fiscal 2024. Management defended its guidance, citing uncertainties surrounding the precise timing of certain deals and potential changes in the revenue recognition profiles for forthcoming agreements.
Affirm Holdings (AFRM) reported a smaller than expected September quarter bottom-line loss as revenue for the quarter soared more than 37% higher YoY to $496.55 million, coming in well ahead of the $444.48 million consensus. The company also raised its full-year gross merchandise volume (GMV) guidance to more than $24.25 billion for its 2024 fiscal year versus its prior view of over $24 billion. Affirm expects revenue for the current quarter of $495-$520 million with GMV of $6.7-$6.9 billion.
Lyft (LYFT) joined the cast of companies reporting better than expected September quarter results and the ride-sharing company guided its current quarter gross bookings to $3.6-$3.7 billion. Management shared that it is seeing strong growth in rideshare rides (+22% year-over-year in the September quarter) with pickup in weekday evening rides, particularly on Thursdays and Fridays. Ride frequency was the strongest in more than 3 years due in part to continued travel momentum with the company’s airport trips up ~15% YoY.
Despite delivering September quarter EPS that bested expectations, Top Golf Callaway Brands (MODG) issued downside revenue guidance for the current quarter of $847-$872 million vs. the $1.01 billion consensus.
Digital Turbine (APPS) reported revenue and EPS for the September quarter below consensus expectations and the company guided current quarter revenue to $144-$150 million versus the $159.22 million consensus.

Reports suggest Bill Holdings (BILL) is in advanced talks to acquire digital payments provider Melio Payments.
Readers who want to dig deeper into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.
After Today’s Market Close
Alarm.com (ALRM), Arlo Technologies (ARLO). Blink Charging (BLK), indie Semiconductor (INDI), Navitas Semiconductor (NVTS), Synaptics (SYNA), and The Trade Desk (TTD) will report their quarterly results after equities stop trading. Those looking for more on upcoming quarterly earnings reports should head on over to Nasdaq’s Earnings Calendar.

On the Horizon

Friday, November 10

  • UK: GDP Growth – 3Q 2023
  • UK: GDP, Manufacturing and Industrial Production – September
  • China: Vehicle Sales – October
  • US: The University of Michigan Consumer Sentiment Index (Preliminary) – November (10:00 AM ET)

Thought for the Day

“Fall, the Beautiful Time of Year Between Heat Stroke and Frost Bite” ~ Unknown

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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