Today’s Big Picture
For those markets that traded today, Asia-Pacific equity market closings were mixed. Japan’s Nikkei fell 1.68% on a mix of strong Yen concerns and weakness in Transportation, Finance, and Communications names. Australia’s ASX All Ordinaries ended the day essentially flat, up a mere 0.04%, South Korea’s KOSPI gained 0.59%, and India’s SENSEX closed 0.99% higher on a broad rally. China, Hong Kong, Taiwan, and various other countries’ markets are closed today as they observe the Qingming Festival, otherwise known as Tomb-Sweeping Day, a spring celebration during which tributes are made to their ancestors. Major European markets are lower in midday trading and U.S. futures point to a lower open.
Before U.S.-listed equities begin trading later this morning, we’ll get the first look at March job creation and wage data courtesy of ADP’s March Employment Change Report. The report is expected to show 200,000 jobs created during the month down from 242,000 in February. As closely watched as that figure will be, traders will focus on inflation concerns regarding what the data says about wage pressure compared to February’s median change in annual pay that rose 7.2% for Job-Stayers and 14.3% for Job-Changers.
Soon after the opening bell, at 9:45 AM S&P Global will release its final U.S. Services PMI for March, which is thought to dip to 54.5 from 55.1 the prior month. Shortly thereafter, ISM will produce its March Non-Manufacturing PMI for March, which is also expected to decline vs. February. It will be the underlying data and commentary for new orders, new export orders, inflation, and jobs that will add more color to the overall economy.
Taken together, this morning’s economic data will fine-tune expectations for Friday’s March Employment Report and 1Q 2023 GDP and also next week’s March Consumer Price Index and Producer Price Index reports. Given the Fed’s focus on inflation in the services ex-housing sector, we expect inflation commentary in both the S&P Global and ISM reports out this morning to be reviewed with a fine-toothed comb. As one can likely guess, what this trio of reports reveals will influence today’s trading and potentially alter economist forecasts for what lies ahead.
Data Download
International Economy
The au Jibun Bank Japan Services PMI was revised higher to 55.0 in March from a preliminary reading of 54.2, and after a final of 54 in February. New orders rose the most since February 2019, and new export orders increased at the fastest rate in 2023 so far. Input prices eased to the softest for a year; however, output cost inflation accelerated to a three-month high, as firms increasingly passed higher cost burdens on to clients.
The S&P Global Eurozone Services PMI was revised lower to 55 in March from a preliminary reading of 55.6, but the data still pointed to the strongest growth in the services sector since May last year. Rates of input cost and output price inflation, despite easing in March, remained stubbornly elevated.
The S&P Global/CIPS UK Services PMI came in at 52.9 in March, broadly in line with the preliminary estimate of 52.8 and below February’s final reading of 53.5. On the price front, operating costs inflation eased to a 22-month low but was still exceptionally strong in comparison to historic norms, while the latest increase in prices charged was the softest since August 2021.
Domestic Economy
As we discussed above, this morning brings several key pieces of March economic data from ADP, S&P Global, and ISM. Rounding out the day’s economic data we have the usual weekly Wednesday data – the MBA Mortgage Applications and EIA Crude Oil Inventories.
Speaking yesterday, Federal Reserve Bank of Cleveland President Loretta Mester said the Fed likely has more interest rate rises ahead amid signs the recent banking sector troubles have been contained. Mester sees monetary policy moving “somewhat further into restrictive territory this year, with the fed funds rate moving above 5% and the real fed funds rate staying in positive territory for some time.” We would note that Mester is not a voting member of the Federal Open Market Committee this year.
Markets
Yesterday saw markets trade-off as the Energy sector gave back some of its Monday rally, shedding 1.81%. Industrials (-2.24%) and Materials (-1.44%) were also hit as traders’ concerns about the economy emerged. Overall, sectors were mixed, with Healthcare and Real Estate ending the day flat, and Communications and Utilities posting modest gains. The Nasdaq Composite declined 0.52% while both the Dow and the S&P 500 fell just under 0.60% while the Russell 2000 dropped 1.81% on the day. Bucking yesterday’s trend was Electronic Arts (EA) which gained 3.21% as traders continue to see future benefits coming from the company’s previously announced 6% workforce reduction.
Here’s how the major market indicators stack up year-to-date:
- Dow Jones Industrial Average: 0.77%
- S&P 500: 6.80%
- Nasdaq Composite: 15.86%
- Russell 2000: 0.48%
- Bitcoin (BTC-USD): 69.55%
- Ether (ETH-USD): 56.04%
Stocks to Watch
Before U.S. equity markets begin trading today, Conagra Brands (CAG), Schnitzer Steel (SCHN), and Simply Good Foods (SMPL) are expected to report their quarterly results.
Walmart (WMT) reiterated its 1Q24 EPS of $1.25-$1.30 vs the $1.29 consensus estimate with net sales growth of 4.5%-5.0% in constant currency. For the full-year fiscal 2024, the retailer continues to see $5.90-$6.05 vs. the $6.11 S&P consensus with net sales growth of 2.5%-3.0% in constant currency. That forecast includes Walmart US comp sales growth of 2.0%-2.5% excluding fuel with comp sales growth of 5.0% for Sam’s Club US on the same basis. The company also shared that by the end of its fiscal 2026, it targets 65% of stores being serviced by automation, ~55% of the fulfillment center volume will move through automated facilities, and unit cost averages could improve by approximately 20%.
FedEx Corp (FDX) is expected to offer details on its plans to reduce costs by $4 billion by 2023 in a DRIVE Program Update later today.
UK privacy regulators fined TikTok, owned by China’s ByteDance (BDNCE) $16 million for failing to protect children’s data.
IPOs
Near-term the calendar for such activity looks rather thin. Readers looking to dig more into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.
After Today’s Market Close
Simulations Plus (SLP) is slated to report its quarterly results after equities stop trading. Those looking for more on which companies are reporting when should head on over to Nasdaq’s Earnings Calendar.
On the Horizon
Thursday, April 6
- China: Caixin Services PMI – March
- US: Weekly Initial & Continuing Jobless Claims
- US: Weekly EIA Natural Gas Inventories
Friday, April 7
- US: Employment Report – March
- US: Consumer Credit – February
Thought for the Day
“Life is a journey, not a destination.” ~ Ralph Waldo Emerson
Disclosures
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
