Daily Markets: Fed’s Beige Book Report and Tesla Earnings in the Spotlight

Today’s Big Picture

Asia-Pacific equity indexes ended today’s session mixed as Korea’s KOSPI ended the day essentially flat, down 0.01%, Hong Kong’s Hang Seng declined 0.40% and China’s Shanghai Composite fell 1.35%. Australia’s ASX All Ordinaries eked out a 0.02% gain, Japan’s Nikkei rose 0.86%, Taiwan’s TAIEX advanced 0.91% and India’s Sensex closed the day 1.02% higher. By mid-day trading, European equity indices are up across the board, and US futures point to a mixed market open later this morning. While futures of the Dow Jones Industrial Average and S&P 500 point to a positive open, those for the Nasdaq Composite Index are feeling the weight of Netflix (NFLX) shares pre-market trading following its March quarter results last night.

The pace of quarterly earnings reports heats up even further and escalating Russian efforts to capture eastern Ukraine is leading Ukraine’s allies to deliver additional weapons. Meanwhile, the European Union is preparing the details of an embargo on Russian oil imports, which follows an earlier ban on Russian coal. Complicating matters, China’s Vice Foreign Minister Le Yucheng called for deepening relationship with Russia during a meeting with Russian Envoy Andrey Ivanovich Denisov earlier this week. As the trading day progresses, investors will likely key into what’s revealed in the Federal Reserve’s latest Beige Book report (see below for more) and Tesla’s (TSLA) March quarter earnings report. While many will be focusing on the usual quarterly metrics reported by the EV company, others will no doubt be using the company’s comments to measure the impact of China’s recent omicron lockdown.

Data Download

International Economy

March YoY German PPI continued its upward, march, posting 30.9% growth, eclipsing both estimates of 29.1% and the previously reported 25.9% in February. The culprit? Energy input costs due to the ongoing war in Ukraine.

February Eurozone Trade Balance figures were released and show that energy costs seem to be able to work their way into everything as the trade balance deficit increased to -€9.4 billion from the previously reported -€7.7 billion reported in January. As the war in Ukraine is extended, expect these figures to widen further until more durable fuel supplies can be secured for the region.

March New Car Registrations in the Eurozone fell 20.5% YoY, a sharper drop than the 6.7% fall recorded for February.

The Government of Canada, for the first time since 2019, is issuing US-dollar denominated 5-year bonds today in a move to maintain foreign reserve levels at or above 3% of GDP. The bonds are expected to price 8 basis points above US Treasuries as the country is rated “AA,” the second highest rating on the scale. The US holds the highest “AAA” credit rating, hence the higher rate for the Canadian bonds.

Domestic Economy

Before the market opens, we’ll get the usual Wednesday weekly Mortgage Applications Index followed by the March Existing Home Sales report. Both will be watched as a gauge of future activity in the housing market, especially following the tumble in March single-family housing starts reported yesterday.

Last night, the American Petroleum Institute reported crude inventories fell 4.5mb, relative to the Department of Energy’s expectation for a build of 2.5mb on the week. Investors will want to contrast with today’s weekly EIA Crude Oil Inventories report.

And this afternoon brings the latest edition of the Fed’s Beige Book, an anecdotal recap of business activity across the various Federal Reserve bank districts. Given all that has gone on in the last several weeks, we expect this edition will receive more than a passing look through as investors and economists assess the impact of inflationary pressures and related items on both the consumer and business activity.

markets

The S&P 500 rose 1.6% yesterday with gains in 10 of its 11 sectors. The Dow Jones Industrial Average added 1.5% while the Nasdaq Composite jumped 2.2% and the Russell 2000 climbed 2.0%. The lone sector to move lower was energy following declines in both oil and natural gas prices. Including yesterday’s moves, here’s how the major market indicators stack up so far in 2022:

  • Dow Jones Industrial Average: -3.9%
  • S&P 500: -6.4%
  • Nasdaq Composite: -13.0%
  • Russell 2000: -9.6%%
  • Bitcoin (BTC-USD): -12.9%
  • Ether (ETH-USD): -17.6%

Stocks to Watch

Before trading kicks off for US-listed equities, Abbott Labs (ABT), ASML (ASML), Litia Motors (LAD), and Procter & Gamble (PG) are among the companies reporting their quarterly results.

Shares of Netflix (NFLX) came under pressure last night after the company reported mixed March quarter results with EPS that topped consensus expectations even though revenue rose 9.8% YoY to $7.87 billion, missing the $7.94 billion consensus. Hitting the shares was the wide miss on global streaming paid net adds for the quarter, which came in at -0.2 million vs. the company’s guidance for 2.50 million. Moreover, Netflix guided global streaming paid net adds for the current quarter to be -2.0 million and guided June quarter revenue to $8.05 billion vs. the $8.22 billion consensus. In an interesting pivot, on its earnings conference call Netflix shared it is “quite open” to offering lower priced service with advertising.

March quarter revenue and EPS at IBM (IBM) topped consensus expectations led by the 12.3% YoY increase in Software revenue and the 13.3% YoY growth in its Consulting revenue. IBM Chief Executive Arvind Krishna said demand for hybrid cloud artificial intelligence led the growth in the company’s software and consulting services. On a constant currency basis, IBM sees its 2022 revenue at the high end of the mid-single digit range it previously communicated, up slightly from its prior guidance of mid-single digit growth.

Ahead of its analyst day later today, Lululemon (LULU) announced it aims to double its 2021 revenue to hit $12.5 billion in sales by 2026 as it looks to double its men’s revenue, double its digital sales, and quadruple international revenue. The company projects its women’s business and North American division to see low, double-digit annual compound growth rates in revenue through 2026.

Victoria’s Secret (VSCO) announced the launch of its newest fully digital brand, Happy Nation, which caters to tweens ages 8-13 and offers a size-inclusive and gender-free product assortment of products. The company shared this is its first-ever metaverse integration.

nokia (NOK) announced it will provide its data center switching solutions for Microsoft’s (MSFT) data center facilities to support the bandwidth growth to Microsoft Azure as part of a multi-faceted deal.

european food delivery giant Just Eat Takeaway.com (JTKWY) is considering a sale of Grubhub, its US arm, after facing pressure from investors to explore strategic deals.

Alongside its quarterly results, global food and beverage company Danone (DANOY) shared expectations for a volatile operating environment with sustained supply chain disruptions and broad-based inflation around the mid-teens level in 2022.

Hamilton Beach Brands, a subsidiary of Hamilton Beach Brands Holding Company (HBB), introduced the first products in a new line of premium air purifiers under the Clorox brand name as part of an exclusive multiyear trademark licensing agreement with The Clorox Company (CLX). With this product launch Hamilton Beach Brands aims to tap into the fast-growing, multibillion dollar home health and wellness market.

IPO’s

No companies are expected to price their IPO offerings 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

Alcoa (AA), CSX (CSX), Lam Research (LRCX), Las Vegas Sands (LVS), Tesla (TSLA)and United Airlines (UAL) are slated to report their latest quarterly results. Investors should remain on watch for companies that pre-announce their March quarter results. Those looking for more on which companies are reporting when, head on over to Nasdaq’s Earnings Calendar.

on the horizon

Thursday, April 21

  • Eurozone: Consumer Price Index – March
  • Eurozone: Consumer Confidence (Flash) – April
  • US: Weekly Initial & Continuing Jobless Claims
  • US: Philadelphia Fed Index – April
  • US: Leading Indicators – March
  • US: Weekly EIA Natural Gas Inventories

Friday, April 22

  • Japan: ICC – March
  • Japan: Markit/JMMA PMI Manufacturing (Preliminary) – April
  • UK: Retail Sales – March
  • Eurozone: S&P Global Manufacturing & Services PMI (Preliminary) – April
  • UK: CIPS Manufacturing & Services PMI (Preliminary) – April
  • US: S&P Global Manufacturing & Services PMI (Preliminary) – April

Thought for the Day

“I have not failed. I’ve just found 10,000 ways that won’t work.” ~Thomas Edison

Disclosures

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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