“Empowering Financial Success” Vica Partners Financial Group
MARKETS TODAY – September 14th, 2023 (Vica Partners)
Global Markets Snapshot
- Asian markets performed well today, with Japan’s Nikkei 225 leading the region, up by 1.41%. Meanwhile, Hong Kong’s Hang Seng rose by 0.21%, and China’s Shanghai Composite gained 0.11%.
- In the US, S&P futures began trading at a 0.46% premium over fair value.
- European markets had a positive day, with London’s FTSE 100 leading the way, gaining 1.95%. France’s CAC 40 also saw a 1.19% increase, while Germany’s DAX rose by 0.97%.
US Markets
- US markets had a strong day with broad gains. Major indices saw positive movement, including a 0.96% rise in the DOW, a 0.84% increase in the S&P 500, and a 0.81% gain in the NASDAQ. All 11 S&P 500 sectors advanced, led by Real Estate with a 1.71% increase, while Health Care lagged at 0.25%. Top-performing industries included Office REITs, Health Care REITs, and Containers & Packaging. Notable ETF gainers included SPDR S&P Regional Banking ETF ^KRE, ProShares UltraShort 20+ Treas ^TBT, Energy Select SPDR Fund ^XLE, and SPDR S&P 500 ETF ^SPY. Additionally, other gainers included >1 Year Treasury Yields, the USD Index, Bitcoin, WTI Oil, and the Bloomberg Commodity Index.
- In the latest economic data, Initial Jobless Claims came in at 220k, slightly below the expected 225k but higher than the previous week’s 217k. Continuing Jobless Claims stood at 1,688k, just below the expected 1,695k and consistent with the previous reading of 1,684k. August’s Producer Price Index (PPI) exceeded expectations, rising by 0.7% monthly and 1.6% yearly compared to the anticipated 0.4% monthly and 1.2% yearly figures. Core PPI, excluding food and energy, matched the expected 0.2% monthly increase but fell slightly short of the projected 2.6% yearly rise, recording 2.2% yearly growth, with the previous month showing a 0.4% monthly and 2.4% yearly increase.
Key Takeaways
- August’s PPI exceeded expectations, and Core PPI matched them, Retail Sales for August outperformed.
- US markets had a strong day, driven by Value Stocks.
- DOW led major indices with Russell 2000 (^RUT) up 1.40%.
- All 11 S&P 500 sectors advanced, led by Real Estate (+1.71%) and Health Care lagging at +0.25%.
- Top-performing industries included Office REITs (+3.29%), Health Care REITs (+2.69%), and Containers & Packaging (+2.55%).
- Notable ETF gainers: SPDR S&P Regional Banking ETF (^KRE) +1.97%, ProShares UltraShort 20+ Treas (^TBT) +1.60%, Energy Select SPDR Fund (^XLE) +1.17%.
- The USD Index resumes an upward trend, >1 Year Treasuries gained.
- Bitcoin rebounded, while both Oil and the Bloomberg Commodity Index showed solid gains in commodities market.
Pro Tip: When the put-to-call ratio is on the rise, it typically indicates that investors are becoming increasingly apprehensive. A ratio exceeding 1 is commonly interpreted as a bearish signal.
Indices, Sectors, Factors, and Treasuries
S&P 500 Sector Highlights
Performance for the Day:
- All 11 S&P 500 sectors gained.
- Real Estate led with a 1.71% increase, while Health Care lagged at 0.25%.
- Top-performing industries included Office REITs (+3.29%), Health Care REITs (+2.69%), Containers & Packaging (+2.55%), Industrial REITs (+2.55%), Independent Power and Renewable Electricity Producers (+2.35%), Metals & Mining (+2.27%).
Monthly Performance (as of September 13, 2023:
- The Information Technology sector has the highest gain at 2.70%.
- Energy followed with a 2.25% gain, while Consumer Discretionary increased by 2.14%
Year-to-Date S&P 500 Leaders (as of September 12, 2023):
- Communication Services (+44.02%)
- Information Technology (+39.24%)
- Consumer Discretionary (+35.98%)
- The S&P 500 has gained 16.35% YTD.
Factors
US Treasuries
Earnings
- In Q1 ’23, 79% of companies beat analyst estimates by an average of 6.5%.
- The Q2 Forecast predicted a decline of <7.2%> in S&P 500 EPS, with Fiscal year 2023 EPS remaining flat YoY. Q2 Seasonal Actuals are yet to be reported.
Notable Earnings Today
- +Beat: Adobe (ADBE), Copart (CPRT), Lennar (LEN)
- -Miss:
Economic Data
US
- Initial Jobless Claims: 220k (vs. expected 225k, previous 217k)
- Continuing Jobless Claims: 1,688k (vs. expected 1,695k, previous 1,684k)
- PPI (Producer Price Index) for August: 0.7% monthly, 1.6% yearly (vs. expected 0.4% monthly, 1.2% yearly, previous 0.4% monthly, 0.8% yearly)
- Core PPI (excluding food and energy) for August: 0.2% monthly, 2.2% yearly (vs. expected 0.2% monthly, 2.6% yearly, previous 0.4% monthly, 2.4% yearly)
- Retail Sales for August: 0.6% monthly (vs. expected 0.2% monthly, previous 0.5%)
- Retail Sales Excluding Gas and Autos for August: 0.2% monthly (previous 0.7%)
“Navigating September 2023: Vica Partners Insights”
- Our aim with this report is to provide you with a comprehensive overview of the prevailing trends that are shaping financial markets.
Key Trends
- Growth stocks tend to perform well during economic optimism.
- ^NYFANG new defensive’s Index as “bigger allows for more capital to scale.”
- AI and Semiconductor Equipment will continue to outperform.
- Market had a Factor regression from Growth to Value stocks in the past 45 days.
- Energy is August Sector leader and look for further ’23 opportunity here.
- Health Care +Health Care REITs and Materials undervalued.
- Current economic signals are mixed with deflation concerns.
- August/September historically have lower ROI.
“Vica Partners: Navigating the Economic Landscape – 2023 Economic Forecast
- As of September 2023, the Federal Reserve no longer predicts a recession. However, Vica Partners disagrees and forecasts a potential recession starting as early as Q4 ’23 and extending into ’24. This projection is based on factors including Fed tightening, rising oil prices, overvalued stock markets, and a strong dollar. Vica Partners believes that market bottoms typically occur amid negative news and deflationary signals. Rising interest rates and their impact on the real estate market, coupled with historical highs in consumer debt, are significant concerns. Vica Partners also notes the shift from Growth to Value stocks and the moderation of the Information Technology sector correction occurred.
Key Points
- The Federal Reserve’s power to control inflation is limited, and traditional economic principles may not be effective in today’s highly automated global economy.
- A 2% inflation target may not be realistic today, and a base rate exceeding 3% could fund wage increases, energy transition, operational efficiency improvements, and protection against deflation.
News
Company News/ Other
- Chinese smartphone giants Huawei and Xiaomi reach global patent cross-licensing deal, fuelling both firms’ push into premium handset segment – SCMP
- Delta Trims Quarter Outlook, Keeps 2023 Earnings Guidance – Bloomberg
- Chip Designer Arm’s Debut Gains Deliver Win for Owner SoftBank – Bloomberg
Energy/ Materials
- European Union Pledges to Help Struggling Wind Energy Industry – Bloomberg
- Fuel Prices Are Soaring. Who Is Feeling the Pinch? – WSJ
- Canada’s Stock Market Sees Energy Industry Deepen Its Dominance – Bloomberg Bloomberg
Real Estate
- Dye & Durham Suffers Record Drop on Canadian Property Woes – Bloomberg
- The Fall in Home Prices May Already Be Over – WSJ
Central Banks/Inflation/Labor Market
- Fed Is Likely to Shy Away From Calling Interest-Rate Peak Next Week – Bloomberg
- European Central Bank Raises Key Interest Rate to Record High – WSJ
- Don’t Bet Against the American Consumer Now – WSJ
Asia/ China
- China cuts banks’ reserve requirement ratio for second time this year, ahead of August data release – SCMP
