“Empowering Financial Success” Vica Partners Financial Group
MARKETS TODAY – September 6th, 2023 (Vica Partners)
Global Markets Snapshot
- Asian markets mixed as Japan’s Nikkei 225 went up by 0.62%, China’s Shanghai Composite had a modest 0.12% gain, but Hong Kong’s Hang Seng index saw a slight 0.04% decline.
- S&P futures began trading slightly below their fair value, showing a 0.14% decrease.
- European markets ended on a negative note. France’s CAC 40 dropped by 0.84%, Germany’s DAX slipped by 0.19%, and London’s FTSE 100 saw a 0.16% decrease.
US Markets Today
- US stock markets had a rough day as they all ended in the red. The NASDAQ fell by 1.06%, the S&P 500 saw a 0.70% decline, and the DOW dropped by 0.57%. Among the 11 S&P 500 sectors, 9 experienced declines. Utilities performed the best, with a gain of +0.20%, while Information Technology took a significant hit, plummeting by -1.37%. Notable industries that stood out for the day included Health Care REITs (+1.05%), Household Durables (+1.03%), and Media (+0.96%). Additionally, the Energy Select Sector SPDR Fund (^XLE) and the Credit Hedge ETF (^CDX ETF) also posted modest gains of 0.08% and 0.25%, respectively.
US Economic Highlights
- In economic news, ISM Services came in better-than-expected and showed clear acceleration from last month 54.5% (previous 52.7%, forecast 52.5%) which sent yields higher. Meanwhile, the U.S. trade deficit for July and the final U.S. services PMI for August both matched the forecasted values.
Key Takeaways
- Positive Surprise Boosts Yields: The ISM Services report exceeded expectations, resulting in a rise in yields.
- Challenging Day for US Markets: US stock markets had a tough day, with all major indices closing in the negative.
- Top Performers: Standout performers for the day were Health Care REITs (+1.05%), Household Durables (+1.03%), Media (+0.96%), and Energy Equipment & Services (+0.90%).
- Modest Gain in Energy Sector: The Energy Select Sector SPDR Fund (^XLE) made a slight gain of 0.08%.
- Rising Treasury Yields: Yields on Treasury securities increased across the yield curve.
- Credit Hedge ETF Gains: The Credit Hedge ETF (^CDX) saw a rise of 0.25%.
- Strength of the US Dollar: The US Dollar Index (^DXY) once again demonstrated its strength.
- Crude Oil Reaches Yearly High: Crude Oil Futures (WTI) climbed to their highest level in about a year.
- Strong Earnings from UiPath: UiPath (PATH) reported impressive earnings, surpassing expectations.
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 Sectors
- Out of the 11 S&P 500 sectors, 9 saw declines. Utilities performed the best, gaining +0.20%, while Information Technology had a significant drop of -1.37%.
- Some standout industries for the day were Health Care REITs (+1.05%), Household Durables (+1.03%), Media (+0.96%), Energy Equipment & Services (+0.90%), and Electrical Equipment (+0.74%).
As of September 05, 2023
- Looking at the past month’s performance, the Energy sector leads with an impressive gain of +4.73%, followed by Information Technology (+3.58%) and Communication Services (+1.99%).
- Year-to-date (YTD) leaders in the S&P 500 are Information Technology (+44.58%), Communication Services (+43.43%), and Consumer Discretionary (+32.91%). Overall, the S&P 500 showed a substantial gain of 17.12%.
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: UiPath (PATH), GameStop Corp (GME), Sprinklr (CXM), C3.ai (AI), American Eagle Outfitters (AEO), Intapp (INTA), Phreesia (PHR), Yext (YEXT)
- -Miss: Core Main (CNM), ChargePoint Holdings (CHPT), Verint (VRNT), Photronics (PLAB), Dave & Buster’s Entertainment (PLAY)
Economic Data
US
- U.S. trade deficit (July): -$65B (Previous -63.7B, Forecast -$65.8B)
- S&P final U.S. services PMI (Aug): 50.5 (Previous 51, Forecast 51)
- ISM services (Aug): 54.5% (Previous 52.7%, Forecast 52.5%)
“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 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
- Europe Luxury Stocks Slide After Richemont Chairman Says Inflation Is Denting Demand – Bloomberg
- Comcast, Disney Move Up Start of Hulu Negotiations – WSJ
- Tesla hails pace of production in Shanghai after rolling out a million EVs in 13 months, hitting 2-million mark – SCMP
Energy/ Materials
- Saudi Move Boosting Oil Prices Raises Political Risk for Biden – Bloomberg
- China Is the Oil and Gas Crowd’s Biggest Unknown – Bloomberg
Real Estate
- Real-Estate Doom Loop Threatens America’s Banks – WSJ
- Rising Rents Are Hitting American Suburbs Hardest – WSJ
Central Banks/Inflation/Labor Market
- Fed Set to Double Its Economic Growth Forecast After Strong US Data – Bloomberg
- US Trade Deficit Widened by Less than Expected in July – Bloomberg
- America’s Trade Trouble Will Continue – WSJ
- Biden FTC’s Antitrust Bark Proves Worse Than Its Bite – WSJ
Asia/ China
