Today’s Big Picture

Asia-Pacific equity markets were mixed today: South Korea’s KOSPI declined 0.31% and Australia’s ASX All Ordinaries fell 1.25% on weakness in Energy Materials. India’s Sensex gained 0.54%, Taiwan’s TAIEX advanced 0.61%, China’s Shanghai Composite was 0.88% higher, and Hong Kong’s Seng rose 1.84% on a broad rally led by Communications names. Japan’s markets equity markets were closed today due to a bank holiday. By mid-day trading, major European equity indices are up across the board, and U.S. futures point to a positive market open.

Following the downbeat end to 2022, one of the most challenging years for the stock market since 2008 with all the major stock markets posting declines, stocks look to start 2023 on a brighter note. While some will still be looking to see if a belated Santa Claus rally materializes, others will be poring over the PMI and employment data being reported this week. The goal will be to cement their view on the economy, determine how quickly inflation may be rolling over, and what it all means for the upcoming December quarter earnings season.

Later this week, CES 2023 kicks off, and while it has typically been an upbeat event featuring companies touting forthcoming technologies and new must-own products, we could see leaders issue more sobering comments this year. So while equity futures look to claw back some recent losses as we start anew, today is the first of 250 trading days in the new year and we expect a clearer picture to emerge before the onslaught of quarterly earnings begins in force in two weeks.

Data Download

International Economy

International Monetary Fund Managing Director Kristalina Georgieva warned that the global economy faces “a tough year, tougher than the year we leave behind.” The IMF warned in October that more than a third of the global economy will contract and that there is a 25% chance of global GDP growing by less than 2% in 2023, which it defines as a global recession.

The S&P Global Taiwan Manufacturing PMI rose from 41.6 in November to 44.6 in December and pointed to a deterioration in the health of the sector for the seventh month running. New export business likewise fell at a historically sharp pace, despite the rate of decline easing on the month. Firms mentioned lower demand across Europe, mainland China, and the U.S. in particular. Per the report’s findings, there were also reports that inventories had risen at some companies due to order cancellations or postponements.

The Caixin China General Manufacturing PMI fell to 49.0 in December, the lowest since September and compared with the market consensus of 48.8 as a spike in COVID cases disrupted production. The reading pointed to the fifth straight month of drop in factory activity, with output, new orders, and export sales all declining further. Separately, the latest China Beige Book International showed China’s manufacturing, services, and property sectors all weakened sharply in the December quarter, resulting in a potential contraction in the economy in the final months of the year.

The S&P Global Eurozone Manufacturing PMI came in at 47.8 for December, marking the sixth successive month below 50 and indicating a continued deterioration in business conditions. To adjust to lower demand, Eurozone manufacturers cut their purchases of raw materials and other components at the end of the year.

The S&P Global/CIPS UK Manufacturing PMI was revised slightly higher to 45.3 in December from the preliminary estimate of 44.7 and compared with November’s figure of 46.5. Even so, output, new orders, employment, and stocks of purchases all fell at accelerated rates leading to the lowest reading in 31 months and one of the weakest since mid-2009.

The EU has offered free Covid-19 vaccines to China to help the country contain the mass outbreak of cases following the decision to end strict nationwide pandemic-related restrictions.

At 9 AM ET, the preliminary December inflation rate for Germany will be published and it’s expected to fall to +10.6% YoY vs. the 11.3% figure in November

Domestic Economy

At 9:45 AM ET, S&P Global will publish its final U.S. Manufacturing PMI data for December and soon after at 10 AM ET, the November Construction Spending report will be released.

Republicans will take control of the House of Representatives today and offer several bills including legislation that would cut IRS funding, establish a China select committee, and block “non-emergency” drawdowns from the Strategic Petroleum Reserve. Most of these measures will be dead on arrival in Senate.

According to CDC data, the Covid omicron XBB.1.5 variant has nearly doubled in prevalence over the past week and now represents about 41% of new cases in the U.S.

Markets

The only positive sector for the year was Energy, up 57%. Consumer Staples, Healthcare, and Utilities were the next best performers, down anywhere between 1.51% and 3.58%. Consumer Discretionary (-36.82%) and Communication Services (-38.22%) provided the largest drag. As we move into 2023, the CHIPs Act will provide some relief for Technology but otherwise, virtually all pundits are calling for some kind of recession, so continued sector weakness along these lines wouldn’t be too surprising.

Here’s how the major market indicators ended 2022:

  • Dow Jones Industrial Average: -8.87%
  • S&P 500: -19.44%
  • Nasdaq Composite: -33.10%
  • Russell 2000: -21.56%
  • Bitcoin (BTC-USD): -64.22%
  • Ether (ETH-USD): -76.50%

Stocks to Watch

Before trading kicks off for U.S.-listed equities, no companies are slated to report their latest quarterly results. That said, we would caution readers to be on the watch for earnings pre-announcements during what is typically a very quiet holiday week for equity markets.

Tesla (TSLA) produced over 439,000 vehicles and delivered over 405,000 vehicles in the December quarter, up 40% YoY but below expected deliveries of 420,760 units. For 2022, the company’s total vehicle deliveries grew 40% YoY to 1.31 million, while production grew 47% YoY to 1.37 million. Reports indicate Tesla’s China chief Tom Zhu has been promoted to take charge of the company’s U.S. assembly plants as well as sales operations in North America and Europe.

BYD (BYDDF) shared it hit record monthly sales of 235,197 new energy vehicles in December, up 150% YoY and comprised 111,939 pure electric passenger cars and 122,659 plug-in hybrids.

Li Auto (LI) announced it delivered 21,233 vehicles in December, achieving another monthly delivery record and representing an increase of 50.7% year over year. This brought the company’s fourth-quarter deliveries to 46,319, up 31.5% year over year.

NIO (NIO) delivered 15,815 vehicles in December, a new record-high monthly delivery, representing an increase of 50.8% year-over-year. The deliveries consisted of 6,842 premium smart electric SUVs including 4,154 ES7s, and 8,973 premium smart electric sedans including 1,379 ET7s and 7,594 ET5s.

Foxconn Technology (FXCOF) has brought the world’s largest iPhone plant to about 90% of anticipated peak capacity, suggesting Apple’s (AAPL) biggest production partner has secured enough workers despite a Covid resurgence and recent staff upheaval. However, Nikkei Asia reports Apple has notified several suppliers to build fewer components for AirPods, the Apple Watch, and MacBooks for 1Q 2023.

Shopify (SHOP) is looking to tap into the advertising and marketing market with its Audiences marketing tool. As it does so, the company will join the ranks of other companies including Apple, Amazon (AMZN), Netflix (NFLX), and Disney (DIS) looking to tap into a market that has been a core one for Meta Platforms (META), Alphabet (GOOGL), Pinterest (PINS), and Snap (SNAP).

IPOs

As the holiday season continues, the near-term IPO calendar is relatively light so there are no significant IPOs slated to price 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

No companies are slated to report their latest quarterly results after equities stop trading today. We would caution readers to be on the watch for earnings pre-announcements during what is typically a very quiet holiday week for equity markets. Those looking for more on which companies are reporting when, head on over to Nasdaq’s Earnings Calendar.

On the Horizon

Wednesday, January 4

  • Japan: Au Jibun Bank Japan Manufacturing PMI – December
  • Eurozone: S&P Global Eurozone Services PMI – December
  • US: ISM Manufacturing Index – December
  • US: JOLTS – Job Openings Report – November
  • Thursday, January 5
  • China: Caixin China General Services PMI – December
  • UK: S&P Global/CIPS UK Services PMI
  • US: ADP Employment Change Report – December
  • US: S&P Global US Sector PMI – December

Friday, January 6

  • Japan: Au Jibun Bank Japan Services PMI – December
  • US: Employment Report – December
  • US: Factory Orders – November
  • US: ISM Non-Manufacturing Index

Thought for the Day

“Every year you make a resolution to change yourself. This year, make a resolution to be yourself.” ~ Abhishek Tiwari

Disclosures

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

By Anisa