Stock Markets: Iran, Inflation, and Evergrande Influence Market Sentiment

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Asian markets traded off today as Hong Kong’s Hang Seng fell 1.07%, Japan’s Nikkei 225 was down 1.00%, Korea’s KOSPI Composite declined 0.64%, Taiwan’s TAIEX dropped 0.49%, and China’s Shanghai Composite was lower by 0.18% European markets are mixed in midday trading while US futures are pointing to a positive open.

The direction of U.S. equity futures will likely be shaped by the November CPI report due at 8:30 AM ET this morning and it’s expected to come in red hot at +6.7% vs. October’s 6.2% increase. Even the core reading, which strips out food and energy prices, is expected to climb 4.9% YoY up from +4.6% in October. Should the CPI figures top those expectations, we would expect the market to price in a greater probability that Fed Chair Powell will look to press forward with an accelerated bond tapering program than the one laid out in November.


Other items that are likely to influence today’s trading and how we close the week are comments from the White House that “If diplomacy cannot get on track soon, and if Iran’s nuclear program continues to accelerate, then we will have no choice but to take additional measures to further restrict Iran’s revenue-producing sectors.” Also, China’s Evergrande (EGRNF) said there was “no guarantee” it could meet its debt repayments as it entered a restructuring process with assistance from local government officials. Complicating matters even further, People’s Bank of China Governor Yi Gang said the inability to meet obligations is a market event and will be dealt with in a market-orientated way. Now to see what that means for Evergrande’s $300 billion in total liabilities and those holding them.

Data Download

International Economy

Germany’s Inflation Rate in November came in at 5.2% YoY, matching the consensus forecast, and compares to October’s 4.5% reading.

Industrial Production in the UK fell 0.6% MoM in October following a 0.4% MoM decline and compared to expectations for an increase of 0.1% MoM. Manufacturing Production rose 1.3% YoY. more than a tad slower than October 2.8% and the expected slowing to 1.7%. GDP in October rose a slower 4.6% YoY following September’s 5.3% pace and the forecasted 5.1% pace.

Industrial Production in Italy fell 0.6% MoM in October from 0.1% MoM in September, clearly missing the expected pick up to 0.4%.

Domestic Economy

Yesterday’s seasonally adjusted initial jobless claims dropped to a 52-year low of 184k while the prior week was revised higher by 5k to 227k. If we remove the seasonal adjustment, claims were a bit less impressive, rising 63.7k from the prior week to 280.7k. That said, the NSA additional claims of 64k are well below the historical average for the 49th week of the year. Continuing claims rose slightly from 1.954 million to 1.992 million.

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Yesterday we also learned that wholesale inventories in the U.S. rose at a record 2.3% MoM pace to $759.4 billion in October, which was slightly higher than the expected 2.2% increase. Inventories of durables rose 2.1%, driven mostly by metals (up 6.6%), hardware (up 3.6%), and autos (up 2.3%).

Later today we will get inflation data in the form of the Consumer Price Index (CPI) and core CPI as well as the preliminary Michigan Consumer Sentiment report for December. One of the big questions for inflation concerns the impact of rents, which have put strong upward pressure on CPI over the past six months. Some good news has come from both the National Multifamily Housing Council’s quarterly indicator of market strength and the high-frequency data from Apartment List that are showing signs that rents may be peaking here.

For those looking for a painful (or creative) read, the federal government’s monthly budget statement for November will also be released later this morning.


After gaining over 4% since the start of December, the S&P 500 took a breather yesterday and closed 0.7% lower. The Nasdaq Composite fell 1.7% and the Dow ended the day relatively unchanged. The Treasury curve flatted again as the spread between the long bond and the 2-year yield slipped to 117 basis points, half of where it was at the middle of March. WTI crude retreated towards $70 a barrel and the VIX rose to 21.5 after falling Wednesday below 20.

Stocks to Watch

Before U.S. equities begin trading this morning, Academy Sports & Outdoors (ASO) will report its quarterly results.

Shares of Chewy (CHWY) came under pressure in after-market trading last night following the company reporting a larger than expected net loss for its most recent quarter. While revenue for the quarter rose 24.1% YoY, it climbed a more modest 2.3% QoQ.

Costco Wholesale (COST) reported its November quarter revenue rose 14.4% YoY to $49.42 billion a tad below the $49.75 billion consensus. For the quarter, adjusted comparable sales which excluding gas price impact and FX, rose 9.8%, with U.S. adjusted comp sales up 9.9%, Canada +8.3%, and e-commerce +13.3%, handily beating the +8.3% comp sales forecast. Membership fees were up 9.9% YoY to $946 million and the company targets adding 23 new warehouse locations in the coming year, up from 22 over the prior 12 months.

lululemon athletica (LULU) reported another top and bottom line quarterly beat last night with total comparable sales climbing 27% YoY led by revenues climbing 28% YoY in North America and 40%. Compared to 2019, revenue grew 58%. The company opened 18 net new company-operated stores during the third quarter, ending with 552 stores. For the current quarter, lululemon sees revenue in the range of $2.125-$2.165 billion vs. the $2.17 billion consensus. The company also shared all of its Vietnam factories have reopened and are ramping up capacity, however, supply chain pressures are expected to continue into the first half of the coming year.

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Broadcom (AVGO) not only reported better than expected top and bottom-line results for its October quarter, the company also boosted its outlook for the current one calling for revenue of $7.6 billion vs. the $7.22 billion consensus. On top of that, the chip and software company also boosted its quarterly dividend by 14% to $4.10 per share and announced a new share repurchase program up to $10 billion.

Taiwan Semiconductor (TSM) reported its revenue for November 2021 was approximately NT$148.27 billion, an increase of 10.2% MoM and up 18.7% YoY.

In a bit of throwing some cold water on expectations, speaking at the Economic Club of Washington yesterday, Intel (INTC) CEO Pat Gelsinger shared it will likely take several years to get the semiconductor giant back on track.


Near-term the IPO calendar is pretty thin and readers looking to dig more into it should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

Hey, it’s Friday! That means there are no companies expected to report their quarterly results after today’s market close. Those looking for more on which companies are reporting when, head on over to Nasdaq’s Earnings Calendar.

On the Horizon


December 14: November Producer Price IndexDecember 15: Retail Sales, NY Empire State Manufacturing, Import/Export Prices, NAHB Housing Market, Business Inventories, Federal Reserve Interest Rate decisionDecember 16: Housing Starts, Building Permits, Philly Fed Manufacturing, jobless claims, Industrial Production, Markit Manufacturing PMI

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