Summary:
- US indices pretty much flat; near 2019 highs
- Philly Fed and US durable goods data disappoint
- Nike shares fall after shoe causes injury to Basketball player
After pushing higher overnight during the Asian session, US indices have pulled back and the stock benchmarks across the Atlantic are called to trade pretty much at the level where they ended Wednesday’s session when the opening bell rings out this afternoon. In the past half an hour we’ve got the main economic releases of the day, which overall is slightly negative for stocks. While the latest initial jobless claims exceeded forecasts both the durable, and core durable, goods orders missed forecasts while the Philly Fed manufacturing index followed on in the same vein as the weak European data on this front this morning in turning negative for the first time since the July 2016 release.
The Philly Fed is following the lead of the Richmond PMI in falling into contractionary territory and overall, they both provide further evidence of a wider slowdown in the manufacturing sector. Source: XTB Macrobond
First off let’s look more closely at the Philadelphia Fed manufacturing index which unexpectedly fell to -4.1 from a consensus forecast of 14.0. To put this in context the prior month was 17 and the first negative print in 2 and a half years will on serve to further confirm the notion that global manufacturing activity is clearly slowing. The new orders index was also worrisome with a print of -2.4 sharply down on the 21.3 last month but one factor that takes the edge off the negativity is a rise in the employment index which increased to 14.5 versus 9.6 previously.
The latest look at the strength of US consumer spending from durable goods orders suggests that there is a clear weakening with the both the headline and core reading rolling over. Source: XTB Macrobond
There was more bad news for the US on the consumer front, where durable goods orders for December missed forecasts of a 1.6% M/M rise, in coming in at 1.2%. This was up from the 1.0% seen last time out, which was revised higher from 0.7% and therefore takes the edge off the miss to some extent. However, the core reading and subcomponents are seen to give a better reflection for this release, and these were worse than the headline. Core, or durable goods orders ex-transport, rose by a measly 0.1% M/M vs 0.3% expected, and while this is a rise compared to the prior reading of -0.4% it isn’t much of one. The prior reading was also revised lower from -0.3% and therefore the revision could be seen to account for the increase. Another component worth mentioning is the capital goods orders non-defence ex air which disappointed badly to the downside in falling to –0.7% vs an expected +0.2%.
Finally, in terms of individual stocks, Nike could be worth keeping an eye on this afternoon with shares in the sportswear giant called to open lower by more than 1.5% after a college basketball player suffered an injury due to his Nike trainer splitting. Zion Williamson’s shoe ripped into pieces less than one minute into the game between Duke University and the University of North Carolina, causing the player to fall and injure his knee which kept him out the rest of the game. "We are obviously concerned and want to wish Zion a speedy recovery. The quality and performance of our products are of utmost importance," Nike said in a statement. "While this is an isolated occurrence, we are working to identify the issue." This clearly doesn’t look good for Nike with Williamson seen as one of the best players at college level and it’s also worth pointing out that the stock of Under Armour, one of Nike’s main competitors are expected to begin more than 2% higher on the open.
Nike shares have outperformed the broader market of late, with the stock recouping almost all the declines seen since the September peak. 86 could now be seen as an important resistance level with the stock called to open lower after the shoe malfunction. Source: xStation
