Morning Markets
The S&P 500 Index ($SPX) (SPY) is up +0.32%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.22%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.22%.
Stocks are modestly higher, despite rising global bond yields, as the 10-year T-note yield climbed to a new 16-year high, and the 10-year German bund yield rose to a new 12-year high. Â
This morning, there was an unexpected downward revision to U.S. Q2 GDP that was dovish for Fed policy. The markets are looking forward to comments from Fed Chair Powell and other Fed members later today on the outlook for Fed policy.
A government shutdown appears imminent on October 1 as House Speaker McCarthy cannot get GOP lawmakers to agree on a temporary spending bill to keep the government open. Senate Republican leader McConnell is backing a bipartisan plan to avoid a shutdown and has publicly separated himself and Senate Republicans from House Republicans. Â
U.S. Q2 GDP was unrevised at +2.1% (annualized q/q), weaker than expectations of an upward revision to +2.2%. Q2 personal consumption was revised lower to +0.8% from the previously reported +1.7%.
U.S. weekly initial unemployment claims rose +2,000 to 204,000, showing a stronger labor market than expectations of 215,000. Weekly continuing claims rose +12,000 to 1.670 million, showing a stronger labor market than expectations of 1.675 million.
The markets are discounting a 23% chance that the FOMC will raise the funds rate by +25 bp at the next FOMC meeting that ends on November 1, and a 46% chance for that +25 bp rate hike at the following meeting that ends on December 13. The markets are then expecting the FOMC to begin cutting rates in the second half of 2024 in response to an expected slowdown in the U.S. economy.
U.S. and European bond yields today are moving higher. The 10-year T-note yield climbed to a 16-year high of 4.686% and is up +3.1 bp at 4.639%. The 10-year German bund yield rose to a 12-year high of 2.959% and is up +8.2 bp at 2.925%. The 10-year UK gilt yield rose to a 3-week high of 4.524% and is up +16.3 bp at 4.521%. Â
Overseas stock markets are mixed. The Euro Stoxx 50 is up +0.27%. China’s Shanghai Composite Index closed +0.10%. Japan’s Nikkei 225 today closed -1.54%.
The Euro Stoxx 50 today recovered from a 6-month low and is moderately higher after signs of easing price pressures in Germany sparked short covering in stocks. German Sep CPI rose +4.3% y/y, less than expected and the smallest increase in two years. Stocks initially opened lower today due to soaring European government bond yields after the 10-year German bund yield jumped to a 12-year high of 2.943% and the 10-year UK gilt yield rose to a 3-week high of 4.514%. Global bond yields are climbing on concern the rally in crude oil prices to a 13-month high will boost inflation pressures and prompt the world’s central banks to keep interest rates higher for longer. On the positive side, a gauge of Eurozone economic confidence fell less than expected this month, and energy stocks rallied today, with crude prices climbing to a 13-month high.
Eurozone Sep economic confidence fell -0.3 to 93.3, stronger than expectations of 92.4.
German Sep CPI (EU harmonized) rose +0.2% m/m and +4.3% y/y, weaker than expectations of +0.3% m/m and +4.5% y/y, with the +4.3% y/y gain the smallest annual increase in two years.
China’s Shanghai Composite Stock Index today closed slightly higher. Chinese stocks rebounded from early losses and closed higher as short covering emerged in late trading today ahead of the week-long Golden Week holidays that begin Friday. The Shanghai Composite today initially moved lower as persistent weakness in property stocks weighed on the overall market. Shares of China Evergrande Group and its units were suspended from trading today in Hong Kong, further weakening sentiment on China’s real estate sector.
Japan’s Nikkei Stock Index today dropped to a 1-month low and closed moderately lower. Stocks sold off today on rising global bond yields. The 10-year Japan JGB bond yield rose to a 10-year high today at 0.763%. Also, the surge in crude prices to a 13-month high weighed on consumer stocks and airlines as the higher energy prices threatens to cut company profits. Stock losses accelerated during the afternoon ahead of a reshuffle in the Nikkei Stock Index effective October 2 and a possible portfolio adjustment by the Government Pension Investment Fund to bring its equity target to 25% of assets before the quarter ends.
The recent rise in global bond yields has prompted foreign investors to reduce their Japanese stock holdings. Data from Japan Exchange Group showed foreign investors dumped 913 billion yen ($6.1 billion) of Japanese equities the week ended September 22, more than three times as much as the previous week and the most for a week in six months.Â
Pre-Market U.S. Stock Movers
Jabil Inc (JBL)Â jumped more than +3% in pre-market trading after reporting Q4 core EPS of $2.45, better than the consensus of $2.32.
Palantir (PLTR) rose more than +1% in pre-market trading after winning a $250 million AI contract with the U.S. Defense Department.Â
Trimble (TRMB) climbed more than +2% in pre-market trading after AGCO Corp said it will acquire technology assets from Trimble for $2 billion to boost its offerings in the agriculture market.
Huntington Ingalls Industries (HII) gained more than +1% in pre-market trading after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $247. Â
Micron Technology (MU) tumbled more than -4% in pre-market trading after forecasting a Q4 adjusted per share of -$1.00 to -$1.14, a bigger loss than the consensus of -96 cents per share.Â
Johnson Controls International Plc (JCI) dropped more than -2 % in pre-market trading after reporting a cybersecurity incident that caused disruptions in parts of its information technology infrastructure and applications.Â
Accenture (ACN) fell more than -4% in pre-market trading after forecasting 2024 adjusted EPS of $11.97-$12.32, below the consensus of $12.37.Â
Workday (WDAY) sank more than -9% in pre-market trading after forecasting annual subscription revenue growth of 17% to 19% over the next three years, below expectations of +20% growth.
CarMax (KMX) dropped more than -10% in pre-market trading after reporting Q2 EPS of 75 cents, weaker than the consensus of 77 cents.
Terex (TEX) fell more than -1% in pre-market trading after KeyBanc Capital Markets downgraded the stock to sector weight from overweight.
Jeffries Financial Group (JEF) dropped more than -2% in pre-market trading after reporting Q3 net revenue of $1.18 billion, below the consensus of $1.25 billion.Â
Earnings Reports (9/28/2023)
Accenture PLC (ACN), CarMax Inc (KMX), Jabil Inc (JBL), NIKE Inc (NKE), NioCorp Developments Ltd (NB), Vail Resorts Inc (MTN).
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On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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