Stocks Set to Open Higher as Investors Await U.S. Inflation Data

September S&P 500 E-Mini futures (ESU24) are up +0.74%, and September Nasdaq 100 E-Mini futures (NQU24) are up +0.95% this morning, partially rebounding from Friday’s losses driven by weaker-than-expected U.S. payroll numbers, while investors looked ahead to the release of U.S. inflation data later in the week.

In Friday’s trading session, Wall Street’s major averages ended in the red, with the benchmark S&P 500 dropping to a 3-1/2 week low, the blue-chip Dow falling to a 3-week low, and the tech-heavy Nasdaq 100 sliding to a 4-week low. Broadcom (AVGO) plunged over -10% and was the top percentage loser on the S&P 500 and Nasdaq 100 after the semiconductor and software giant issued weaker-than-expected Q4 revenue guidance. Also, megacap technology stocks lost ground, with Tesla (TSLA) slumping more than -8% and Amazon.com (AMZN) falling over -3% to lead losers in the Dow. In addition, Super Micro Computer (SMCI) slid more than -6% after JPMorgan downgraded the stock to Neutral from Overweight. On the bullish side, Samsara (IOT) surged over +13% after the company posted upbeat Q2 results and raised its full-year guidance.

The U.S. Labor Department’s report on Friday showed that nonfarm payrolls increased by 142K in August, up from the 89K added in July (revised from 114K), but still falling short of the 164K consensus estimate. Also, the U.S. August unemployment rate ticked down to 4.2% from 4.3% in July, in line with expectations. In addition, U.S. average hourly earnings came in at +0.4% m/m and +3.8% y/y in August, stronger than expectations of +0.3% m/m and +3.7% y/y. 

“August employment data continue the portrayal of an economy running out the string, nearing an inflection point,” said Steven Blitz at TS Lombard. “Whether inflection turns into recession, or something less negative, depends upon how aggressive the Fed counters current negative momentum. Does the Fed go 25 or 50?”

New York Fed President John Williams stated on Friday that the central bank should now lower interest rates, given the progress in reducing inflation and a slowdown in the labor market. “With the economy now in equipoise and inflation on a path to 2%, it is now appropriate to dial down the degree of restrictiveness in the stance of policy by reducing the target range for the federal funds rate,” Williams said. Also, Fed Governor Christopher Waller said that it is crucial for the central bank to start reducing interest rates this month due to increasing risks of further weakening in the labor market. Waller noted he is also “open-minded” about the possibility of a larger rate cut and would support one if deemed appropriate. “The balance of risks has shifted toward the employment side of our dual mandate, and that policy needs to adjust accordingly,” he said.

U.S. rate futures have priced in a 75.0% chance of a 25 basis point rate cut and a 25.0% probability of a 50 basis point rate cut at the Fed’s monetary policy committee meeting next week.

In the coming week, the U.S. consumer inflation report for August will be the main highlight. Also, market participants will be monitoring other economic data releases, including the U.S. PPI, Core PPI, Crude Oil Inventories, Initial Jobless Claims, Export Price Index, Import Price Index, and Michigan Consumer Sentiment Index (preliminary).

Several notable companies like Adobe (ADBE), Oracle (ORCL), Kroger (KR), and GameStop (GME) are set to report their quarterly figures this week.

Meanwhile, the first U.S. Presidential debate between former President Donald Trump and Vice President Kamala Harris is set to take place on Tuesday.

Today, investors will focus on U.S. Consumer Credit data, which is scheduled to be released later in the day. Economists, on average, forecast that July Consumer Credit will stand at $12.30B, compared to the previous figure of $8.93B.

U.S. Wholesale Inventories data will be reported today as well. Economists expect July’s figure to be +0.3% m/m, compared to +0.2% m/m in June.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 3.759%, up +1.45%.

The Euro Stoxx 50 futures are up +0.87% this morning, recovering some of last week’s losses, while investors awaited a series of economic data from the region and the European Central Bank’s interest rate decision later in the week. Travel and leisure stocks led the gains on Monday, while technology stocks also gained ground. A survey released on Monday indicated that investor sentiment in the Eurozone declined for a third straight month in September, falling to its lowest level since January due to dissatisfaction with the economic situation, especially in Germany. Meanwhile, the ECB is set to announce its interest rate decision on Thursday. The central bank is widely anticipated to reduce its deposit rate by 25 basis points to 3.50%. However, it is expected to be cautious about the outlook for additional rate cuts as services inflation remains relatively high. Investors will also analyze consumer price figures from Germany, Spain, and France, along with the Eurozone’s industrial production data, which are scheduled for release later in the week. In corporate news, Adidas Ag (ADS.D.DX) fell over -3% after Barclays downgraded the stock to Equal Weight from Overweight.

Eurozone’s Sentix Investor Confidence Index was released today.

Eurozone September Sentix Investor Confidence Index arrived at -15.4, weaker than expectations of -12.4.

Asian stock markets today settled in the red. China’s Shanghai Composite Index (SHCOMP) closed down -1.06% and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.48%.

China’s Shanghai Composite Index closed lower today, falling to a new 7-month low as soft inflation data from the country intensified worries about the economy. Energy and bank stocks led the declines on Monday, while pharmaceutical stocks advanced. Data from the National Bureau of Statistics released on Monday showed that China’s annual consumer inflation picked up in August, though it fell short of expectations despite supply constraints due to abnormal weather, while producer prices declined at the sharpest rate in four months. Meanwhile, China intensified its efforts to further open up the economy by removing restrictions on the manufacturing sector and broadening opportunities for foreign investment in the health sector, aiming to stimulate growth. The Chinese government will trim its list of industries closed to foreign investors to 29 from 31 and honor its commitment to eliminate restrictions on the manufacturing sector, the National Development and Reform Commission and the Commerce Ministry announced in a joint statement on Sunday. China’s Commerce Ministry also announced on Sunday that foreign investors are now permitted to establish wholly foreign-owned hospitals in Beijing, Tianjin, Shanghai, Nanjing, Suzhou, Fuzhou, Guangzhou, Shenzhen, and Hainan Island. In other news, China’s Commerce Ministry officially launched an anti-dumping investigation into Canadian rapeseed or canola oil imports on Monday. Investors are now focusing on Chinese trade figures due Tuesday to gain further insights into the world’s second-largest economy.

The Chinese August CPI has been reported at +0.4% m/m and +0.6% y/y, weaker than expectations of +0.5% m/m and +0.7% y/y.

The Chinese August PPI came in at -1.8% y/y, weaker than expectations of -1.5% y/y.

Japan’s Nikkei 225 Stock Index ended lower today, hitting a more than 3-week low and tracking Friday’s steep selloff on Wall Street as weak U.S. jobs data sparked concerns about the health of the world’s largest economy. Japanese stocks were also pressured by a stronger yen, which surged on Friday due to increased demand for safe havens as equities declined. Technology stocks led the declines on Monday. The Cabinet Office’s revised figures released on Monday indicated that Japan’s economy expanded at a slightly slower rate than initially estimated in the second quarter, impacted by downward revisions to corporate and household spending. Separately, data showed that Japan’s current account surplus grew more than anticipated in July, representing the 18th straight month of surplus in the current account and reaching the largest figure since March. Meanwhile, solid growth, increasing wages, and persistent inflationary pressures continued to bolster expectations that the Bank of Japan would raise interest rates further. In other news, Japan’s ruling party official and candidate in the party’s leadership race, Sanae Takaichi, on Monday advocated for implementing “strategic” fiscal spending to support the economy. In corporate news, Seven & I Holdings gained over +2% after Canada’s Alimentation Couche-Tard expressed willingness to continue discussions with the Japanese company. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -1.20% to 28.72.

The Japanese GDP arrived at +0.7% q/q and +2.9% y/y in the second quarter, weaker than expectations of +0.8% q/q and +3.1% y/y.

The Japanese July Current Account n.s.a. stood at 3.193T yen, stronger than expectations of 2.589T yen.

Pre-Market U.S. Stock Movers

Dell Technologies (DELL) and Palantir Technologies (PLTR) climbed over +6% in pre-market trading after S&P Global announced their addition to the benchmark S&P 500 index.

Boeing (BA) rose nearly +3% in pre-market trading after the company announced a tentative agreement for a 25% pay raise for its largest union to avoid a strike.

Savara (SVRA) surged about +12% in pre-market trading following the announcement of new data from the Pivotal Phase 3 IMPALA-2 trial.

JetBlue (JBLU) gained more than +3% in pre-market trading after BofA upgraded the stock to Neutral from Underperform with a $6 price target.

U.S. Steel (X) advanced over +2% in pre-market trading after JPMorgan upgraded the stock to Overweight from Neutral with a price target of $42.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Monday - September 9th

Oracle (ORCL), Mission Produce (AVO), Avid Bioservices (CDMO), Limoneira (LMNR), Calavo Growers (CVGW), Matrix (MTRX).

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