Stock Index Futures Muted as Euphoria Over Fed Rate Cut Ebbs, FedEx Results Disappoint

September S&P 500 E-Mini futures (ESU24) are down -0.09%, and September Nasdaq 100 E-Mini futures (NQU24) are down -0.15% this morning as disappointing earnings results from global economic bellwether FedEx dampened optimism surrounding the outlook for interest rates, while investors geared up for the so-called triple-witching event later in the day.

FedEx (FDX) plunged over -13% in pre-market trading after the delivery services giant reported weaker-than-expected Q1 adjusted EPS and cut its full-year guidance.

In yesterday’s trading session, Wall Street’s major indexes closed higher, with the benchmark S&P 500 and blue-chip Dow notching new all-time highs and the tech-heavy Nasdaq 100 rising to a 2-month high. Darden Restaurants (DRI) surged over +8% and was the top percentage gainer on the S&P 500 as the announcement of a delivery partnership between its Olive Garden restaurant chain and Uber overshadowed weaker-than-expected Q1 results. Also, megacap technology stocks rallied, with Tesla (TSLA) climbing more than +7% to lead gainers in the Nasdaq 100 and Apple (AAPL) advancing over +3%. In addition, chip stocks gained ground, with Advanced Micro Devices (AMD) and Applied Materials (AMAT) rising more than +5%. On the bearish side, Steelcase (SCS) slumped over -5% after the company reported weaker-than-expected Q2 revenue and provided below-consensus Q3 revenue guidance.

“Despite some volatility after the Fed’s rate cut, the S&P 500’s bullish trend remains intact,” said Fawad Razaqzada at City Index and Forex.com. “The Fed’s decision to deliver a 50-basis point rate cut was largely welcomed by investors. The move was seen as a bold but necessary step to ease economic concerns without sending panic signals reminiscent of the 2008 financial crisis.”

Economic data released on Thursday showed that the U.S. Philadelphia Fed manufacturing index rose to 1.7 in September, stronger than expectations of -0.8. Also, the number of Americans filing for initial jobless claims in the past week fell -12K to a 4-month low of 219K, stronger than expectations of 230K. In addition, the U.S. leading indicator index fell -0.2% m/m in August, a smaller decline than expectations of -0.3% m/m. At the same time, U.S. existing home sales fell -2.5% m/m to a 10-month low of 3.86M in August, weaker than expectations of 3.92M.

U.S. rate futures have priced in a 59.1% chance of a 25 basis point rate cut and a 40.9% chance of a 50 basis point rate cut at the next central bank meeting in November.

Meanwhile, Wall Street is preparing for a quarterly event known as triple witching, during which derivatives contracts linked to equities, index options, and futures expire, prompting traders collectively to either roll over their current positions or initiate new ones. About $5.1 trillion worth of options tied to individual stocks, indexes, and exchange-traded funds are set to expire today, according to an estimate from derivatives analytical firm Asym 500. 

“Triple-witching will likely inject more volatility into the market - we just don’t know which direction,” said Matt Thompson, co-portfolio manager at Little Harbor Advisors.

The U.S. economic data slate is empty on Friday. However, investors will likely focus on a speech from Philadelphia Fed President Patrick Harker.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 3.708%, down -0.03%.

The Euro Stoxx 50 futures are down -0.80% this morning, following the previous session’s sharp gains, as investors continued to evaluate the global economic outlook. Automobile stocks led the declines on Friday. Data from the Office for National Statistics showed Friday that Britain’s monthly retail sales rose more than anticipated in August. Separately, data from the Federal Statistical Office showed that producer prices in Germany dropped less than expected in August from a year earlier. Meanwhile, the Bank of England kept rates steady on Thursday and stated that it would not rush to ease policy. European Central Bank Vice President Luis de Guindos told Portugal’s Expresso in an interview published on Friday that the ECB will have higher-quality information in December to decide on a potential interest rate cut, but is also leaving the door open for a decision in October. Investors are now turning their attention to the Eurozone’s consumer confidence data for September, due later in the session. In corporate news, Mercedes-Benz Group Ag (MBG.D.DX) slumped over -6% after the German carmaker lowered its full-year financial forecast. Also, Burberry Group Plc (BRBY.LN) slid more than -4% after Jefferies downgraded the stock to Underperform from Hold.

U.K.’s Retail Sales, U.K.’s Core Retail Sales, and Germany’s PPI data were released today.

U.K. August Retail Sales arrived at +1.0% m/m and +2.5% y/y, stronger than expectations of +0.3% m/m and +1.4% y/y.

U.K. August Core Retail Sales stood at +1.1% m/m and +2.3% y/y, stronger than expectations of +0.5% m/m and +1.1% y/y.

The German August PPI has been reported at +0.2% m/m and -0.8% y/y, stronger than expectations of 0.0% m/m and -1.0% y/y.

Asian stock markets today settled in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.03%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +1.53%. 

China’s Shanghai Composite Index closed just above the flatline today, underperforming its regional peers as investors exercised caution after benchmark lending rates were unexpectedly left unchanged. Property stocks advanced on Friday after Bloomberg News reported that China is weighing the removal of some of the largest remaining restrictions on home purchases after previous measures did not rejuvenate a stagnant housing market. Also, some electric vehicle stocks climbed after the European Union and China agreed to deepen discussions to avoid impending tariffs on EVs, with a deadline just days away. China left its benchmark lending rates unchanged for September, maintaining the one-year loan prime rate at 3.35% and the five-year LPR at 3.85%. However, this disappointed investors who had been anticipating additional policy easing following the Fed’s bigger-than-expected interest rate cut earlier this week. The Securities Times reported on Friday that the Fed’s rate cut has created space for China to boost monetary and fiscal stimulus to bolster the economy. Meanwhile, China’s top planning body announced Thursday that the country will boost investment and consumption to stimulate domestic demand. It aims to promote private-sector investments in government projects and explore wage increases. In corporate news, CSPC Pharmaceutical Group surged more than +6% in Hong Kong after announcing it would allocate up to $641.7 million for share repurchases over the next two years.

Japan’s Nikkei 225 Stock Index closed higher today, tracking overnight gains on Wall Street, though it trimmed some of its early gains after the Bank of Japan indicated a path toward tightening. Retail and technology stocks led the gains on Friday. Data released by the Ministry of Internal Affairs on Friday showed that Japan’s core consumer price index accelerated for the fourth consecutive month in August, supporting the Bank of Japan’s hawkish shift this year. Meanwhile, the BOJ kept its target for the overnight call rate at 0.25% on Friday, having raised it to that level in July, as was widely anticipated. The central bank upgraded its view on consumer spending and reiterated its expectation that price growth will align with its target in the latter half of its projection period, signaling that it remains on course for rate hikes. At the same time, BOJ Governor Kazuo Ueda struck a less hawkish tone than some investors anticipated, signaling little urgency to raise rates and noting that upside risks to inflation are diminishing. In other news, overseas investors offloaded Japanese stocks worth 3.01 trillion yen ($21.13 billion) in the week ending September 14th, marking the largest outflow since last September, driven by a strengthening yen and heightened caution ahead of the Federal Reserve’s and the Bank of Japan’s monetary policy decisions. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -5.44% to 24.33.

The Japanese August National Core CPI has been reported at +2.8% y/y, in line with expectations.

Pre-Market U.S. Stock Movers

FedEx (FDX) plunged over -13% in pre-market trading after the delivery services giant reported weaker-than-expected Q1 adjusted EPS and cut its full-year guidance.

Nike (NKE) climbed more than +6% in pre-market trading after the company announced that Elliott Hill would return as President and Chief Executive Officer, effective October 14th.

Lennar (LEN) fell over -2% in pre-market trading after the company provided weaker-than-expected Q4 gross margin guidance.

PepsiCo (PEP) dropped more than -1% in pre-market trading after Morgan Stanley downgraded the stock to Equal Weight from Overweight.

ASML Holding NV (ASML) slid over -2% in pre-market trading after Morgan Stanley downgraded the stock to Equal Weight from Overweight.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Friday - September 20th

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