December S&P 500 E-Mini futures (ESZ24) are down -0.29%, and December Nasdaq 100 E-Mini futures (NQZ24) are down -0.31% this morning as market participants looked ahead to remarks from Federal Reserve Chair Jerome Powell and other Fed officials as well as a fresh batch of U.S. labor market data, with a particular focus on Friday’s nonfarm payrolls report.
In Friday’s trading session, Wall Street’s major averages closed mixed. HP Inc. (HPQ) slumped nearly -4% after Bank of America downgraded the stock to Neutral from Buy. Also, chip stocks lost ground, with Marvell Technology (MRVL) sliding more than -3% to lead losers in the Nasdaq 100 and Applied Materials (AMAT) dropping over -2%. In addition, Costco Wholesale (COST) fell more than -1% after the company reported weaker-than-expected Q4 revenue. On the bullish side, Wynn Resorts (WYNN) climbed over +7% and was the top percentage gainer on the S&P 500 after Morgan Stanley upgraded the stock to Overweight from Equal Weight with a price target of $104.
Data from the U.S. Department of Commerce released on Friday showed that the core PCE price index, a key inflation gauge monitored by the Fed, came in at +0.1% m/m and +2.7% y/y in August, compared to expectations of +0.2% m/m and +2.7% y/y. Also, U.S. August personal spending rose +0.2% m/m, weaker than expectations of +0.3% m/m, while August personal income grew +0.2% m/m, weaker than expectations of +0.4% m/m. In addition, the University of Michigan U.S. consumer sentiment index was revised upward to a 5-month high of 70.1 in September, stronger than expectations of 69.0.
“Add [Friday’s] PCE price index to the list of economic data landing in a sweet spot,” said Chris Larkin, managing director, trading and investing, at E*Trade. “Inflation continues to keep its head down, and while economic growth may be slowing, there’s no indication it’s falling off a cliff.”
St. Louis Fed President Alberto Musalem stated on Friday that the U.S. central bank should reduce interest rates “gradually” following what he described as the “strong and clear message” of a half-point interest rate cut, which he endorsed. “For me, it’s about easing off the brake at this stage. It’s about making policy gradually less restrictive,” Musalem said in an interview with the Financial Times. If the economy or the labor market deteriorates more than anticipated, he noted, “a faster pace of rate reductions might be appropriate.”
U.S. rate futures have priced in a 58.5% chance of a 25 basis point rate cut and a 41.5% probability of a 50 basis point rate cut at the next central bank meeting in November.
In the coming week, the U.S. Nonfarm Payrolls report for September will be the main highlight. Also, market participants will be eyeing a spate of other economic data releases, including U.S. JOLTs Job Openings, S&P Global Manufacturing PMI, Construction Spending, ISM Manufacturing PMI, ADP Nonfarm Employment Change, Crude Oil Inventories, Initial Jobless Claims, S&P Global Composite PMI, S&P Global Services PMI, Factory Orders, ISM Non-Manufacturing PMI, Average Hourly Earnings, and the Unemployment Rate.
Meanwhile, Fed Chairman Jerome Powell is set to deliver a speech at the annual meeting of the National Association for Business Economics in Nashville later today. A host of other Fed officials will also be making appearances throughout the week, including Bowman, Bostic, Cook, Collins, Barkin, and Williams.
Several notable companies like Nike (NKE), Carnival (CCL), Paychex (PAYX), McCormick & Company (MKC), and Levi Strauss (LEVI) are slated to release their quarterly results this week.
Today, investors will focus on the U.S. Chicago PMI, which is set to be released in a couple of hours. Economists forecast that the Chicago PMI will stand at 46.1 in September, matching last month’s value.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 3.785%, up +0.89%.
The Euro Stoxx 50 futures are down -0.73% this morning, pressured by a series of profit warnings from automakers, while investors looked ahead to a raft of economic data from the region this week. Automobile stocks led the declines on Monday. The Office for National Statistics said Monday that the British economy grew less than initially anticipated in the second quarter, following a downward revision in government spending and exports. Separately, data showed that Italy’s annual inflation rate eased to 0.7% in September from 1.1% in August, marking the slowest rise in consumer prices since the beginning of the year. Investors’ attention is now on Germany’s preliminary inflation data for September, scheduled for release later in the session. Market participants will also closely monitor Eurozone inflation and PMI data this week. In corporate news, Stellantis NV (STLAP.FP) tumbled over -12% after the Dodge-maker slashed its full-year profit margin forecast due to worsening “global industry dynamics” and increased competition from China. Also, Volkswagen Ag (VOW3.D.DX) slid more than -3% after the carmaker lowered its 2024 guidance.
U.K.’s GDP and Italy’s CPI (preliminary) data were released today.
U.K. GDP has been reported at +0.5% q/q and +0.7% y/y in the second quarter, weaker than expectations of +0.6% q/q and +0.9% y/y.
The Italian September CPI came in at -0.2% m/m and +0.7% y/y, compared to expectations of -0.2% m/m and +0.8% y/y.
Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed up +8.06%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -4.80%.
China’s Shanghai Composite Index closed sharply higher today, marking its largest one-day gain since 2008 as Beijing’s extensive stimulus package drew foreign, institutional, and retail investors back into the market amid fears of missing out. Property stocks rallied on Monday after China’s central bank announced late Sunday that it would tell banks to reduce mortgage rates for existing home loans by October 31st, as part of comprehensive measures to bolster the country’s struggling property market. Also, Guangzhou on Sunday became the first top-tier city to remove all home purchase restrictions, while Shanghai and Shenzhen announced they would relax curbs on housing purchases by non-local buyers and reduce the minimum downpayment ratio for first-time homebuyers to no less than 15%. Meanwhile, official data released on Monday indicated that Chinese manufacturing activity contracted for the fifth consecutive month in September, albeit at a slower pace than in August, and the gauge of services activity stalled, supporting the argument for more robust policy measures to address deepening economic challenges. Separately, a private survey revealed an unexpected drop in manufacturing activity and a slowdown in services sector growth in September, also indicating economic weakness. In other news, UBS and Nomura increased their year-end targets for China’s major benchmark indices. In corporate news, SolaX Power Network Technology soared about +19% after announcing a 1.05 billion yuan investment plan to construct a large-scale energy storage system as well as a smart energy system.
The Chinese September Manufacturing PMI stood at 49.8, stronger than expectations of 49.4.
The Chinese September Non-Manufacturing PMI came in at 50.0, weaker than expectations of 50.4.
The Chinese September Caixin Manufacturing PMI arrived at 49.3, weaker than expectations of 50.5.
The Chinese September Caixin Services PMI arrived at 50.3, weaker than expectations of 51.6.
Japan’s Nikkei 225 Stock Index closed sharply lower today, marking its biggest drop in eight weeks, dragged down by a sharp rally in the yen as Shigeru Ishiba’s victory in the Japanese ruling party’s leadership race caught investors off guard. Real estate, automobile, and technology stocks led the declines on Monday. Preliminary data from the Ministry of Economy, Trade and Industry released Monday indicated that Japan’s industrial production fell more than anticipated in August, with key sectors such as motor vehicles and electrical machinery contributing significantly to the decline. Separate government data revealed that retail sales in August increased more than expected from a year earlier, marking the 29th consecutive month of growth as rising wages continued to bolster consumption. Meanwhile, 67-year-old Ishiba narrowly secured a victory in the ruling Liberal Democratic Party’s election on Friday to become party leader, and the LDP-controlled parliament is set to convene on Tuesday to elect him as prime minister. Ishiba’s selection prompted investors to scale back positions that had been built on speculation that Takaichi would become Japan’s new prime minister and encourage the Bank of Japan to maintain low interest rates. Ishiba’s support for higher corporate and investment-income taxes presents another challenge for equities. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +6.49% to 28.23.
The Japanese August Industrial Production (preliminary) arrived at -3.3% m/m, weaker than expectations of -0.5% m/m.
The Japanese August Retail Sales came in at +2.8% y/y, stronger than expectations of +2.6% y/y.
The Japanese August Housing Starts stood at -5.1% y/y, weaker than expectations of -3.3% y/y.
Pre-Market U.S. Stock Movers
CVS Health (CVS) rose over +1% in pre-market trading after the Wall Street Journal reported that hedge fund Glenview Capital Management is scheduled to meet with CVS Health’s top executives on Monday to suggest operational improvements.
Accenture (ACN) gained about +0.7% in pre-market trading after TD Securities upgraded the stock to Buy from Hold with a price target of $400.
Walt Disney Company (DIS) advanced more than +1% in pre-market trading after Seaport Research upgraded the stock to Buy from Neutral with a $108 price target.
Ford (F) and General Motors (GM) slid over -3% in pre-market trading after Stellantis slashed its 2024 profit margin guidance.
Procter & Gamble (PG) fell about -1% in pre-market trading after Barclays downgraded the stock to Equal Weight from Overweight with a price target of $163.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Monday - September 30th
Carnival Corp (CCL), Repositrak (TRAK), Glimpse Group (VRAR).
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On the date of publication, Oleksandr Pylypenko 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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