S&P Futures Tread Water Ahead of FOMC Meeting Minutes and More Fed Speak

December S&P 500 E-Mini futures (ESZ24) are trending down -0.02% this morning as market participants awaited the Federal Reserve’s September meeting minutes and remarks from Fed officials.

In yesterday’s trading session, Wall Street’s main stock indexes ended in the green. Palo Alto Networks (PANW) climbed over +5% and was the top percentage gainer on the Nasdaq 100 after Exane BNP Paribas initiated coverage of the stock with an Outperform rating and a price target of $410. Also, megacap technology stocks advanced, with Netflix (NFLX) rising more than +2% and Microsoft (MSFT) gaining over +1%. In addition, Nvidia (NVDA) rose more than +4% after Hon Hai announced it is constructing the world’s largest facility to manufacture Nvidia’s GB200 AI chips. On the bearish side, Roblox (RBLX) fell over -2% after Hindenburg Research revealed a short position in the gaming platform.

Economic data released on Tuesday showed that the U.S. trade deficit fell to -$70.40B in August from -$78.90B in July (revised from -$78.80B), marking the smallest deficit in five months.

Fed Governor Adriana Kugler said Tuesday that the U.S. central bank should maintain its focus on returning inflation to its 2% target, albeit with a “balanced approach” that prevents an “undesirable” slowdown in employment growth and economic expansion. Also, Atlanta Fed President Raphael Bostic said the Fed must balance competing risks considering how fast it will continue to reduce interest rates in the coming months. “I’m still laser-focused on the inflation target and making sure that we get that to target,” Bostic said. In addition, Boston Fed President Susan Collins remarked that rate cuts should be careful and data-driven.

Meanwhile, U.S. rate futures have priced in an 86.7% chance of a 25 basis point rate cut and a 13.3% chance of no rate change at the next central bank meeting in November.

Today, investors will closely monitor the release of the Federal Reserve’s minutes from the September meeting, which may provide further insights into how policymakers are thinking about the future pace of easing.

Also, market participants will be looking toward a batch of speeches from Fed officials Bostic, Logan, Goolsbee, Barkin, Williams, Jefferson, Collins, and Daly.

On the economic data front, investors will likely focus on U.S. Crude Oil Inventories data, which is set to be released in a couple of hours. Economists estimate this figure to be 2.000M, compared to last week’s value of 3.889M.

U.S. Wholesale Inventories data will be reported today as well. Economists anticipate the August figure to be +0.2% m/m, the same as in July.

The focus remains on the September reading of the U.S. Consumer Price Index, scheduled for release on Thursday, which is expected to show a decline in inflation to +2.3% y/y from +2.5% y/y in August.

Third-quarter corporate earnings season begins in earnest on Friday, with major banks such as JPMorgan Chase (JPM) and Wells Fargo (WFC) set to report their quarterly results. The S&P 500’s estimated earnings growth rate is 5%, based on estimates from LSEG.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.020%, down -0.40%.

The Euro Stoxx 50 futures are down -0.16% this morning as doubts about China’s stimulus plans kept market sentiment subdued. Bank stocks led the declines on Wednesday. The Federal Statistical Office reported Wednesday that German exports unexpectedly rose in August while imports fell more than anticipated. Meanwhile, European Central Bank policymaker Francois Villeroy de Galhau stated on Wednesday that it is “very likely” the central bank will cut its interest rates next week. “A cut is very likely and it will not be the last one, the rhythm depends on how the fight against inflation evolves,” Villeroy told Franceinfo radio station. Another ECB policymaker, Yannis Stournaras, said in an interview with the Financial Times that he supports two interest rate cuts this year. In corporate news, Continental Ag (CON.D.DX) climbed over +6% after the German automotive supplier projected an improvement in profitability within its automotive business for the third quarter.

Germany’s Exports and Germany’s Imports data were released today.

The German August Exports arrived at +1.3% m/m, stronger than expectations of -1.0% m/m.

The German August Imports came in at -3.4% m/m, weaker than expectations of -2.5% m/m.

Asian stock markets today closed mixed. China’s Shanghai Composite Index (SHCOMP) closed down -6.62% and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.87%.

China’s Shanghai Composite Index closed sharply lower today, snapping a ten-day winning streak, as investors digested weak economic data from the Golden Week holiday and doubted Beijing’s commitment to additional stimulus measures. Hardware stocks led the declines on Wednesday. Property and tourism stocks also lost ground. Data from the Ministry of Culture and Tourism released Tuesday showed that tourists in China made 765 million domestic trips during the seven-day National Day holiday, marking a 5.9% increase from the previous year and 10.2% higher than the same period in 2019, while tourism revenue reached 700.82 billion yuan, up 6.3% year-over-year and 7.9% above the pre-pandemic level in 2019. That indicates per-trip spending fell 2.1% from five years ago, according to Bloomberg calculations based on figures from the ministry. An economic briefing on Tuesday, where authorities were expected to elaborate on policy plans, also failed to excite investors due to the lack of details on additional stimulus. Meanwhile, China’s finance ministry is scheduled to hold a media briefing on Saturday, the State Council Information Office said in a notice on Wednesday, fueling expectations that Beijing is preparing fiscal stimulus to bolster the economy. In corporate news, Jinyuan EP plunged about -10% after Qiu Yongping was elected as its chair.

Japan’s Nikkei 225 Stock Index closed higher today, tracking an overnight rally on Wall Street. Recent weakness in the yen also bolstered Japanese stocks, enhancing the profit outlook for Japan’s export-oriented industries. Technology and healthcare stocks led the gains on Wednesday. Data released on Wednesday showed that Japan’s Reuters Tankan sentiment index for manufacturers increased to +7 in October from +4 in September, as companies grew more optimistic about business conditions, though ongoing concerns over China’s economic recovery continued to weigh on sentiment. Meanwhile, Eiji Maeda, the former executive director responsible for monetary policy, stated in a Tuesday interview that new Prime Minister Shigeru Ishiba is unlikely to obstruct the Bank of Japan’s path toward interest rate hikes, with January being the most probable time for the next increase. In other news, Nomura lifted its year-end target for the Nikkei to 40,000 from 38,000, citing solid corporate earnings, abundant cash and deposits, and governance reforms. In corporate news, Seven & I Holdings gained over +4% after Bloomberg reported that Canada’s Alimentation Couche-Tard had sweetened its offer for the company to 7 trillion yen ($47.2 billion). Investor attention is now directed toward earnings reports from major Japanese firms set for later this week, including AEON, Fast Retailing, and Seven & I Holdings. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -4.35% to 32.08.

Pre-Market U.S. Stock Movers

Arcadium Lithium (ALTM) soared about +31% in pre-market trading after Rio Tinto agreed to buy the company for $6.7 billion.

Alphabet (GOOGL) fell over -1% in pre-market trading following news that the U.S. Justice Department was weighing a breakup of Google.

Boeing (BA) dropped more than -1% in pre-market trading after withdrawing its offer to around 33,000 striking machinists and halting negotiations with their union.

Saratoga Investment (SAR) climbed over +7% in pre-market trading after reporting better-than-expected Q2 adjusted EPS.

Home Depot (HD) and Lowe’s (LOW) rose more than +1% in pre-market trading after Loop Capital upgraded the stocks to Buy from Hold.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Wednesday - October 9th

AZZ (AZZ), Applied Digital (APLD), Helen of Troy Ltd (HELE), E2open Parent Holdings (ETWO), Byrna Technologies (BYRN), Richardson Electronics (RELL), Bassett (BSET).

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