S&P Futures Tread Water Ahead of Fed Speak and More Big Bank Earnings

December S&P 500 E-Mini futures (ESZ24) are trending down -0.03% this morning as investors looked ahead to quarterly reports from more big banks while also awaiting remarks from Federal Reserve officials.

In yesterday’s trading session, Wall Street’s main stock indexes ended in the green, with the benchmark S&P 500 and blue-chip Dow notching new all-time highs and the tech-heavy Nasdaq 100 posting a 2-3/4 month high. Vistra Corp. (VST) climbed over +5% and was the top percentage gainer on the S&P 500 after Exane BNP Paribas initiated coverage of the stock with an Outperform rating and a price target of $231. Also, chip stocks gained ground, with Arm (ARM) rising more than +6% to lead gainers in the Nasdaq 100 and Marvell Technology (MRVL) advancing nearly +5%. In addition, Apple (AAPL) rose over +1% and was the top percentage gainer on the Dow after Evercore ISI added the stock to its “Tactical Outperform” list ahead of earnings. On the bearish side, Caterpillar (CAT) fell more than -2% and was the top percentage loser on the Dow after Morgan Stanley downgraded the stock to Underweight from Equal Weight with a price target of $332.

Minneapolis Fed President Neel Kashkari stated Monday that “further modest reductions” in the federal funds rate appear likely to be appropriate in the coming quarters. “Ultimately, the path ahead for policy will be driven by the actual economic, inflation, and labor market data,” Kashkari said. Also, Fed Governor Christopher Waller stated that recent economic data indicate policymakers can approach subsequent rate cuts with less urgency than they did at their last month’s meeting. “I view the totality of the data as saying monetary policy should proceed with more caution on the pace of rate cuts than was needed at the September meeting,” Waller said.

Meanwhile, U.S. rate futures have priced in an 86.8% chance of a 25 basis point rate cut and a 13.2% chance of no rate change at the conclusion of the Fed’s November meeting.

On the earnings front, major U.S. banks such as Bank of America (BAC), Goldman Sachs (GS), and Citigroup (C) are scheduled to release their quarterly results today. UnitedHealth (UNH), Johnson & Johnson (JNJ), Charles Schwab (SCHW), and United Airlines (UAL) are other prominent companies set to deliver their quarterly updates today.

According to Bloomberg Intelligence, companies in the S&P 500 are expected to post an average +4.3% increase in quarterly earnings for Q3 compared to the previous year, down from +7.9% growth projected in mid-July.

“The third quarter earnings season has begun, and while expectations have tempered since earlier in the year, the corporate sector remains strong, with ample buffers given elevated profit margins and strong balance sheets,” said Principal Asset Management.

On the economic data front, investors will likely focus on the NY Empire State manufacturing index, which is set to be released in a couple of hours. Economists, on average, forecast that the October NY Empire State manufacturing index will stand at 3.40, compared to last month’s value of 11.50.

In addition, market participants will be anticipating speeches from San Francisco Fed President Mary Daly, Fed Governor Adriana Kugler, and Atlanta Fed President Raphael Bostic.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.072%, down -1.29%.

The Euro Stoxx 50 futures are down -0.38% this morning as investors digested a new set of regional economic data while keeping an eye on the ongoing earnings season and awaiting the European Central Bank’s policy meeting later this week. Mining and energy stocks slumped on Tuesday, while telecom and travel stocks outperformed. The Office for National Statistics reported Tuesday that wage growth in the U.K. slowed modestly in the three months to August, while the unemployment rate unexpectedly fell during the same period, boosting the likelihood of the Bank of England reducing interest rates in November. Separately, the INSEE statistics agency reported that France’s annual inflation rate eased more than initially anticipated in September. In addition, Eurostat said that the Eurozone industry rebounded in August, providing a glimmer of hope for the struggling manufacturing sector. Meanwhile, market participants are awaiting the ECB’s monetary policy decision on Thursday, with the central bank widely expected to deliver another 25-basis-point rate cut. In corporate news, Telefonaktiebolaget Lm Ericsson (ERICB.S.DX) climbed over +8% after the Swedish telecom equipment maker reported better-than-expected Q3 core earnings, buoyed by a rebound in demand for 5G gear in North America.

U.K.’s Average Earnings ex Bonus, U.K.’s Unemployment Rate, France’s CPI, Spain’s CPI, Eurozone’s Industrial Production, Germany’s ZEW Economic Sentiment Index, and Eurozone’s ZEW Economic Sentiment Index were released today.

U.K. Average Earnings ex Bonus arrived at 4.9% in the three months to August, in line with expectations.

U.K. Unemployment Rate was at 4.0% in the three months to August, stronger than expectations of 4.1%.

The French September CPI came in at -1.3% m/m and +1.1% y/y, better than expectations of -1.2% m/m and +1.2% y/y.

The Spanish September CPI stood at -0.6% m/m and +1.5% y/y, in line with expectations.

Eurozone August Industrial Production arrived at +1.8% m/m and +0.1% y/y, compared to expectations of +1.8% m/m and -1.0% y/y.

The German October ZEW Economic Sentiment Index has been reported at 13.1, stronger than expectations of 10.2.

Eurozone October ZEW Economic Sentiment Index came in at 20.1, stronger than expectations of 16.9.

Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed down -2.53% and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.77%.

China’s Shanghai Composite Index closed lower today, reversing gains from the previous session, as investors awaited details and the extent of the country’s fiscal stimulus package. Finance stocks led the declines on Tuesday. Data released on Monday showed that Chinese export growth slowed to a five-month low in September, while imports also rose less than expected, further highlighting economic weakness. Meanwhile, top Chinese officials detailed the country’s fiscal stimulus plan in a briefing on Saturday without disclosing the size of the rescue package, though reports indicated that China might raise an additional 6 trillion yuan ($846 billion) from ultra-long special government bonds over three years. In other news, Bloomberg reported that China has started enforcing a long-ignored tax on overseas investment gains made by the country’s ultra-wealthy. In corporate news, Inner Mongolia Xingye Silver & Tin Mining slumped over -6% after projecting a 14% year-over-year drop in Q3 profit. Investor focus is now on the release of China’s third-quarter GDP figures and additional data for September, including fixed asset investment, unemployment, industrial production, and retail sales, set for Friday.

Japan’s Nikkei 225 Stock Index closed higher today as trading resumed after a long weekend. The benchmark index reached its highest level since July on Tuesday, propelled by overnight gains on Wall Street. Japanese stocks were also buoyed by a weaker yen, which typically boosts exporters’ overseas earnings when repatriated. Technology and financial stocks led the gains on Tuesday. Final data from the Ministry of Economy, Trade, and Industry released Tuesday confirmed that Japan’s industrial production fell in August as initially estimated. Meanwhile, the Nikkei Business Daily reported that Japanese Prime Minister Shigeru Ishiba stated his government plans to compile a supplementary budget for the current fiscal year exceeding last year’s 13.1 trillion yen ($87.6 billion) to finance an economic support package. In other news, Bloomberg reported that Tokyo Metro Co.’s initial public offering garnered 348.6 billion yen ($2.3 billion) after the company priced its shares at the upper end of the marketed range. In corporate news, Fuji Soft surged over +7% after announcing it would consider Bain Capital’s tender offer. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -5.34% to 27.14.

The Japanese August Industrial Production stood at -3.3% m/m, in line with expectations.

Pre-Market U.S. Stock Movers

Nvidia (NVDA) slid more than -1% in pre-market trading after Bloomberg reported that the U.S. is contemplating restricting exports of advanced AI chips from the company and other American firms to certain countries.

Etsy (ETSY) slumped over -4% in pre-market trading after Goldman Sachs downgraded the stock to Sell from Neutral with a price target of $45.

Coty (COTY) fell more than -2% in pre-market trading after the cosmetics and fragrance manufacturer posted downbeat preliminary FQ1 results.

Enphase Energy (ENPH) dropped over -1% in pre-market trading after RBC Capital downgraded the stock to Sector Perform from Outperform with a price target of $100.

Doximity (DOCS) gained more than +3% in pre-market trading after Barclays upgraded the stock to Overweight from Equal Weight with a $52 price target.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Tuesday - October 15th

UnitedHealth (UNH), J&J (JNJ), Bank of America (BAC), Goldman Sachs (GS), Citigroup (C), Charles Schwab (SCHW), PNC Financial (PNC), Interactive Brokers (IBKR), State Street (STT), United Airlines Holdings (UAL), Omnicom (OMC), JB Hunt (JBHT), Albertsons (ACI), Walgreens Boots (WBA), Pinnacle (PNFP), Hancock Whitney (HWC), Fulton (FULT), Enerpac Tool Group (EPAC), FB Financial (FBK), Smart Global (SGH), Mercantile (MBWM), Equity Bancshares Inc (EQBK), Sono-Tek Corp (SOTK).

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