Stock Index Futures Muted After Fed’s Rate Cut

December S&P 500 E-Mini futures (ESZ24) are down -0.10%, and December Nasdaq 100 E-Mini futures (NQZ24) are down -0.13% this morning as investors took a breather at the end of an eventful week that saw Donald Trump reclaim the U.S. presidency and the Federal Reserve cut rates.

As widely expected, the Federal Reserve cut its benchmark interest rate by a quarter percentage point yesterday. The Federal Open Market Committee voted unanimously to reduce the federal funds rate to a range of 4.50% to 4.75%, marking its second consecutive rate cut. Fed officials adjusted their language to note that “labor market conditions have generally eased” and reiterated that “the unemployment rate has moved up but remains low.” In addition, the statement eliminated the reference to “further” inflation progress, instead noting that inflation “has made progress toward the committee’s 2% objective but remains somewhat elevated.” “This further recalibration of our policy stance will help maintain the strength of the economy and the labor market and will continue to enable further progress on inflation as we move toward a more neutral stance over time,” Fed Chair Jerome Powell said in a press conference. The Fed Chair noted that recent indicators suggest the U.S. economy continues to expand solidly, adding that he does not rule “out or in” a rate cut in December. Powell also stated that the U.S. presidential election will have “no effects” on the Fed’s policy decisions in the near term. 

“No skip signs here. I believe that it is a good thing that the Fed did not lay the blame on the recent labor market slowdown on the hurricanes or strikes. They are just sticking with have generally eased. This statement does not put a December skip in play,” said Neil Dutta at Renaissance Macro Research.

In yesterday’s trading session, Wall Street’s major indices closed mostly higher, with the benchmark S&P 500 and the tech-heavy Nasdaq 100 notching new all-time highs. EPAM Systems (EPAM) climbed over +14% and was the top percentage gainer on the S&P 500 after the company posted upbeat Q3 results and issued strong Q4 guidance. Also, Arm Holdings (ARM) gained more than +4% after the semiconductor design company reported better-than-expected FQ2 results. In addition, Warner Bros. Discovery (WBD) surged over +11% after posting a surprise Q3 profit. On the bearish side, Match Group (MTCH) tumbled more than -17% and was the top percentage loser on the S&P 500 after reporting weaker-than-expected Q3 revenue and providing below-consensus Q4 revenue guidance. Also, MercadoLibre (MELI) plunged over -16% and was the top percentage loser on the Nasdaq 100 after the company posted weaker-than-expected Q3 adjusted EBITDA.

The Labor Department’s report on Thursday showed that the number of Americans filing for initial jobless claims in the past week rose by +3K to 221K, compared with the 223K expected. Also, U.S. Q3 nonfarm productivity rose +2.2% q/q, missing the +2.6% q/q consensus, while Q3 unit labor costs increased +1.9% q/q, stronger than expectations of +1.1% q/q. In addition, U.S. consumer credit rose +$6.00B in September, weaker than expectations of +$12.20B.

Meanwhile, U.S. rate futures have priced in a 71.3% chance of a 25 basis point rate cut and a 28.7% chance of no rate change at the next central bank meeting in December.

Today, investors will focus on the University of Michigan’s U.S. Consumer Sentiment Index, which is set to be released in a couple of hours. Economists, on average, forecast the preliminary November figure to be 71.0, up from last month’s figure of 70.5.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.301%, down -0.95%.

The Euro Stoxx 50 futures are down -1.05% this morning as investors digested mixed earnings updates and the political situation in Germany. Mining and luxury stocks slumped on Friday, while healthcare stocks outperformed. Data from the statistics agency Istat released Friday showed that Italy’s monthly industrial production fell more than expected in September. Meanwhile, the Bank of England reduced its key interest rate by 25 basis points to 4.75% on Thursday, with Governor Andrew Bailey stating that borrowing costs are likely to fall “gradually from here.” Investors also closely monitored political developments in Germany. Chancellor Olaf Scholz’s effort to engage with Friedrich Merz, leader of the opposition Christian Democratic Union, faced strong resistance, as Merz not only rejected Scholz’s approach but also called for an immediate vote of no confidence in the Chancellor. In corporate news, Cie Financiere Richemont Sa (CFR.Z.IX) slid over -5% after the luxury goods group reported weaker-than-expected H1 results. At the same time, International Consolidated Airlines Group S.A. (IAG.LN) climbed more than +5% after reporting solid Q3 results and announcing a 350 million euro ($376.95 million) share buyback.

Italy’s Industrial Production data was released today.

The Italian September Industrial Production stood at -0.4% m/m, weaker than expectations of -0.2% m/m.

Asian stock markets today closed mixed. China’s Shanghai Composite Index (SHCOMP) closed down -0.53% and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.30%. 

China’s Shanghai Composite Index closed lower today, reversing earlier gains as investors cautiously awaited announcements of additional stimulus from the Standing Committee meeting of the National People’s Congress. Profit-taking also weighed as the benchmark index neared the highs reached in October following initial stimulus measures. Property and brokerage stocks led the declines on Friday. After the market closed, China unveiled a 10 trillion yuan ($1.4 trillion) program to refinance local government debt, aiming to support a slowing economy facing new challenges following Donald Trump’s reelection. China will raise the debt ceiling for local governments to 35.52 trillion yuan, enabling them to issue 6 trillion yuan in additional special bonds over three years to swap hidden debt, as reported by the Xinhua News Agency on Friday. Authorities later announced that local governments would have access to an additional 4 trillion yuan in new special local bond quota over five years for the same purpose. Meanwhile, the plan approved by the Standing Committee of the National People’s Congress is near the upper range of most economists’ forecasts. In corporate news, Semiconductor Manufacturing International Corp. gained about +1% in Hong Kong after China’s largest chipmaker posted a 58.3% year-over-year surge in its Q3 net profit. Also, Xpeng soared more than +14% in Hong Kong following the launch of a new artificial intelligence-powered EV model.

Japan’s Nikkei 225 Stock Index closed higher today, tracking overnight gains on Wall Street. The benchmark index posted its biggest weekly gain since late September. Healthcare and technology stocks outperformed on Friday. Government data released on Friday showed that Japanese household spending declined in September for the second consecutive month as higher prices dampened consumer appetite, posing a challenge to the Bank of Japan’s plans for further rate hikes. Separately, preliminary data from the Cabinet Office showed that Japan’s leading economic index, which is used to gauge the economic outlook for a few months ahead on data such as job offers and consumer sentiment, rose to a 4-month high in September. Meanwhile, Japan’s finance minister issued a new warning to the currency market following Donald Trump’s election victory, which drove the dollar sharply higher against the yen. “We are watching developments in the currency market, including speculative moves, with an extremely high sense of urgency,” Katsunobu Kato said at a news conference on Friday. In corporate news, Nissan Motor slumped over -6% after the automaker announced it would lay off 9,000 workers and reduce its global manufacturing capacity by 20%. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -5.38% to 26.04.

The Japanese September Household Spending came in at -1.3% m/m and -1.1% y/y, compared to expectations of -0.7% m/m and -1.8% y/y.

The Japanese September Leading Index arrived at 109.4, stronger than expectations of 108.9.

Pre-Market U.S. Stock Movers

Doximity (DOCS) jumped about +43% in pre-market trading after the company posted upbeat FQ2 results and raised its full-year guidance for revenue and adjusted EBITDA.

Upstart Holdings (UPST) soared more than +24% in pre-market trading after the company reported stronger-than-expected Q3 results and issued above-consensus Q4 revenue guidance.

Toast (TOST) surged over +16% in pre-market trading after the restaurant software provider reported better-than-expected Q3 results and boosted its annual adjusted EBITDA forecast.

Pinterest (PINS) plunged more than -12% in pre-market trading after the company provided weaker-than-expected Q4 revenue guidance.

Airbnb (ABNB) fell over -5% in pre-market trading after reporting weaker-than-expected Q3 EPS.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Friday - November 8th

TELUS (TU), NRG (NRG), Baxter (BAX), RB Global (RBA), Paramount Global (PARA), CNH Industrial NV (CNH), Lamar (LAMR), Brookfield Renewable (BEP), ADS (WMS), Plains All American Pipeline (PAA), Fluor (FLR), Icahn Enterprises (IEP), Brookfield Business (BBU), Flowers Foods (FLO), Plains GP Holdings (PAGP), NexGen Energy (NXE), Atmus Filtration Tech (ATMU), Amneal Pharma A (AMRX), PAR Technology (PAR), GCM Grosvenor (GCMG), Perella Weinberg Partners (PWP), Hawaiian Electric Industries (HE), Adient (ADNT), Global Partners (GLP), Fortrea Holdings (FTRE), Marcus & Millichap (MMI), Docebo (DCBO), Madison Square Garden Entertainment (MSGE), Air Transport Services (ATSG), Bloomin Brands (BLMN), CompoSecure (CMPO), ANI Pharma (ANIP), TELUS International (TIXT), Okeanis Eco Tankers (ECO), Koppers (KOP), American Axle&Manufacturing (AXL), Fulgent Genetics (FLGT), Humacyte (HUMA), International Money Express (IMXI), Gray Television (GTN), Xeris Pharmaceuticals (XERS), Airsculpt Technologies (AIRS), Canopy Growth (CGC), AMC Networks (AMCX), Graham (GHM), Holley (HLLY), Delcath Systems (DCTH), Ocugen (OCGN), FutureFuel (FF), Proficient Auto Logistics (PAL).

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