Stocks Set to Open Lower as Bond Yields Climb, U.S. Jobs Data Awaited

September S&P 500 E-Mini futures (ESU25) are down -0.75%, and September Nasdaq 100 E-Mini futures (NQU25) are down -0.95% this morning as Treasury yields climbed after cash trading resumed following the Labor Day holiday.

This week, investors look ahead to remarks from Federal Reserve officials, earnings reports from several high-profile companies, as well as a slew of U.S. economic data, with a particular focus on Friday’s nonfarm payrolls report.

In Friday’s trading session, Wall Street’s major equity averages ended in the red. Marvell Technology (MRVL) tumbled over -18% and was the top percentage loser on the Nasdaq 100 after the chip designer provided tepid Q3 revenue guidance. Also, Dell Technologies (DELL) slid more than -8% and was the top percentage loser on the S&P 500 after reporting a slowdown in AI server orders in Q2 and a weaker-than-expected operating margin in its infrastructure unit. In addition, Caterpillar (CAT) fell over -3% and was the top percentage loser on the Dow after warning that it expects a larger-than-anticipated net tariff impact of up to $1.8 billion this year. On the bullish side, Autodesk (ADSK) climbed over +9% and was the top percentage gainer on the S&P 500 and Nasdaq 100 after the company posted upbeat Q2 results and issued above-consensus Q3 guidance.

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, rose +0.3% m/m and +2.9% y/y in July, in line with expectations. Also, U.S. July personal spending climbed +0.5% m/m, in line with expectations, and personal income rose +0.4% m/m, in line with expectations. In addition, the U.S. Chicago PMI fell to 41.5 in August, weaker than expectations of 46.6. Finally, the University of Michigan’s U.S. August consumer sentiment index was unexpectedly revised lower to 58.2, weaker than expectations of no change at 58.6.

“The good news is, in-line expectations likely keep the status quo intact, which leaves a Fed rate cut in play for September. The bad news is, inflation is continuing to inch higher, which isn’t really the environment the Fed likely wants to cut in,” said Bret Kenwell at eToro.

San Francisco Fed President Mary Daly indicated on Friday that officials are likely to be ready to cut interest rates soon, noting that inflation pressures from tariffs will probably be temporary. “It will soon be time to recalibrate policy to better match our economy,” Daly wrote in a brief social media post.

U.S. rate futures have priced in a 91.8% chance of a 25 basis point rate cut and an 8.2% chance of no rate change at the September FOMC meeting.

Following Friday’s selloff in tech stocks on Wall Street, the record-breaking stock rally now faces a critical test this month, with jobs data, inflation numbers, and the Fed’s rate decision all scheduled in the coming weeks. Tariff tensions and uncertainty over the Fed’s independence are further adding to risks in September, which has historically been the weakest month of the year for U.S. markets.

In this holiday-shortened week, the U.S. August Nonfarm Payrolls report will be the main highlight. The report will serve as a key consideration for Fed officials ahead of their September policy meeting, with many analysts anticipating that August payrolls will confirm a slowdown in U.S. job creation. Ahead of the key jobs report, additional insights into the health of the U.S. labor market will come from the JOLTs Job Openings, ADP Nonfarm Employment Change, and Initial Jobless Claims. Other noteworthy data releases include the U.S. Trade Balance, Factory Orders, Nonfarm Productivity, Unit Labor Costs, the S&P Global Services PMI, the ISM Non-Manufacturing PMI, Average Hourly Earnings, and the Unemployment Rate.

Investors will hear perspectives from St. Louis Fed President Alberto Musalem, Minneapolis Fed President Neel Kashkari, New York Fed President John Williams, and Chicago Fed President Austan Goolsbee throughout the week. The Fed will also release its Beige Book survey of regional business contacts this week, which provides an update on economic conditions in each of the 12 Fed districts. The Beige Book is published two weeks before each meeting of the policy-setting Federal Open Market Committee.

In addition, several high-profile companies, including Broadcom (AVGO), Salesforce (CRM), Zscaler (ZS), Hewlett Packard Enterprise (HPE), Dollar Tree (DLTR), and Lululemon Athletica (LULU), are scheduled to report their quarterly results this week.

Meanwhile, market participants will also be watching the U.S. administration’s next steps after a federal appeals court ruled on Friday that most of President Trump’s global tariffs were illegal, stating he exceeded his authority by enacting them through an emergency law. However, the judges allowed the tariffs to remain in effect while the case proceeds.

Today, investors will focus on the U.S. ISM Manufacturing PMI and the S&P Global Manufacturing PMI, set to be released in a couple of hours. Economists expect the August ISM manufacturing index to be 49.0 and the S&P Global manufacturing PMI to be 53.3, compared to the previous values of 48.0 and 49.8, respectively.

U.S. Construction Spending data will also be released today. Economists forecast the July figure at -0.1% m/m, compared to -0.4% m/m in June.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.283%, up +0.87%.

The Euro Stoxx 50 Index is down -0.52% this morning, weighed down by weakness in real estate stocks and retailers. Rate-sensitive real estate stocks led the declines on Tuesday as bond yields climbed across the bloc amid concerns over government finances, with Germany’s 30-year yields surging to their highest levels since 2011. Retail stocks also slumped. Preliminary data from Eurostat released on Tuesday showed that Eurozone inflation accelerated slightly in August, reinforcing expectations that the European Central Bank will keep interest rates unchanged next week. Meanwhile, ECB Executive Board member Isabel Schnabel told Reuters that the central bank should hold rates steady, noting the Eurozone economy is holding up against U.S. tariffs and inflation could still exceed projections in the coming years. “I believe that we may be already mildly accommodative and therefore I do not see a reason for a further rate cut in the current situation,” Schnabel said in an interview published Tuesday. In corporate news, Nestle SA (NESN.Z.IX) fell about -1% after the company dismissed Chief Executive Officer Laurent Freixe just a year into the role over an undisclosed workplace affair. At the same time, Kering (KER.FP) climbed more than +3% after HSBC upgraded the stock to Buy from Hold.

Eurozone’s CPI (preliminary) and Eurozone’s Core CPI (preliminary) data were released today.

Eurozone’s August CPI rose +2.1% y/y, in line with expectations.

Eurozone’s August Core CPI rose +2.3% y/y, stronger than expectations of +2.2% y/y.

Asian stock markets today closed mixed. China’s Shanghai Composite Index (SHCOMP) closed down -0.45%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.29%.

China’s Shanghai Composite Index closed lower today, snapping a three-day winning streak as investors booked profits after the recent sharp rally, with attention shifting to the country’s largest-ever military parade. AI-related and semiconductor stocks retreated on Tuesday. Investors also monitored the Shanghai Cooperation Organization summit in Tianjin, where President Xi Jinping unveiled plans for an SCO development bank and pledged $1.4 billion in loans over the next three years. Meanwhile, margin trading in China’s onshore equities market climbed to 2.28 trillion yuan ($320 billion) on Monday, surpassing the previous record of 2.27 trillion yuan in 2015, as investors boosted leveraged bets to chase the stock market rally. Chinese stocks have been rallying since April, partly on optimism that the country’s advances in AI and efforts to curb overcapacity will help revive growth. Also adding to investor optimism were expectations that authorities would keep sentiment supported ahead of the September 3rd military parade, set to commemorate the 80th anniversary of the end of World War II. In other news, Daiwa analysts noted that the contraction in China’s property sales eased in August, supported by rising average selling prices.

Japan’s Nikkei 225 Stock Index reversed early losses and ended higher today, supported by bargain hunting. Energy, industrial, and financial stocks outperformed on Tuesday. The benchmark index also found support as the yen weakened against the dollar after Bank of Japan Deputy Governor Ryozo Himino’s speech offered little guidance on the future path of interest rates. Himino said the central bank should continue raising interest rates but warned about tariff-related risks, indicating the bank was in no hurry to raise still-low borrowing costs. “Despite the three policy interest rate hikes by the bank thus far, real interest rates have remained at significantly low levels, as inflation has stayed strong,” Himino said. However, he cautioned that uncertainty surrounding the impact of U.S. tariffs on the global economy remains high, and any effects are likely to become clearer over time. Meanwhile, Japan’s 10-year government bonds rallied on Tuesday after an auction of the benchmark tenor saw its strongest demand since October 2023. In other news, the Sankei newspaper reported on Tuesday that Japan’s Prime Minister Shigeru Ishiba plans to ask ministers as soon as this week to compile an economic stimulus package to counter inflation and Trump’s tariffs. In corporate news, J.Front Retailing climbed over +4%, and Takashimaya rose more than +3% after a unit of the former company and the latter posted preliminary same-store sales numbers for August that marked the first year-over-year increase since February. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed down -2.15% to 23.70.

Pre-Market U.S. Stock Movers

The Magnificent Seven stocks dropped in pre-market trading, with Nvidia (NVDA) sliding over -2% and Amazon.com (AMZN) falling more than -1%.

Chip stocks are moving lower in pre-market trading. Marvell Technology (MRVL), Micron Technology (MU), and Intel (INTC) are down more than -1%.

Fortinet (FTNT) fell over -2% in pre-market trading after Morgan Stanley downgraded the stock to Underweight from Equal Weight with a price target of $67.

e.l.f. Beauty (ELF) slid more than -2% in pre-market trading after Deutsche Bank downgraded the stock to Hold from Buy.

Zscaler (ZS) rose over +2% in pre-market trading after Morgan Stanley upgraded the stock to Overweight from Equal Weight with a price target of $320.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Tuesday - September 2nd 

Zscaler (ZS), Healthequity Inc (HQY), Signet Jewelers (SIG), Academy Sports (ASO), Great Elm Group (GEG).