S&P Futures Slip on U.S. Government Shutdown, ADP Jobs Report in Focus

December S&P 500 E-Mini futures (ESZ25) are trending down -0.56% this morning as sentiment took a hit after the U.S. government shut down for the first time in seven years.

The U.S. government shut down after a midnight funding deadline as the White House and lawmakers failed to reach a spending deal. The shutdown is expected to pause some federal services and place hundreds of thousands of federal employees on furlough. The Congressional Budget Office estimates that roughly 750,000 employees will be furloughed, costing $400 million per day in lost compensation, which could curb spending and negatively impact the economy. Notably, key economic data will not be released during the shutdown, with Thursday’s weekly jobless claims and Friday’s payrolls report immediately at risk. However, ADP private payroll figures and the ISM manufacturing PMI are still scheduled for release later today.

“Government shutdowns in the U.S. are rarely market-moving in and of themselves, but the timing matters. This one comes at a point where the Fed is data-dependent. The absence of clean data can increase volatility,” said Nina Stanojevic, investment specialist at St James’s Place. 

In yesterday’s trading session, Wall Street’s major indexes ended in the green. Pfizer (PFE) climbed over +6% and was the top percentage gainer on the S&P 500 after CEO Albert Bourla said the company secured a three-year exemption from President Trump’s proposed tariffs on pharmaceuticals in a deal that would reduce some of its U.S. drug prices by up to 85%. Also, CoreWeave (CRWV) surged more than +11% after announcing a $14.2 billion AI cloud-computing deal with Meta Platforms. In addition, EchoStar (SATS) rose over +3% after Bloomberg reported that Verizon was in talks with the company about purchasing some of its wireless spectrum. On the bearish side, Albemarle (ALB) slumped more than -6% and was the top percentage loser on the S&P 500 following news that China approved the restart of the CATL mine, which had been halted since August.

A Labor Department report released on Tuesday showed that the U.S. JOLTs job openings rose to 7.227 million in August, stronger than expectations of 7.190 million. Also, the U.S. July S&P/CS HPI Composite - 20 n.s.a. eased to +1.8% y/y from +2.2% y/y in June (revised from +2.1% y/y), stronger than expectations of +1.7% y/y. At the same time, the U.S. Conference Board’s consumer confidence index fell to a 5-month low of 94.2 in September, weaker than expectations of 96.0. In addition, the U.S. Chicago PMI unexpectedly fell to 40.6 in September, weaker than expectations of 43.4.

Fed Vice Chair Philip Jefferson on Tuesday cautioned that the central bank is confronting a weakening labor market at the same time as inflation pressures rise, complicating the monetary policy outlook. Still, he said, “The unemployment rate could edge a bit higher this year before moving back down next year,” adding that he expects “the disinflation process to resume after this year and inflation to return to the 2% target in the coming years.” Also, Boston Fed President Susan Collins said additional rate cuts could be appropriate this year, given a weaker labor market, but emphasized that officials must remain vigilant against the risk of persistent inflation. “It may be appropriate to ease the policy rate a bit further this year, but the data will have to show that,” Collins said. In addition, Dallas Fed President Lorie Logan said officials should exercise caution in considering further rate cuts while inflation remains above target and the labor market remains relatively balanced.

Meanwhile, U.S. rate futures have priced in a 94.6% chance of a 25 basis point rate cut and a 5.4% chance of no rate change at the next FOMC meeting in October.

Today, investors will focus on the U.S. ADP Nonfarm Employment Change data, which is set to be released in a couple of hours. In light of the government shutdown, the report may serve as the only broad, nationwide measure of job growth until Bureau of Labor Statistics operations resume. Economists, on average, forecast that the September ADP Nonfarm Employment Change will stand at 52K, compared to the August figure of 54K.

The U.S. ISM Manufacturing PMI and the S&P Global Manufacturing PMI will also be closely monitored today. Economists expect the September ISM manufacturing index to be 49.0 and the S&P Global manufacturing PMI to be 52.0, compared to the previous values of 48.7 and 53.0, respectively.

U.S. Construction Spending data will be reported today. Economists forecast the August figure at -0.1% m/m, the same as in July.

U.S. Crude Oil Inventories data will be released today as well. Economists expect this figure to be 1.5 million, compared to last week’s value of -0.6 million.

In addition, market participants will be anticipating speeches from Richmond Fed President Tom Barkin and Chicago Fed President Austan Goolsbee.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.153%, up +0.12%.

The Euro Stoxx 50 Index is up +0.11% this morning as investors digest fresh inflation data from the region and assess the impact of the U.S. government shutdown. Strength in pharmaceutical stocks is lending support to the overall market on Wednesday. Pfizer and U.S. President Donald Trump announced on Tuesday that they had reached a deal in which the drugmaker agreed to cut prescription drug prices in exchange for tariff relief, which analysts said could serve as a blueprint for wider cooperation between the pharma industry and the Trump administration. Also, bank stocks erased earlier losses after European Central Bank Vice President Luis de Guindos said the central bank plans to propose reducing the number of capital buffers banks must maintain and implementing a lighter regime for smaller lenders. Meanwhile, preliminary data from Eurostat released on Wednesday showed that the Eurozone’s annual inflation rate accelerated in September, reinforcing expectations that the ECB will keep its key interest rate unchanged for the remainder of the year. Separately, a survey showed that Eurozone manufacturing activity returned to contraction in September as new orders declined at the sharpest pace in six months, indicating that the region’s industrial sector recovery remained fragile. In corporate news, Novartis AG (NOVN.Z.IX) rose over +2% after the U.S. Food and Drug Administration approved its oral treatment for patients with a form of chronic inflammatory skin disease.

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

Eurozone’s September CPI rose +2.2% y/y, in line with expectations.

Eurozone’s September Core CPI rose +2.3% y/y, in line with expectations.

Eurozone’s September Manufacturing PMI came in at 49.8, stronger than expectations of 49.5.

Japan’s Nikkei 225 Stock Index (NIK) closed down -0.85%, while China’s financial markets were closed for a holiday.

Japan’s Nikkei 225 Stock Index closed lower and hit a 3-week low today as investors took profits from the recent rally at the start of the second half of the country’s fiscal year. Sentiment was also dampened by the U.S. government shutdown after Senate lawmakers failed to reach a funding deal. Heavy industry and financial stocks led the declines on Wednesday. A Bank of Japan survey released on Wednesday showed that confidence among large Japanese manufacturers improved for the second consecutive quarter and companies maintained their upbeat spending plans, strengthening the case for the central bank to resume raising rates. The survey, one of the key data points the BOJ will scrutinize at its policy meeting this month, indicates that the export-dependent economy was withstanding the impact of U.S. tariffs, at least for the time being, according to analysts. JPMorgan’s Benjamin Shatil said, “We think the Tankan survey will prompt a further shift in the BOJ’s assessment, paving the way for the next policy rate rise at the October meeting.” At the same time, some economists noted that the impact of U.S. tariffs will likely be more clearly reflected in the December Tankan survey. Separate data showed that Japan’s manufacturing activity contracted at the quickest pace in six months in September, with steeper declines in output and new orders. Meanwhile, investors are also cautious ahead of the ruling Liberal Democratic Party’s leadership vote on Saturday. The Nikkei newspaper reported on Wednesday that Shinjiro Koizumi, a leading candidate to become Japan’s next prime minister, said the government and central bank needed to have a common understanding of the direction of economic policy. Investor focus is now on speeches from BOJ policy board members, with Governor Kazuo Ueda’s remarks on Friday being the highlight. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed up +1.66% to 25.66.

The Japanese Tankan Large Manufacturers Index stood at 14 in the third quarter, in line with expectations.

The Japanese Tankan Large Non-Manufacturers Index came in at 34 in the third quarter, stronger than expectations of 33.

The Japanese September au Jibun Bank Manufacturing PMI arrived at 48.5, stronger than expectations of 48.4.

China’s Shanghai Composite Index was closed today for the Golden Week holiday. Mainland China’s financial markets will reopen on Thursday, October 9th. 

Pre-Market U.S. Stock Movers

The Magnificent Seven stocks are moving lower in pre-market trading, with Tesla (TSLA) and Meta Platforms (META) down about -0.7%.

Chip stocks are falling in pre-market trading. Marvell Technology (MRVL) and Micron Technology (MU) are down more than -2%. Also, GlobalFoundries (GFS) is down over -1%.

Doximity (DOCS) slid more than -4% in pre-market trading after Goldman Sachs downgraded the stock to Sell from Neutral with a price target of $64.

U.S.-listed shares of Lithium Americas (LAC) jumped over +32% in pre-market trading after the U.S. government agreed to acquire a 5% stake in the company and 5% stake in the company’s mining project of the largest lithium deposit in the U.S.

Nike (NKE) rose over +3% in pre-market trading after the world’s largest sportswear company posted better-than-expected FQ1 results.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Wednesday - October 1st

RPM (RPM), Acuity Brands (AYI), Conagra Brands (CAG), Cal-Maine (CALM), Novagold (NG), Rezolve AI (RZLV).