S&P Futures Climb on Fed Rate-Cut Optimism, More Big Bank Earnings on Tap

December S&P 500 E-Mini futures (ESZ25) are trending up +0.63% this morning amid optimism over Federal Reserve interest-rate cuts following dovish comments from Fed Chair Jerome Powell, while investors await quarterly reports from more big banks.

In yesterday’s trading session, Wall Street’s major indexes closed mixed. Most members of the Magnificent Seven stocks retreated, with Nvidia (NVDA) falling more than -4% to lead losers in the Dow and Amazon.com (AMZN) dropping over -1%. Also, semiconductor and AI infrastructure stocks slumped, with Arista Networks (ANET) sliding over -5% to lead losers in the S&P 500 and Intel (INTC) falling more than -4%. In addition, Salesforce (CRM) dropped over -3% after Northland Securities downgraded the stock to Market Perform from Outperform. On the bullish side, Wells Fargo (WFC) climbed more than +7% and was the top percentage gainer on the S&P 500 after the lender posted upbeat Q3 results and raised a key profitability metric. 

Fed Chair Jerome Powell indicated on Tuesday that labor market conditions continue to worsen, reinforcing investors’ expectations for another interest rate cut this month. “The labor market has demonstrated pretty significant downside risks,” Powell said. “The data we got right after the July meeting—which adjusted back all the way through May—showed that the labor market has actually softened pretty considerably, and puts us in a situation where the two risks are closer to being in balance.”

Boston Fed President Susan Collins said policymakers should keep lowering interest rates this year to support the labor market. “Even with some additional easing, monetary policy would remain mildly restrictive, which is appropriate for ensuring that inflation resumes its decline once tariff effects filter through the economy,” Collins said.

Meanwhile, U.S. rate futures have priced in a 95.7% chance of a 25 basis point rate cut and a 4.3% chance of no rate change at the October FOMC meeting.

On the trade front, U.S. President Donald Trump said on Tuesday that Washington was considering ending certain trade relations with China, including the purchase of cooking oil. At the same time, U.S. Trade Representative Jamieson Greer said tensions with China over export controls are likely to ease following talks between officials from both nations.

Third-quarter corporate earnings season picks up steam, with investors awaiting reports today from major U.S. banks such as Bank of America (BAC) and Morgan Stanley (MS), as well as notable companies like Abbott Labs (ABT), Progressive (PGR), and United Airlines Holdings (UAL). According to Bloomberg Intelligence, companies in the S&P 500 are expected to post an average +7.2% increase in quarterly earnings for Q3 compared to the previous year, marking the smallest rise in two years.

On the economic data front, investors will focus on the New York Fed-compiled Empire State Manufacturing Index, which is set to be released in a couple of hours. Economists foresee the October figure coming in at -1.80, compared to -8.70 in September.

In light of the government shutdown, the September inflation report will not be released today as originally scheduled. However, the U.S. Bureau of Labor Statistics announced on Friday that it would publish the CPI report on October 24th, making a rare exception to release data during the shutdown.

Market participants will also parse comments today from Fed Governor Stephen Miran, Atlanta Fed President Raphael Bostic, Fed Governor Christopher Waller, and Kansas City Fed President Jeff Schmid.

Later today, the Fed will release its Beige Book survey of regional business contacts, 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 the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.017%, down -0.20%.

The Euro Stoxx 50 Index is up +1.49% this morning as strong earnings and positive developments in French politics boosted sentiment. Adding to the optimism were comments from Fed Chair Powell that reinforced expectations for an October rate cut. Luxury stocks climbed on Wednesday, with LVMH (MC.FP) surging over +13% after it reported an unexpected increase in Q3 sales. Final data from the statistics office INSEE confirmed on Wednesday that France’s annual inflation rate rose to 1.2% in September from 0.9% in August. Separately, final data from the INE showed that Spain’s annual inflation rate accelerated slightly more than initially estimated to 3.0% in September from 2.7% in August. In addition, data showed that the Eurozone’s monthly industrial production fell back in August, reflecting ongoing uncertainty among manufacturers as they adjust to shifting global trade dynamics. Meanwhile, French Prime Minister Sebastien Lecornu secured key backing from the Socialist Party in France’s National Assembly, greatly increasing the likelihood that his new government will survive two no-confidence votes on Thursday. Lecornu vowed on Tuesday to delay pension reform until after the 2027 election, meeting a key demand from the Socialists. In other corporate news, ASML Holding (ASML.NA) rose more than +3% after the world’s biggest supplier of computer chip-making equipment reported better-than-expected Q3 orders and issued solid Q4 guidance.

France’s CPI, Spain’s CPI, and Eurozone’s Industrial Production data were released today.

The French September CPI fell -1.0% m/m and rose +1.2% y/y, in line with expectations.

The Spanish September CPI fell -0.3% m/m and rose +3.0% y/y, stronger than expectations of -0.4% m/m and +2.9% y/y.

Eurozone August Industrial Production fell -1.2% m/m, stronger than expectations of -1.6% m/m.

Asian stock markets today closed in the green. China’s Shanghai Composite Index (SHCOMP) closed up +1.22%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +1.76%.

China’s Shanghai Composite Index closed higher today as persistent deflationary pressures in the country bolstered expectations for additional policy support. Technology and clean energy stocks led the gains on Wednesday. Data from the National Bureau of Statistics released on Wednesday showed that deflationary pressures persisted in China, as both consumer and producer prices fell in September. Lynn Song, chief economist for Greater China at ING, said, “Considering the slowing momentum in the third quarter, another month of deflation suggests that monetary policy easing remains on the table.” Sentiment was also lifted after an editorial in the Qiushi Journal stated that the government will focus on “boosting social development confidence, further stabilising market expectations, responding to market concerns timely and enhancing policy predictability.” Meanwhile, Chinese Premier Li Qiang, during a meeting with analysts and entrepreneurs on Tuesday, reiterated the need to intensify efforts to boost consumption and curb excessive price competition among businesses. The International Monetary Fund said on Tuesday that China needs to shift its economic growth model toward domestic demand, which has remained subdued for some time amid the country’s property downturn. On the trade front, U.S. President Trump said on Tuesday that Washington was considering ending certain trade relations with China, including the purchase of cooking oil. Still, U.S. Trade Representative Jamieson Greer said tensions with China over export controls are likely to ease following talks between officials from both nations. Investors now await the Fourth Plenum, set for October 20th-23rd, which will lay out China’s economic, political, and social priorities as well as its development plans for the next five years.

The Chinese September CPI rose +0.1% m/m and fell -0.3% y/y, weaker than expectations of +0.2% m/m and -0.2% y/y.

The Chinese September PPI fell -2.3% y/y, in line with expectations.

Japan’s Nikkei 225 Stock Index closed higher today as bargain-hunting emerged following the benchmark’s steepest drop since April in the previous session. Investors were also buoyed by Fed Chair Powell’s overnight remarks, which kept the central bank on course for another interest rate cut later this month, outweighing renewed U.S.-China trade tensions. Retail, chip, and bank stocks outperformed on Wednesday. Data released on Wednesday showed that Japan’s monthly industrial production fell more than initially thought in August. Meanwhile, Japan’s first government bond auction since the collapse of the ruling political coalition saw demand that was stronger than the 12-month average as higher yields attracted investors. The withdrawal of Komeito from Japan’s ruling coalition is expected to complicate Sanae Takaichi’s bid to become the nation’s next prime minister. Investors will closely watch political developments in the coming days as the LDP, Komeito, and other parties consider potential alliances and decide whom to back as Japan’s next prime minister. Kyodo reported on Wednesday that a parliamentary committee failed to reach an agreement on scheduling a vote for October 21st to choose the next prime minister. In corporate news, Mercari jumped over +14% after the online retailer announced it would withdraw from its on-demand employment service. Also, Aeon Co. Ltd. climbed more than +9% after the mall operator posted record half-year sales and operating profit. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed down -4.42% to 31.36.

The Japanese August Industrial Production was revised lower to -1.5% m/m from the preliminary estimate of -1.2% m/m.

Pre-Market U.S. Stock Movers

Chip stocks advanced in pre-market trading after ASML Holding NV reported better-than-expected Q3 orders, with Micron Technology (MU) and Advanced Micro Devices (AMD) rising over +2%.

Nvidia (NVDA) gained more than +2% in pre-market trading after HSBC upgraded the stock to Buy from Hold with a $320 price target.

Bank of America (BAC) climbed over +4% in pre-market trading after reporting stronger-than-expected Q3 results.

Bunge Global (BG) rose over +5% and Archer-Daniels-Midland Company (ADM) gained more than +2% in pre-market trading after President Trump said Washington was considering ending certain trade relations with China, including the purchase of cooking oil.

Sunrun (RUN) climbed over +5% in pre-market trading after BMO Capital upgraded the stock to Market Perform from Underperform.

You can see more pre-market stock movers here

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

Bank of America (BAC), Morgan Stanley (MS), Abbott Labs (ABT), Progressive (PGR), Prologis (PLD), PNC Financial (PNC), United Airlines Holdings (UAL), Synchrony Financial (SYF), Citizens Financial Group Inc (CFG), JB Hunt (JBHT), First Horizon National (FHN), Rexford Inl Rty (REXR), First Industrial RT (FR), Pinnacle (PNFP), Synovus (SNV), Home BancShares (HOMB), SL Green (SLG), Banner (BANR), Enerpac Tool Group (EPAC), Triumph Bancorp (TFIN), Great Southern Bancorp (GSBC), Bank7 (BSVN), Martin Midstream (MMLP).