September S&P 500 E-Mini futures (ESU26) are down -0.32%, and September Nasdaq 100 E-Mini futures (NQU26) are down -0.35% this morning as rising oil prices pushed bond yields higher, sapping risk appetite.
The price of WTI crude rose over +2% on Tuesday as the closure of Saudi Arabia’s East-West pipeline and recent territorial advances by Houthi militants in Yemen fueled continued concerns about Middle East crude supplies.
Join 200K+ Subscribers: Find out why the midday Barchart Brief newsletter is a must-read for thousands daily.
Elevated oil prices deepened investor concerns about inflation, driving further selling in Treasuries. The 10-year T-note yield rose three basis points to 5.02%.
Investors are now awaiting the start of the Federal Reserve’s two-day policy meeting.
In yesterday’s trading session, Wall Street’s main stock indexes closed lower as chipmakers got hit after leaders of major AI companies called for a slower pace of AI development. Chip and AI infrastructure stocks sank, with Arm Holdings (ARM) slumping over -9% and Lam Research (LRCX) dropping more than -8%. Also, bank stocks declined after Bank of America CEO Brian Moynihan said sales and trading revenue would be “relatively flat” in the third quarter compared with a year earlier, with Bank of America (BAC) sliding over -5% and Goldman Sachs (GS) falling nearly -4%. In addition, Corning (GLW) tumbled over -13% and was the top percentage loser on the S&P 500 after entering into an equity distribution agreement with Goldman Sachs to sell up to $2 billion of stock. On the bullish side, cybersecurity stocks surged as growing concerns over AI safety boosted expectations for increased security spending, with CrowdStrike Holdings (CRWD) jumping over +13% to lead gainers in the S&P 500 and Nasdaq 100, and Palo Alto Networks (PANW) climbing more than +13%.
“Whether calls to pace advanced model development will gain traction across the industry remains uncertain, but we believe they are more aimed at shaping a regulatory framework acceptable to leading AI labs,” said Ulrike Hoffmann-Burchardi at UBS Chief Investment Office. “We therefore expect AI investment to continue.”
The Fed kicks off its two-day meeting later in the day. U.S. rate futures have priced in a 92.5% probability that the central bank will deliver a 25-basis-point rate hike on Wednesday. That would lift the target range for the federal funds rate to 3.75%-4.00% from 3.50%-3.75%. Fed Chairman Kevin Warsh said last month at the Jackson Hole symposium that the Fed would “have work to do” if it could not “be confident that underlying inflation is moving to our objective, clearly and at sufficient speed.” Last week’s hotter-than-expected monthly core inflation reading did little to provide that reassurance. Market participants will be closely watching Warsh’s post-decision press conference for clues on whether, if the Fed does raise rates, the move would mark the start of a broader tightening cycle or prove to be a one-off. In addition, the Fed will release updated projections for the economy along with its “dot plot” interest-rate forecasts.
Former New York Fed President William Dudley said Monday on CNBC that the Fed could undermine its credibility if it doesn’t act. “It would basically be all talk, no action,” Dudley said.
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 project the September figure to come in at 14.8, compared with 20.6 in August.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 5.02%, up +0.58%.
The Euro Stoxx 50 Index is down -0.64% this morning as rising oil prices and bond yields soured investor sentiment. Bank stocks sank on Tuesday, mirroring declines in their U.S. peers after Bank of America CEO Brian Moynihan warned that sales and trading revenue for the current quarter will be flat. At the same time, defense stocks advanced, supported by reports that Japan was considering an increase in defense spending and that the Pentagon was seeking to replenish its stockpiles. Investors also digested a raft of regional economic data. Final data released on Tuesday showed that France’s annual inflation rate accelerated to 2.4% in August and Spain’s annual inflation rate picked up to 4.3%, confirming preliminary estimates. Separately, data showed that the U.K. unemployment rate and annual wage growth, excluding bonuses, were unchanged in the three months through July. In addition, the ZEW Economic Institute said German investor morale improved for a fifth consecutive month in September, buoyed by the economy’s continued resilience. Meanwhile, Eurozone government bond yields climbed on Tuesday as higher oil prices intensified investor concerns over inflation. In corporate news, Deutz (DEZ.D.DX) slid over -3% after announcing a capital increase of up to 10% of its outstanding shares.
U.K. Average Earnings ex Bonus, U.K. Unemployment Rate, France’s CPI, Spain’s CPI, Germany’s ZEW Economic Sentiment Index, Eurozone’s ZEW Economic Sentiment Index, and Eurozone’s Trade Balance data were released today.
U.K. Average Earnings ex Bonus rose +3.5% in the three months to July, in line with expectations.
The U.K. Unemployment Rate was 4.9% in the three months to July, stronger than expectations of 5.0%.
The French August CPI rose +0.7% m/m and +2.4% y/y, in line with expectations.
The Spanish August CPI rose +0.7% m/m and +4.3% y/y, in line with expectations.
The German September ZEW Economic Sentiment Index came in at 34.7, weaker than expectations of 39.8.
The Eurozone September ZEW Economic Sentiment Index arrived at 25.8, weaker than expectations of 39.2.
Eurozone’s July Trade Balance came in at 14.2 billion euros, stronger than expectations of 3.7 billion euros.
Asian stock markets today settled in the red. China’s Shanghai Composite Index (SHCOMP) closed down -0.54%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.01%.
China’s Shanghai Composite Index closed lower today as a mixed set of economic data from the country weighed on sentiment. Financial, real estate, and consumer stocks fell on Tuesday. Data from the National Bureau of Statistics released on Tuesday showed that China’s investment slump deepened last month and retail sales growth, a key gauge of domestic consumption, was weaker than expected amid sluggish domestic demand. At the same time, the nation’s industrial production improved more than expected in August, bolstered by resilient exports. Separate data showed that China’s home prices continued to fall in August, highlighting persistent weakness in the housing market. Tuesday’s data, alongside inflation and trade figures released earlier this month, indicate that a K-shaped growth pattern is becoming more deeply embedded in the world’s second-largest economy. Meanwhile, a rebound in technology stocks helped limit losses in the benchmark index. In corporate news, Guangdong Tianyu Semiconductor jumped over +8% after announcing a share buyback plan.
The Chinese August Industrial Production rose +5.2% y/y, stronger than expectations of +4.8% y/y.
The Chinese August Retail Sales rose +0.4% y/y, weaker than expectations of +0.7% y/y.
The Chinese Fixed Asset Investment fell -7.2% y/y in the January-August period, weaker than expectations of -7.1% y/y.
The Chinese August Unemployment Rate was 5.3%, weaker than expectations of no change at 5.2%.
Japan’s Nikkei 225 Stock Index closed just below the flatline today after a volatile trading session. Bank stocks tumbled on Tuesday, tracking overnight losses in their U.S. peers. Weakness in real estate and energy stocks also dragged on the Nikkei. At the same time, some technology stocks rebounded from the previous session’s selloff triggered by a warning from leading AI companies. Tech investor SoftBank Group climbed over +7% and memory chipmaker Kioxia Holdings gained more than +2%, providing support to the benchmark index. Meanwhile, Japanese government bond yields climbed on Tuesday, tracking U.S. Treasury yields higher as rising oil prices fueled inflation concerns. Long-dated JGBs faced additional pressure as the government reportedly weighed a new medium-term defense spending target of 3.5% of GDP. In corporate news, Leopalace21 closed up over +14% after the company said Hikari Tsushin, together with investment funds, will launch a tender offer at 1,000 yen per share. Investor focus this week is on the Bank of Japan’s policy decision. The BOJ is widely expected to raise its benchmark rate by 25 basis points to 1.25%, the highest level since 1995, after a series of supportive economic reports. Market participants will scrutinize the BOJ’s tone and guidance for clues on whether it will accelerate the pace of tightening or maintain a gradual approach. Ahead of the BOJ’s decision, investors will closely watch Japan’s trade data and national core CPI for August. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed down -1.22% to 30.68.
Pre-Market U.S. Stock Movers
Most members of the Magnificent Seven slipped in pre-market trading, with Alphabet (GOOGL) and Microsoft (MSFT) falling over -1%.
Cryptocurrency-exposed stocks slid in pre-market trading as Bitcoin fell ahead of a key procedural vote in the Senate on the Clarity Act. Coinbase Global (COIN) was down over -4%, Strategy (MSTR) was down more than -3%, and MARA Holdings (MARA) was down over -1%.
Dave & Buster’s Entertainment (PLAY) plunged more than -11% in pre-market trading after the arcade chain swung to a loss in the second quarter.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Tuesday - September 15th
Forgent Power Solutions (FPS), Evolution Petroleum (EPM).
On the date of publication, Oleksandr Pylypenko did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
More news from Barchart
U.S. Stock Futures Slip as Rising Oil Prices Lift Bond Yields, FOMC Meeting on Tap S&P 500: Q4 Strength or Election Risk? Long-Term Bull Put Spread Provides Opportunities for Amazon Bulls Nasdaq Futures Plunge as Chipmakers Sink on AI Slowdown Concerns, Fed Meeting Awaited