December S&P 500 E-Mini futures (ESZ26) are up +0.07%, and December Nasdaq 100 E-Mini futures (NQZ26) are down -0.08% this morning as investors refrain from making big bets ahead of the release of the Federal Reserve’s preferred inflation gauge and earnings from memory-chip maker Micron Technology.
The price of WTI crude rose nearly +1% on Wednesday as investors weighed uncertainty surrounding U.S.-Iran talks against signs of a continued recovery in Persian Gulf crude exports.
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Despite the rise in oil prices, Treasury yields dipped as Tuesday’s speech from New York Fed President John Williams and softer-than-expected economic data reduced expectations for near-term Fed interest-rate hikes. The 10-year T-note yield fell two basis points to 5.23%.
Williams said one more interest-rate hike this year may be needed to help curb inflation, but added that there is no need to act quickly after the central bank raised rates earlier this month. His remarks suggested the Fed could hold off until December before raising rates again, leading markets to scale back expectations for an October move. Williams’ comments carry particular weight because, as vice chairman of the Fed’s rate-setting committee, he has generally aimed to convey the committee’s prevailing view rather than emphasize his own.
U.S. rate futures are currently pricing in a 42.6% chance of a 25-basis-point rate hike at the next FOMC meeting in October, down from 73% earlier in the week.
In yesterday’s trading session, Wall Street’s major indexes closed mostly lower, pressured by a rise in long-term Treasury yields. Fair Isaac (FICO) cratered over -26% and was the top percentage loser in the S&P 500 after Federal Housing Finance Agency Director Bill Pulte said mortgage pricing will be simplified and that the revamped system will introduce a direct competitor to the company’s FICO score. Also, energy stocks declined as oil prices slid, with SLB N.V. (SLB) falling over -3% and Occidental Petroleum (OXY) dropping more than -2%. In addition, Apple (AAPL) slipped over -2% and was the top percentage loser in the Dow after BofA Securities warned that Meta’s Muse poses competitive risks and could weigh on the company’s services revenue. On the bullish side, Carnival (CCL) surged over +13% and was the top percentage gainer in the S&P 500 after the cruise operator posted better-than-expected Q3 results and raised its full-year adjusted EPS guidance.
Economic data released on Tuesday were mostly weaker than expected. U.S. JOLTS job openings fell to a 5-month low of 7.079 million in August, weaker than expectations of 7.230 million. Also, the U.S. Conference Board’s consumer confidence index slumped to a 12-year low of 81.9 in September, weaker than expectations of 89.2. At the same time, the U.S. July S&P/CS HPI Composite - 20 n.s.a. rose +2.5% y/y, stronger than expectations of +2.2% y/y.
Today, investors will focus on the U.S. core personal consumption expenditures price index, the Fed’s preferred inflation gauge, which is set to be released in a couple of hours. Economists, on average, forecast that the core PCE price index will rise +0.3% m/m and +3.3% y/y in August, compared with +0.2% m/m and +3.3% y/y in July.
The U.S. Commerce Department’s final estimate of second-quarter gross domestic product will also be closely monitored today. Economists expect the U.S. economy to expand at an annual rate of 1.5% in the second quarter, in line with the second estimate.
The U.S. ADP private payrolls report will be released today. Economists project that private-sector payrolls will rise by 73K in September following a 38K gain in August.
U.S. personal spending and personal income data will be published today. Economists expect August personal spending to rise +0.8% m/m and personal income to grow +0.5% m/m, compared with the July figures of +0.2% m/m and +0.4% m/m, respectively.
The U.S. Chicago PMI will come in today. Economists forecast the September figure at 51.2, compared with 47.1 in the previous month.
The EIA’s weekly crude oil inventory report will be released today as well. Economists expect crude oil inventories to decline by 0.7 million barrels in the week ended September 25th, compared with an increase of 3.0 million barrels in the prior week.
In addition, market participants will parse comments today from Fed Governor Lisa Cook, Richmond Fed President Tom Barkin, Chicago Fed President Austan Goolsbee, and Minneapolis Fed President Neel Kashkari.
On the earnings front, memory-chip maker Micron Technology (MU) is scheduled to report its FQ4 results after the closing bell today. Micron’s earnings will serve as a key test for the broader AI trade. “Investors will be watching margins, revenue, projected demand, and earnings,” said Kathleen Brooks at XTB. “Margins are particularly in focus due to surging memory costs.”
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 5.23%, down -0.30%.
The Euro Stoxx 50 Index is down -0.01% this morning, struggling for direction at the end of a tumultuous month. Media and energy stocks underperformed on Wednesday. At the same time, utility and mining stocks climbed, limiting losses in the broader market. The benchmark index was on track to notch a monthly loss. Preliminary data released on Wednesday showed that France’s and Italy’s annual inflation rates accelerated more than expected in September, highlighting persistent energy-price pressures that could prompt European Central Bank policymakers to raise interest rates again this year. Separately, data showed that the U.K. economy expanded more than previously estimated in the second quarter. In addition, data showed that the number of unemployed people in Germany rose much more than expected in September. Investor attention now shifts to Germany’s preliminary inflation data for September, due later in the session. Meanwhile, Eurozone government bond yields fell on Wednesday, tracking a retreat in U.S. Treasury yields. In corporate news, Greggs Plc (GRG.LN) gained over +6% after the British fast-food chain raised its full-year profit guidance.
U.K. GDP, Germany’s Retail Sales, Germany’s Unemployment Change, Germany’s Unemployment Rate, France’s CPI (preliminary), and Italy’s CPI (preliminary) data were released today.
U.K. GDP rose +0.5% q/q and +1.4% y/y in the second quarter, stronger than expectations of +0.4% q/q and +1.2% y/y.
The German August Retail Sales rose +1.3% m/m, weaker than expectations of +1.6% m/m.
The German September Unemployment Change stood at 12K, weaker than expectations of 1K.
The German September Unemployment Rate was 6.4%, in line with expectations.
The French September CPI fell -0.3% m/m and rose +3.0% y/y, stronger than expectations of -0.5% m/m and +2.8% y/y.
The Italian September CPI rose +0.7% m/m and +4.2% y/y, stronger than expectations of +0.2% m/m and +3.8% y/y.
Asian stock markets today settled in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.31%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +1.94%.
China’s Shanghai Composite Index closed higher today as investors weighed upbeat PMI data and Beijing’s latest economic stimulus package. An official survey released on Wednesday showed that China’s factory activity returned to growth in September, snapping a two-month stretch of contraction. China’s September non-manufacturing PMI, which covers both services and construction activity, also moved back into expansion territory. In addition, private surveys of manufacturing and services showed a stronger-than-expected improvement in September. Taken together, the readings suggested the economy ended the third quarter on a firmer footing, just hours after the government unveiled its largest stimulus package in two years. The People’s Bank of China cut the one-year interest rate on its pledged supplementary lending facility by 25 basis points to 1.5% and increased quotas for lending-support programs for banks to fund infrastructure projects and provide loans to targeted sectors, including technology and small businesses. The government also said it will subsidize mortgages for eligible first-time homebuyers, covering 1 percentage point of annual interest payments for up to five years. Still, the measures failed to impress investors as economists said they appear aimed at keeping economic growth on target rather than driving a broad recovery. Property stocks initially tumbled before recovering their losses and ending slightly higher. At the same time, semiconductor and other AI-related stocks slid. Mainland China’s financial markets will be closed for the week-long National Day holiday beginning on Thursday.
The Chinese September Manufacturing PMI came in at 50.1, in line with expectations.
The Chinese September Non-Manufacturing PMI arrived at 50.2, stronger than expectations of 49.2.
The Chinese September RatingDog Manufacturing PMI stood at 52.1, stronger than expectations of 51.7.
The Chinese September RatingDog Services PMI came in at 51.6, stronger than expectations of 51.3.
Japan’s Nikkei 225 Stock Index closed sharply higher today as an overnight drop in oil prices boosted risk appetite. Gains were broad-based on Wednesday, with financial shares leading the advance. Strength in chip-related stocks, which tracked overnight gains among their U.S. peers, provided a particularly strong boost to the tech-heavy Nikkei. Heavyweight SoftBank Group, an OpenAI investor, climbed over +6% after Bloomberg reported that the AI startup was seeking to raise at least $30 billion in fresh funding at a $1.4 trillion valuation. The benchmark index posted modest gains for September. Government data released on Wednesday showed that Japan’s monthly industrial production unexpectedly fell in August, but companies anticipate a recovery in the coming months amid easing energy-supply concerns and robust AI-related demand. Separate data showed that retail sales rose less than expected in August from a year earlier. Investor focus now turns to Japan’s third-quarter Tankan survey, which is expected to show sentiment among the country’s largest manufacturers improving to the most optimistic level since December 2017. The BOJ’s summary of opinions from its September meeting and Tokyo core CPI for September will also be closely watched. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed down -21.30% to 21.83.
The Japanese August Industrial Production (preliminary) unexpectedly fell -1.7% m/m, weaker than expectations of +1.4% m/m.
The Japanese August Retail Sales rose +2.7% y/y, weaker than expectations of +3.3% y/y.
Pre-Market U.S. Stock Movers
Boeing (BA) rose nearly +3% in pre-market trading after the planemaker secured a multibillion-dollar contract to build the Navy’s next Top Gun fighter jet.
GameStop (GME) gained over +1% in pre-market trading after a regulatory filing revealed that CEO Ryan Cohen purchased 450,000 shares on Tuesday.
Moderna (MRNA) slumped more than -6% in pre-market trading after Citi downgraded the stock to Sell from Neutral with a price target of $80.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Wednesday - September 30th
Micron Technology (MU), Jabil (JBL), FactSet Research Systems (FDS), Conagra Brands (CAG), Cal-Maine Foods (CALM), Progress Software (PRGS).
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.
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