September S&P 500 E-Mini futures (ESU26) are up +0.90%, and September Nasdaq 100 E-Mini futures (NQU26) are up +1.09% this morning as Fed Chairman Kevin Warsh’s resolve to combat inflation reassured markets, driving bond yields lower and boosting sentiment.
Treasuries rose across the curve on Thursday, with the benchmark 10-year yield falling 3.5 basis points to 4.99%. A drop in oil prices provided further support to Treasuries, reinforcing hopes that the worst inflation fears won’t materialize.
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The price of WTI crude fell over -1% on Thursday as worries about Middle East supplies eased. Saudi Arabia is reportedly aiming to restore roughly half the capacity of its East-West pipeline within days after drone strikes prompted its closure last week. Meanwhile, U.S. President Donald Trump said on Wednesday that the Iran war will end “very soon.” Axios reported that President Trump is set to meet with Gulf leaders next week on the sidelines of the UN General Assembly in New York to discuss the next steps in the conflict.
Investors are now awaiting a slew of U.S. economic data.
In yesterday’s trading session, Wall Street’s three main equity benchmarks closed mostly lower after the Federal Reserve raised interest rates for the first time since 2023 and signaled that additional rate hikes could follow. J.B. Hunt Transport Services (JBHT) tumbled over -13% and was the top percentage loser on the S&P 500 after CFO Brad Delco said he expects Q3 profit to decline between 5% and 10% from the previous quarter due to higher costs. Also, energy stocks slid as oil prices dropped, with Diamondback Energy (FANG) slumping over -8% to lead losers in the Nasdaq 100 and Occidental Petroleum (OXY) falling more than -6%. In addition, Expedia (EXPE) slipped over -2% after Morgan Stanley downgraded the stock to Underweight from Equal Weight with a price target of $235. On the bullish side, optical networking stocks climbed, with Lumentum Holdings (LITE) surging over +9% to lead gainers in the S&P 500 and Nasdaq 100 and Coherent (COHR) rising more than +6%.
Economic data released on Wednesday showed that U.S. retail sales rose +1.2% m/m in August, stronger than expectations of +0.8% m/m, and core retail sales, which exclude motor vehicles and parts, climbed +1.4% m/m, stronger than expectations of +0.6% m/m. Separately, the U.S. import price index rose +0.7% m/m in August, stronger than expectations of +0.4% m/m.
The Federal Open Market Committee voted unanimously on Wednesday to raise the benchmark federal funds rate by a quarter percentage point to a range of 3.75% to 4.00%. “Today’s policy action will support a timelier return to the committee’s 2% goal. The Committee will deliver price stability,” the Fed’s statement said. Policymakers’ updated projections showed that twelve officials expect one more quarter-point rate hike by the end of this year, while four expect two more. Two others expect the committee to stop after one rate hike. Notably, one Fed official did not submit interest-rate projections, as in June, when Fed Chairman Kevin Warsh declined to provide his own forecasts.
At a press conference, Mr. Warsh said, “We removed a dose of accommodation so that financial and credit conditions would be more consistent with our ultimate objectives.” He also reiterated his concerns about inflation, saying too many categories of goods and services were posting annualized price increases above 3% on a 6- and 12-month basis.
“The debate now shifts from whether rates will rise again to how many hikes lie ahead. The unanimous vote shows that rising energy prices and stubborn inflation have brought even the doves on board, making a one-and-done move highly unlikely,” said Seema Shah at Principal Asset Management.
Meanwhile, U.S. rate futures have priced in a 54.2% probability of a 25-basis-point rate hike and a 45.8% chance of no rate change at the next FOMC meeting in October.
Today, investors will focus on U.S. initial jobless claims data, set to be released in a couple of hours. Economists expect applications for U.S. unemployment benefits to come in at 207K in the week ended September 12th, compared with 206K in the prior week.
The U.S. Philadelphia Fed manufacturing index will also be closely watched today. Economists anticipate that the Philly Fed manufacturing index will stand at 31.3 in September, compared with last month’s figure of 47.4.
U.S. building permits (preliminary) and housing starts data will be released today. Economists expect August building permits to total 1.400 million and housing starts to total 1.320 million, compared with the prior month’s figures of 1.433 million and 1.239 million, respectively.
The National Association of Realtors’ pending home sales data will be released today as well. Economists project pending home sales to fall -0.2% m/m in August after a -2.3% m/m drop in July.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.99%, down -0.70%.
The Euro Stoxx 50 Index is up +0.64% this morning as lower oil prices lifted sentiment ahead of the Bank of England’s interest-rate decision. Automobile stocks led the gains on Thursday, rebounding from yesterday’s selloff. Travel stocks also climbed as lower oil prices improved the sector’s earnings outlook. In addition, technology stocks advanced. Final data from Eurostat released on Thursday showed that the Eurozone’s annual inflation rate picked up to +3.2% in August, slightly less than initially estimated. Meanwhile, Eurozone government bond yields edged higher on Thursday, tracking an initial increase in U.S. Treasury yields following the Fed’s interest-rate hike. Investor attention now turns to the Bank of England’s interest-rate decision. The BOE is widely expected to keep rates unchanged at 3.75% later today, though policymakers will likely leave the door open to further tightening as tensions in the Middle East continue to escalate. Investors will also focus on the BOE’s annual announcement on the pace at which it plans to reduce its bond holdings. In corporate news, Berentzen-Gruppe AG (BEZ.D.DX) surged over +27% after confirming takeover talks with Sazerac.
Eurozone’s CPI and Core CPI were released today.
Eurozone’s August CPI rose +3.2% y/y, weaker than expectations of +3.3% y/y.
Eurozone’s August Core CPI rose +2.4% y/y, in line with expectations.
Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed down -0.41%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.33%.
China’s Shanghai Composite Index closed lower today, weighed down by weakness in gold and energy stocks. Gold-related shares led the declines on Thursday, tracking yesterday’s slump in the precious metal’s price after the Fed delivered its first interest-rate hike in three years. Energy stocks also slid amid a drop in oil prices. Limiting losses, healthcare stocks advanced. Meanwhile, official news agency Xinhua reported on Thursday that President Xi Jinping, speaking at the National Advanced Manufacturing Conference in Beijing this week, called on China to make its advanced manufacturing sector “bigger and stronger” and bolster control over key industrial supply chains. In other news, China broadened its central clearing system this week to enable spot yuan transactions against additional foreign currencies, marking another step in Beijing’s push to expand the currency’s international reach and global use. In corporate news, Guangdong Shenling Environmental Systems gained over +2% after announcing a $414.6 million supply deal with an overseas customer.
Japan’s Nikkei 225 Stock Index closed higher today, supported by bargain hunting. Video game and pharmaceutical stocks were among the biggest gainers on Thursday as investors bought names that had trailed the broader market. Also, shares of trading houses advanced after Bloomberg reported that Berkshire Hathaway was considering boosting its stakes in the companies. At the same time, chip-related stocks declined, limiting the benchmark index’s gains. Meanwhile, Japanese government bond yields were mixed on Thursday, with shorter-dated yields rising ahead of the expected Bank of Japan rate hike and longer-dated yields falling in tandem with their U.S. peers. Elsewhere, foreign investors sold a net 1.52 trillion yen ($9.74 billion) worth of Japanese stocks in the week through September 12th, marking their biggest weekly net sales since June 27th, according to Ministry of Finance data. In corporate news, Mitsui O.S.K. Lines rose over +4% after Jefferies raised its price target on the stock to 9,400 yen from 8,600 yen, saying the company’s earnings are likely to benefit from ongoing disruptions in the Middle East. Investor focus is now squarely on the BOJ’s policy decision. The BOJ is widely expected to raise its benchmark rate by 25 basis points to 1.25% on Friday, 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. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed down -1.02% at 28.15.
Pre-Market U.S. Stock Movers
Chip and AI infrastructure stocks climbed in pre-market trading. Arm Holdings (ARM) was up over +3%, while Marvell Technology (MRVL), Intel (INTC), and Micron Technology (MU) were up more than +2%.
The Magnificent Seven stocks advanced in pre-market trading, with Nvidia (NVDA), Meta Platforms (META), Amazon.com (AMZN), Alphabet (GOOGL), and Tesla (TSLA) rising over +1%. Microsoft (MSFT) was up +0.80%, while Apple (AAPL) was up about +0.50%.
Generac Holdings (GNRC) jumped over +34% in pre-market trading after the company announced a long-term agreement to supply Amazon with generators for its data centers.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Thursday - September 17th
Upexi (UPXI).
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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