December S&P 500 E-Mini futures (ESZ26) are down -0.18%, and December Nasdaq 100 E-Mini futures (NQZ26) are down -0.23% this morning as Europe’s political turmoil and fiscal strains weighed on sentiment at the start of a new week.
France’s CAC 40 tumbled on Monday, while French government bond yields continued to climb as investors grew increasingly concerned about the country’s debt burden and political gridlock ahead of next year’s presidential election. Adding to political uncertainty in the region, Spanish Prime Minister Pedro Sanchez called a snap election amid growing social unrest over housing. The turmoil also weighed on the euro, sending the currency to a 17-month low against the dollar.
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Meanwhile, the price of WTI crude erased most of its earlier losses on Monday as traders remained cautious about potential disruptions to Middle East supplies. The reversal followed an AFP report that Saudi Arabia’s vital East-West pipeline had been shut down after a new attack, though Bloomberg later reported that it was operating normally. The 30-year Treasury yield rose two basis points to 5.63%, while yields across other maturities were little changed.
This week, investors will focus on the minutes of the Federal Reserve’s latest policy meeting, remarks from Fed officials, and several U.S. economic reports.
In Friday’s trading session, Wall Street’s major equity averages ended in the green after a weaker-than-expected jobs report tempered expectations that the Fed will raise rates again later this month. The Magnificent Seven stocks advanced, with Tesla (TSLA) rising over +4% and Alphabet (GOOGL) gaining more than +1%. Also, chip and AI infrastructure stocks climbed, with Arm Holdings (ARM) surging over +5% and Texas Instruments (TXN) advancing more than +4%. In addition, Hewlett Packard Enterprise (HPE) rose over +7% and was among the top percentage gainers in the S&P 500 after Daiwa upgraded the stock to Outperform from Neutral with a price target of $75. On the bearish side, Western Digital (WDC) tumbled over -10% to lead losers in the S&P 500 and Nasdaq 100, while Seagate Technology Holdings (STX) plunged more than -10% after Nikkei reported that Japanese rival Toshiba plans to double its hard disk drive production capacity in fiscal 2027.
The Labor Department’s report released on Friday showed that nonfarm payrolls rose by 29K in September and payrolls for the previous two months were revised downward. Economists had expected 89K new jobs to be added. Also, the U.S. unemployment rate unexpectedly ticked up to 4.2% in September, weaker than expectations of no change at 4.1%. In addition, U.S. September average hourly earnings rose +0.1% m/m and +3.0% y/y, weaker than expectations of +0.3% m/m and +3.2% y/y. Finally, U.S. factory orders rose +0.1% m/m in August, in line with expectations.
“A softer-than-expected jobs report should put an October Fed hike firmly on the back foot. Weaker payrolls, softer wage growth, and a higher unemployment rate all point to a labor market that’s cooling rather than reaccelerating,” said Seema Shah at Principal Asset Management.
Cleveland Fed President Beth Hammack said on Friday that the September jobs report was consistent with the recent hiring trend, adding that she has time before deciding on the next monetary policy move. Separately, Chicago Fed President Austan Goolsbee said the latest jobs data indicate the labor market remains steady and that elevated inflation continues to be the Fed’s greater policy priority. Goolsbee said there is “plenty of room for anything to be on the table” when asked about the prospect of further rate hikes.
U.S. rate futures are currently pricing in a 79.5% probability of no rate change and a 20.5% probability of a 25-basis-point rate hike at the October FOMC meeting.
This week, market participants will closely watch the Fed’s minutes from the September 15-16 meeting. The Federal Open Market Committee voted unanimously last month to raise interest rates by 25 basis points for the first time in three years. The minutes could show that many policymakers were increasingly concerned about underlying price pressures and expected at least one more rate increase before year-end. However, last week’s softer-than-expected employment and inflation data, coupled with dovish comments from two senior officials, Fed Vice Chair Philip Jefferson and New York Fed President John Williams, prompted traders to sharply scale back bets on an October hike. Economists said that even if the minutes underscore how hawkish officials were in September, the data released since then have bolstered the case for patience.
Market watchers will also keep a close eye on remarks from Fed officials. Fed Vice Chair for Supervision Michelle Bowman, Fed Governor Christopher Waller, Dallas Fed President Lorie Logan, New York Fed President John Williams, St. Louis Fed President Alberto Musalem, and Boston Fed President Susan Collins are scheduled to speak this week.
The U.S. economic calendar is relatively light this week. Beyond the ISM and S&P Global services indexes due later today, key releases include the University of Michigan’s preliminary consumer sentiment index, initial jobless claims, and the trade balance.
Meanwhile, soft drinks and snacks maker PepsiCo (PEP) and carrier Delta Air Lines (DAL) are scheduled to report third-quarter results this week. While the two companies will kick off the reporting period, results from big banks next week will mark the unofficial start of the earnings season.
Elsewhere, Microsoft (MSFT) will host a Windows and Surface event this week. The event is expected to focus on local AI in Windows and Surface devices, with potential updates to the Surface Laptop Ultra, Surface RTX Spark Dev Box, and Windows 11.
Today, investors will focus on the U.S. ISM Non-Manufacturing PMI and S&P Global Services PMI, set to be released in a couple of hours. Economists expect the September ISM services index to edge down to 55.1 from 55.4 in August, while the final S&P Global services PMI is projected to remain unrevised at 58.7.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 5.28%, down -0.07%.
The Euro Stoxx 50 Index is down -0.30% this morning, with political upheaval, bond-market volatility, and oil prices keeping investors on edge. France’s CAC 40 tumbled on Monday, while French government bond yields continued to climb as investors grew increasingly concerned about the country’s debt burden and political gridlock ahead of next year’s presidential election. At the same time, Spain’s IBEX 35 climbed after Prime Minister Pedro Sanchez called a snap election amid growing social unrest over housing. A survey released on Monday showed that Eurozone business activity grew at its fastest pace in nearly three and a half years in September as demand remained resilient despite inflation concerns stemming from the Middle East conflict. A separate survey showed that investor confidence in the Eurozone declined in October as fading expectations raised doubts about a potential economic recovery. Beyond politics, investor attention this week will turn to the European Central Bank’s account of its September 9-10 meeting, when policymakers delivered their second rate hike of the cycle. Investors will look for signals on the timing of the ECB’s next rate hike. European Central Bank Chief Economist Philip Lane said on Monday that the recent surge in energy prices could weaken demand in the Eurozone through various channels, reducing the need for rate hikes to curb inflation. Other ECB officials scheduled to speak this week include Executive Board member Isabel Schnabel and Governing Council member Martin Kocher. In addition, Eurozone retail sales figures and Germany’s factory orders data for August will attract attention. “Euro area retail sales and German industrial orders should give insight into how the European economy is faring with higher energy costs,” according to Danske Bank analysts. In corporate news, Schneider Electric (SU.FP) slumped over -9% after agreeing to acquire U.S. industrial-software maker PTC for $22.6 billion in an all-cash deal.
Eurozone’s Composite PMI, Services PMI, Sentix Investor Confidence Index, and PPI data were released today.
Eurozone’s September Composite PMI remained unrevised at 53.1, in line with expectations.
Eurozone’s September Services PMI remained unrevised at 53.0, in line with expectations.
The Eurozone October Sentix Investor Confidence Index came in at 2.7, weaker than expectations of 4.5.
Eurozone’s August PPI rose +1.9% m/m and +8.2% y/y, compared with expectations of +1.9% m/m and +8.1% y/y.
Japan’s Nikkei 225 Stock Index ($NKY) closed up +2.40%, while mainland China’s financial markets were closed for a holiday.
Japan’s Nikkei 225 Stock Index closed sharply higher and hit a 3-month high today as softer U.S. jobs data tempered expectations for further Fed rate hikes, boosting appetite for risk assets. Chip-related stocks rallied on Monday, tracking Friday’s gains among their U.S. peers. Chip gear maker Tokyo Electron rose over +5%, while chip-testing equipment maker Advantest gained more than +4%, providing the biggest boosts to the Nikkei. Gains in financial and retail stocks also supported the benchmark. Meanwhile, Japanese Prime Minister Sanae Takaichi on Monday vowed to “control” bond issuance and move quickly to address market turbulence, seeking to ease investor concerns over Japan’s worsening public finances. Her remarks underscored growing concerns in Tokyo over rising Japanese government bond yields, which would increase the cost of financing the premier’s ambitious spending plans. The 30-year JGB yield climbed to a record high before Takaichi spoke. On the economic front, a survey showed on Monday that Japan’s service sector expanded at a slower pace in September as growth in business activity and new orders eased and earthquake-related disruptions weighed on demand. Investor focus this week is on Bank of Japan Governor Kazuo Ueda’s speech and the central bank’s branch managers’ meeting, where it will release its quarterly regional economic report. Japan’s August wage data will also draw attention, with investors watching to see whether real wages rose for an eighth consecutive month. Together, the speech, regional report, and wage data will be closely watched for clues on the timing of the BOJ’s next rate hike. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed up +1.28% at 22.87.
The Japanese September S&P Global Services PMI was revised downward to 51.3 from the preliminary reading of 51.6.
The Japanese September Household Confidence stood at 35.4, stronger than expectations of 35.3.
China’s Shanghai Composite Index was closed today for the week-long National Day holiday. Mainland China’s financial markets will reopen on Thursday.
Pre-Market U.S. Stock Movers
Intel (INTC) slid nearly -4% in pre-market trading after Elon Musk confirmed that rival Taiwan Semiconductor Manufacturing Co. was in talks with his chip venture, Terafab.
PTC Inc. (PTC) soared over +35% in pre-market trading after Schneider Electric agreed to acquire the company for $22.6 billion in an all-cash deal.
Qualcomm (QCOM) gained about +1% in pre-market trading after announcing a multi-year patent licensing agreement with Huawei.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Monday - October 5th
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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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