Morning Markets

December E-Mini S&P 500 futures (ESZ23) are down -0.81%, and the Dec Nasdaq 100 E-Mini futures (NQZ23) are down -1.03%.

Stock index futures this morning gave up overnight gains and sold off sharply after bond yields jumped when the monthly U.S. payroll report showed Sep nonfarm payrolls surged +336,000, well above expectations of +170,000 and the most in eight months.  The strength in the U.S. labor market bolsters the chances that the Fed may boost interest rates at its next meeting in November. 

U.S. Sep nonfarm payrolls surged +336,000, well above expectations of +170,000 and the most in eight months.  Also, Aug nonfarm payrolls were revised upward by 40,000 to +227,000 from the initially reported +187,000.  The Sep unemployment rate was unchanged at 3.8%, weaker than expectations of a decline to 3.7%. 

U.S. Sep average hourly earnings rose +0.2% m/m and +4.2% y/y, weaker than expectations of +0.3% m/m and +4.3% y/y.

The markets are discounting a 32% chance that the FOMC will raise the funds rate by +25 bp at the next FOMC meeting that ends on November 1, and a 50% chance for that +25 bp rate hike at the following meeting that ends on December 13.  The markets are then expecting the FOMC to begin cutting rates in the second half of 2024 in response to an expected slowdown in the U.S. economy.

U.S. and European bond yields are moving higher.  The 10-year T-note yield is up +11.8 bp at 4.837%.  The 10-year German bund yield is up +6.1 bp at 2.939%.  The 10-year UK gilt yield is up +7.7 at 4.619%.  

Overseas stock markets are mixed.  The Euro Stoxx 50 is up +0.38%.  China’s Shanghai Composite Index was closed for the Golden Week holidays.  Japan’s Nikkei 225 today closed -0.26%.

The Euro Stoxx 50 today is moderately higher, led by strength in insurance stocks on signs of takeover activity.  Aviva Plc is up more than 10% after The Times reported that the insurer may be attracting interest from at least two potential bidders.  Also, positive economic news gave stocks a boost after German Aug factory orders rose more than expected.  On the negative side, European government bond yields rose on hawkish comments from ECB Executive Board member Schnabel, who said more interest rate hikes may be required if inflation risks materialize. 

German Aug factory orders rose +3.9% m/m, stronger than expectations of +1.5% m/m.

ECB Executive Board member Schnabel said, "I still see upside risks to inflation, and if they materialized, further interest rate hikes could be necessary."

China’s Shanghai Composite Stock Index today was closed for the week-long Golden Week holidays.  Chinese stocks will reopen for trading on Monday.

Japan’s Nikkei Stock Index today gave up an early advance and closed moderately lower.  Economic concerns weighed on Japanese stocks after today’s news showed Japan’s Aug household spending and Aug labor cash earnings were weaker than expected. Japanese stocks initially moved higher today on carryover support from a rally in Hong Kong stocks as the Hang Seng Index climbed more than +1% on positive Golden Week holiday spending in China. The Shanghai Securities News reported that spending on China’s online platforms during the Golden Week holiday topped pre-pandemic levels.  Markets in China will reopen on Monday after the week-long Golden Week holidays.

 The Japan Aug leading index CI rose +1.3 to a 9-month high of 109.5, stronger than expectations of 109.1.

Japan Aug household spending fell -2.5% y/y, a smaller decline than expectations of -3.9% y/y.

Japan Aug labor cash earnings rose +1.1% y/y, weaker than expectation of +1.5% y/y.

Pre-Market U.S. Stock Movers

Pioneer Natural Resources (PXD) jumped more than +12% in pre-market trading after Bloomberg News reported that Exxon Mobil is in talks to acquire the company.

Elf Beauty (ELF) climbed more than +2% in pre-market trading after Jeffries upgraded the stock to buy from hold with a price target of $115. 

Shoals Technologies Group (SHLS) rose more than +3% in pre-market trading after Piper Sandler upgraded the stock to overweight from neutral with a price target of $28.   

Trane Technologies Plc (TT) gained nearly +1% in pre-market trading after JPMorgan Chase upgraded the stock to neutral from underweight.

Eaton Corp Plc (ETN) rose almost +1% in pre-market trading after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $230.

ResMed (RMD) climbed more than +3% in pre-market trading after the FDA requested additional tests on rival device maker Phillips sleep apnea machines amid a product recall.

Wesco International (WCC) gained nearly +1% in pre-market trading after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $180.

Tesla (TSLA) slid more than -1% in pre-market trading after it cut the price on its most popular cars in the U.S.

Levi Strauss (LEVI) fell more than -1% in pre-market trading after reporting Q3 revenue of $1.51 billion, below the consensus of $1.54 billion, and cut its full-year revenue forecast to 0% to +1% from a prior view of +1.5% to +2.5%. 

Aehr Test Systems (AEHR) sank more than -14% in pre-market trading after reporting Q1 bookings of $18.4 million, and William Blair said the company’s book-to-bill ratio was “light.” 

Carrier Global (CARR) fell more than -1% in pre-market trading after JPMorgan Chase downgraded the stock to underweight from neutral.

Exxon Mobil (XOM) slid more than -1% in pre-market trading after Bloomberg News reported the company is in talks to acquire Pioneer Natural Resources.

LCI Industries (LCII) fell more than -1% in pre-market trading after DA Davidson downgraded the stock to underperform from neutral. 

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