Nasdaq Futures Slip as Bond Yields Rebound, U.S. Jobs Report Looms

Oleksandr Pylypenko - Barchart - Thu Oct 5, 2023

December Nasdaq 100 E-Mini futures (NQZ23) are trending down -0.10% this morning after three major U.S. benchmark indices closed higher on Wednesday as the latest batch of U.S. economic data prompted investors to scale back forecasts for Federal Reserve tightening this year, with the focus now turning to Friday’s U.S. jobs data.

In Wednesday’s trading session, major growth stocks gained ground after Treasury yields retreated from multiyear highs, with Microsoft Corporation (MSFT), Amazon.com Inc (AMZN), and Meta Platforms Inc (META) rising more than +1%. Also, Palantir Technologies Inc (PLTR) climbed over +5% following a report from Bloomberg stating that the company is on track to win a contract to overhaul the U.K.’s National Health Service. On the bearish side, energy stocks slumped as the price of WTI crude dropped over -5% to a 5-week low, with Phillips 66 (PSX) and Marathon Oil Corporation (MRO) plunging more than -4%. In addition, Cal-Maine Foods Inc (CALM) slid over -7% after the company posted downbeat Q1 results.

The ADP National Employment report on Wednesday showed private payrolls rose by 89K jobs in September, significantly below the consensus figure of 153K and the smallest increase in over 2-1/2 years. Also, the U.S. September ISM services index fell to 53.6, in line with expectations, pointing to signs of a slowdown in the economy. At the same time, U.S. factory orders came in at +1.2% m/m in August, stronger than expectations of +0.2% m/m.

“Stock investors have been hoping the labor market will loosen up and give the Fed enough breathing room to dial down its hawkishness. ADP isn’t necessarily a reliable predictor of the government’s monthly jobs data, but if Friday’s report also shows the labor market is cooling, stock investors may worry a little less about indefinitely higher interest rates,” said Mike Loewengart, head of model portfolio construction at the Morgan Stanley Global Investment Office.

Meanwhile, U.S. rate futures have priced in a 20.4% probability of a 25 basis point rate hike at the next FOMC meeting in November and a 33.0% chance of a 25 basis point rate increase at the December meeting.

Today, all eyes are focused on U.S. Initial Jobless Claims data in a couple of hours. Economists, on average, forecast that Initial Jobless Claims will come in at 210K, compared to last week’s value of 204K.

Also, investors are likely to focus on U.S. Trade Balance data, which was at -65.00B in July. Economists foresee the August figure to be -62.30B.

In addition, market participants will be looking toward a batch of speeches from Fed officials Mester, Kashkari, Barkin, and Daly.

In the bond markets, United States 10-year rates are at 4.747%, up +0.30%.

The Euro Stoxx 50 futures are up +0.15% this morning after closing at the lowest level in over six months on Wednesday. Strength in travel and leisure stocks is lending support to the overall market. European stocks have received a positive handover from Wall Street after main indexes closed higher, primarily due to the retreat of longer-dated U.S. Treasury yields, driven by weaker-than-expected job data. Investor attention is now firmly centered on the release of the U.S. non-farm payrolls report due on Friday. In corporate news, Pandora A/S (PNDOR.C.DX) climbed over +9% after the Danish company raised its growth targets and said it would enter the Indian market and expand in other Asian countries.

Germany’s Trade Balance, France’s Industrial Production, and Spain’s Industrial Production data were released today.

The German August Trade Balance stood at 16.6B, stronger than expectations of 15.0B.

The French August Industrial Production came in at -0.3% m/m, stronger than expectations of -0.4% m/m.

The Spanish August Industrial Production arrived at -3.4% y/y, weaker than expectations of -2.1% y/y.

Japan’s Nikkei 225 Stock Index (NIK) closed up +1.80%, while the Chinese market was closed for the week-long Golden Week holidays.

Japan’s Nikkei 225 Stock Index closed higher today, snapping a five-day losing streak as investors scooped up beaten-down stocks after U.S. Treasury yields retreated from 16-year highs in the wake of a decline in oil prices and softer U.S. labor data. Real estate and financial stocks led the gains on Thursday. Meanwhile, Monex Group Inc. soared more than +17% after Japanese mobile operator NTT Docomo announced that it had formed a capital tie-up with the fintech company to establish a new financial services business. Chip stocks also advanced, with Advantest Corp surging over +5% and Tokyo Electron Ltd rising about +2%. In other news, foreign investors bought 71 billion yen worth of Japanese stocks on a net basis in the week ending September 30th. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -8.44% to 20.84.

“Investors were prompted to buy back stocks after sharp declines in Japanese equities this week, and U.S. Treasury yields eased. But they will be cautious about making active buying before confirming U.S. economic data such as the payrolls report, which could set directions of U.S. yields,” said Jun Morita, general manager of the research department at Chibagin Asset Management.

Pre-Market U.S. Stock Movers

MaxCyte Inc (MXCT) plunged over -22% in pre-market trading after the cell-engineering company reported weaker-than-expected preliminary Q3 revenue and provided below-consensus FY23 revenue guidance.

BlackBerry Ltd (BB) climbed more than +4% in pre-market trading after the company said it would separate its Internet of Things and cybersecurity businesses into two independently operated entities.

Cambium Networks Corp (CMBM) tumbled about -27% in pre-market trading after lowering its Q3 revenue guidance.

Clorox Co (CLX) slid over -4% in pre-market trading following the announcement that a cybersecurity attack, which it had revealed in September, would have a significant impact on the company’s Q1 results.

Paymentus Holdings Inc (PAY) fell more than -2% in pre-market trading after Citi downgraded the stock to Neutral from Buy.

O’Reilly Automotive Inc (ORLY) rose over +1% in pre-market trading after Citi upgraded the stock to Buy from Neutral.

You can see more pre-market stock movershere

Today’s U.S. Earnings Spotlight: Thursday - October 5th

Constellation Brands A (STZ), Lamb Weston Holdings (LW), ConAgra Foods (CAG), Levi Strauss A (LEVI), Aehr Test Systems (AEHR), Park Aerospace (PKE), Lifecore Biomedical (LFCR).

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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.