Stocks Tread Water Before the Open as Investors Await Key U.S. GDP Data, Nike Earnings on Tap

Oleksandr Pylypenko - Barchart - Thu Sep 28, 2023

December S&P 500 futures (ESZ23)are up +0.04%, and December Nasdaq 100 E-Mini futures (NQZ23) are down -0.05% this morning as market participants geared up for a flurry of U.S. economic data while also awaiting speeches from Fed officials and an earnings report from footwear and sports apparel giant Nike.

In Wednesday’s trading session, Wall Street’s major averages ended mixed, with the blue-chip Dow dropping to a 3-1/2 month low. Nextera Energy Inc (NEE) plunged over -8% and was the top percentage loser on the benchmark S&P 500 after its affiliate NextEra Energy Partners cut its long-term growth outlook. Also, Zions Bancorporation (ZION) slid more than -2% after Morgan Stanley downgraded the stock to Underweight from Equal Weight. On the bullish side, energy stocks climbed as the price of WTI crude rose over +3% to a 13-month high. In addition, Paychex Inc (PAYX) gained more than +3% after the company reported upbeat Q1 results.

Economic data on Wednesday showed that U.S. durable goods orders unexpectedly rose +0.2% m/m in August, stronger than expectations of -0.5% m/m. Also, U.S. August core durable goods orders came in at +0.4% m/m, higher than the expected figure of +0.1% m/m.

“Concern is that the economy is still doing okay, but we need to see some weakness to give interest rates a reason to peak, and so far, we’re not seeing that,” said Paul Nolte, market strategist at Murphy & Sylvest Wealth Management.

Minneapolis Fed President Neel Kashkari stated Wednesday that a U.S. government shutdown or prolonged strike by automotive workers could slow down the economy, obviating the need for the Federal Reserve to employ its tools to ease price growth. “If these downside scenarios hit the U.S. economy, we might then have to do less with our monetary policy to bring inflation back down to 2%,” Kashkari said.

U.S. rate futures have priced in a 22.4% probability of a 25 basis point rate increase at the November FOMC meeting and a 36.5% chance of a 25 basis point rate hike at the December meeting.

Meanwhile, Federal Reserve Chair Jerome Powell is scheduled to host a town hall with educators later today.

On the earnings front, notable companies like Nike (NKE), Accenture (ACN), Jabil Circuit (JBL), and CarMax (KMX) are set to report their quarterly figures today.

Today, all eyes are focused on the final U.S. GDP reading in a couple of hours. Economists, on average, forecast that U.S. GDP will stand at +2.1% q/q in the second quarter, compared to the first-quarter value of +2.0% q/q.

Also, investors will likely focus on the U.S. GDP Price Index, which came in at +4.1% q/q in the first quarter. Economists anticipate the second-quarter figure to be +2.0% q/q.

U.S. Pending Home Sales data will also be closely watched today. Economists foresee this figure to stand at -0.8% m/m in August, compared to the previous value of +0.9% m/m.

U.S. Initial Jobless Claims data will be reported today as well. Economists anticipate this figure to be 215K, compared to last week’s value of 201K.

In addition, market participants will be looking toward a batch of speeches from Fed officials Barkin, Goolsbee, and Cook.

In the bond markets, United States 10-year rates are at 4.645%, up +0.30%.

The Euro Stoxx 50 futures are down -0.24% this morning, falling for a sixth straight session. Limiting the downside on Thursday, energy shares gained ground after a drop in crude stocks in the United States underscored a widening global deficit. Meanwhile, the Italian government on Wednesday reduced its growth projections for both this year and the next while increasing its budget deficit targets. In addition, five economic institutes, comprising four German and one Austrian, are forecasting a 0.6% contraction in Germany’s gross domestic product for 2023 due to the impact of rising interest rates on the economy and reduced consumption amid high inflation. Investor attention is now firmly centered on the release of Germany’s CPI data, due later in the session. In corporate news, Ryanair Holdings Plc (RYA.I.DX) fell over -2% following the European airline’s announcement of several reductions in its winter schedule due to the Boeing delivery delays.

Spain’s CPI (preliminary) and Eurozone’s Consumer Confidence data were released today.

The Spanish September CPI has been reported at +0.2% m/m and +3.5% y/y, compared to expectations of +0.3% m/m and +3.5% y/y.

Eurozone September Consumer Confidence stood at -17.8, in line with expectations.

Asian stock markets today closed mixed. China’s Shanghai Composite Index (SHCOMP) closed up +0.10%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -1.54%.

China’s Shanghai Composite closed slightly higher today as investors exercised caution ahead of a week-long Autumn festival holiday. Chinese property developers continued to decline after falling to levels last seen in 2011 on Wednesday. Trading in China Evergrande Group was suspended in Hong Kong following a report indicating that the company’s chairman, Hui Ka Yan, had been placed under police surveillance. Also, Country Garden Holdings Co Ltd fell over -2% after the company’s bondholders said they had not received a coupon payment scheduled for Wednesday. Investors were also anticipating China’s PMI figures, set to be released over the weekend, to gain further insights into the country’s economic activity.

“Uncertainty during the holidays tends to curb investor risk appetite,” said Capital Securities in a note.

Japan’s Nikkei 225 Stock Index closed sharply lower today, hitting a 1-month low as risk sentiment took a hit on concerns about the Federal Reserve maintaining higher interest rates. Technology and materials stocks led declines on Thursday, while energy stocks outperformed. Data from the Ministry of Finance revealed that in the week ending on September 23rd, foreign investors offloaded Japanese shares worth 3 trillion yen, a record weekly net selling by foreigners. Meanwhile, Japan’s benchmark 10-year government bond yield reached a level not seen in a decade on Thursday, and the 20-year government bond yield rose to its highest point since 2014, driven by the increase in U.S. yields. Investor focus is now squarely on Tokyo core CPI data for September, due on Friday. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +3.81% to 18.81.

Pre-Market U.S. Stock Movers

Micron Technology Inc (MU) plunged over -5% in pre-market trading after the memory maker reported better-than-expected Q4 results but provided mixed guidance.

Peloton Interactive Inc (PTON) soared more than +13% in pre-market trading after the company announced it had inked a five-year strategic global partnership with Lululemon Athletica.

Gritstone Oncology Inc (GRTS) surged about +37% in pre-market trading after announcing that it had been awarded a U.S. government contract valued at up to $433 million to test a next-generation COVID-19 vaccine.

Workday Inc (WDAY) slumped over -10% in pre-market trading after the company cut its medium-term subscription revenue growth view at the Investor Day presentation.

Redfin Corp (RDFN) rose more than +1% in pre-market trading after DA Davidson upgraded the stock to Neutral from Underperform.

You can see more pre-market stock movershere

Today’s U.S. Earnings Spotlight: Thursday - September 28th

Accenture (ACN), Nike (NKE), Jabil Circuit (JBL), CarMax (KMX), Vail Resorts (MTN), BlackBerry (BB), Park City Group (PCYG), Bassett (BSET).

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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.