Stocks Climb Before the Open as U.S. ADP Jobs Report Looms

Oleksandr Pylypenko - Barchart - Wed Oct 4, 2023

December S&P 500 futures (ESZ23)are up +0.18%, and December Nasdaq 100 E-Mini futures (NQZ23) are up +0.21% this morning as Treasury yields retreated, with investors’ focus now shifting to the ADP National Employment numbers due later in the day.

In Tuesday’s trading session, the benchmark S&P 500 and blue-chip Dow fell to 4-month lows. McCormick (MKC) plunged over -8% after the spice maker reported weaker-than-expected Q3 sales. Also, Amazon.com (AMZN) slid more than -3%, and Microsoft (MSFT) dropped over -2% following a Reuters report indicating that these companies might face antitrust investigations by British media regulator Ofcom. In addition, Airbnb Inc (ABNB) fell more than -6% after KeyBanc Capital Markets downgraded the stock to Sector Weight from Overweight. On the bullish side, HP Inc (HPQ) rose over +1% after BofA Global Research upgraded the stock to Buy from Underperform.

A Labor Department report on Tuesday showed that U.S. JOLTs job openings unexpectedly rose to 9.610M in August, stronger than expectations of 8.800M, pointing to stubborn resilience in the labor market.

“Unless the NFP report comes in lower than expected, Wall Street will likely start to fully price in at least one more Fed rate hike before the end of the year,” said Ed Moya, senior market analyst for the Americas at Oanda.

Atlanta Fed President Raphael Bostic stated Tuesday that the U.S. central bank should hold interest rates at elevated levels “for a long time” to bring inflation back down to its 2% target. “I am not in a hurry to raise, but I am not in a hurry to reduce either,” Bostic said.

Meanwhile, U.S. rate futures have priced in a 28.7% probability of a 25 basis point rate increase at the next central bank meeting in November and a 37.6% chance of a 25 basis point rate hike at December’s monetary policy meeting.

In other news, the U.S. House of Representatives voted to oust Kevin McCarthy as speaker just three days after he struck a deal with Democrats to pass a short-term spending bill, preventing a government shutdown.

Today, all eyes are focused on U.S. ADP Nonfarm Employment Change data in a couple of hours. Economists, on average, forecast that September ADP Nonfarm Employment Change will stand at 153K, compared to the previous value of 177K.

Also, investors are likely to focus on the U.S. ISM Non-Manufacturing PMI, which came in at 54.5 in August. Economists foresee the new figure to be 53.6.

U.S. S&P Global Composite PMI will be reported today. Economists foresee this figure to stand at 50.1 in September, compared to 50.2 in August.

U.S. S&P Global Services PMI will come in today. Economists expect September’s figure to be 50.2, compared to August’s number of 50.5.

U.S. Factory Orders data will also be in focus today. Economists foresee this figure to stand at +0.2% m/m in August, compared to the previous value of -2.1% m/m.

U.S. Crude Oil Inventories data will be reported today as well. Economists estimate this figure to be -0.446M, compared to last week’s value of -2.170M.

In the bond markets, United States 10-year rates are at 4.760%, down -0.83%.

The Euro Stoxx 50 futures are up +0.24% this morning, reversing an earlier drop. Gains in utilities and media stocks are leading the overall market higher. Meanwhile, a survey released on Wednesday showed that the Eurozone economy likely contracted in the third quarter, with demand experiencing its swiftest decline in almost three years in September as indebted consumers curtailed their spending due to rising borrowing costs and higher prices. Separately, data showed on Wednesday that Eurozone retail sales fell much more than expected in August, indicating reduced consumer demand in the context of persistently high inflation. In corporate news, Tesco Plc (TSCO.L.EB) rose over +2% after Britain’s biggest retailer boosted its annual profit guidance and signaled that food inflation would continue to fall.

Germany’s Composite PMI, Germany’s Services PMI, Eurozone’s Composite PMI, Eurozone’s Services PMI, U.K.’s Composite PMI, U.K.’s Services PMI, Eurozone’s Retail Sales, and Eurozone’s PPI data were released today.

The German September Composite PMI came in at 46.4, stronger than expectations of 46.2.

The German September Services PMI was at 50.3, stronger than expectations of 49.8.

Eurozone September Composite PMI arrived at 47.2, stronger than expectations of 47.1.

Eurozone September Services PMI stood at 48.7, stronger than expectations of 48.4.

U.K. September Composite PMI was at 48.5, stronger than expectations of 46.8.

U.K. September Services PMI arrived at 49.3, stronger than expectations of 47.2.

Eurozone August Retail Sales came in at -1.2% m/m and -2.1% y/y, weaker than expectations of -0.3% m/m and -1.2% y/y.

Eurozone August PPI has been reported at +0.6% m/m and -11.5% y/y, compared to expectations of +0.6% m/m and -11.6% y/y.

Japan’s Nikkei 225 Stock Index (NIK) closed down -2.28%, while the Chinese market was closed for a holiday.

Japan’s Nikkei 225 Stock Index closed sharply lower and hit a more than 4-month low today, tracking Wall Street declines overnight after U.S. Treasury yields climbed to fresh 16-year highs amid the prospect of higher rates. All sectors of the Nikkei 225 ended in the red, with real estate and utilities stocks experiencing the largest declines. A private survey showed on Wednesday that Japan’s service activity expanded for the 13th consecutive month in September, albeit at the slowest pace since the beginning of the year. Meanwhile, despite conducting an emergency bond purchase on Wednesday, the Bank of Japan failed to ease Japanese government bond yields from their decade-high levels. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +12.12% to 22.76.

The Japanese September Services PMI stood at 53.8, stronger than expectations of 53.3.

“There’s so much uncertainty about the U.S. outlook, and that’s weighing on Japanese stocks. There is a risk in the near term that the Nikkei falls below 30,000 - it’s possible,” said Kenji Abe, strategist at Daiwa Securities.

Pre-Market U.S. Stock Movers

Intel Corporation (INTC) gained about +2% in pre-market trading after the company said it would separate its Programmable Solutions Group operations into a standalone business, effective January 1st.

Apple Inc (AAPL) fell more than -1% in pre-market trading after KeyBanc Capital Markets downgraded the stock to Sector Weight from Overweight.

Palantir Technologies Inc (PLTR) rose over +1% in pre-market trading 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.

Cal-Maine Foods Inc (CALM) plunged over -12% in pre-market trading after the company reported downbeat Q1 results.

B&G Foods Inc (BGS) slid more than -4% in pre-market trading after Piper Sandler downgraded the stock to Underweight from Neutral.

Brooge Holdings Ltd (BROG) surged about +18% in pre-market trading after announcing it received a proposal to buy the company from Dubai-listed maritime and shipping company Gulf Navigation Holdings.

You can see more pre-market stock movershere

Today’s U.S. Earnings Spotlight: Wednesday - October 4th

RPM (RPM), Acuity Brands (AYI), Helen of Troy Ltd (HELE), Accolade (ACCD), Resources Connection (RGP), AngioDynamics (ANGO).

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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.