Stocks Set to Open Lower as Investors Await U.S. Jobs Data and Powell’s Comments, U.S. Avoids Shutdown

Oleksandr Pylypenko - Barchart - Mon Oct 2, 2023

December S&P 500 futures (ESZ23)are down -0.21%, and December Nasdaq 100 E-Mini futures (NQZ23) are down -0.06% this morning as market participants looked ahead to comments from Fed Chair Jerome Powell and other Fed officials later today, while also bracing for more data on the U.S. labor market after a U.S. government shutdown was averted over the weekend.

The U.S. Congress passed a stopgap funding bill late on Saturday, sending the legislation to President Joe Biden, who signed it into law before the midnight deadline. The bill sustains government funding at 2023 levels until November 17th and does not include aid for Ukraine but increases federal disaster assistance by $16 billion.

In Friday’s trading session, Wall Street’s major averages closed mixed. Carnival Corporation (CCL) plunged about -5% and was the top percentage loser on the benchmark S&P 500 after the cruise line operator provided weaker-than-expected Q4 adjusted EBITDA guidance. Also, energy stocks retreated amid weakness in crude oil prices, with Schlumberger NV (SLB) falling more than -4% and Marathon Oil Corporation (MRO) dropping over -2%. On the bullish side, Nike Inc (NKE) soared more than +6% after the sports footwear and apparel giant topped Wall Street estimates for Q1 profit. In addition, Walgreens Boots Alliance Inc (WBA) climbed over +6% after Bloomberg reported that the company is contemplating the appointment of Tim Wentworth, the former leader of Cigna, as its next CEO.

Data from the U.S. Department of Commerce on Friday showed that the U.S. core PCE price index, a key inflation gauge monitored by the Federal Reserve, stood at +0.1% m/m and +3.9% y/y in August, compared to expectations of +0.2% m/m and +3.9% y/y. Also, the U.S. September Chicago PMI came in at 44.1, weaker than expectations of 47.6. In addition, the University of Michigan’s reading of consumer sentiment in September was revised upward to 68.1 from 67.7.

New York Fed President John Williams stated Friday that the Fed is at or near a peak on interest rates and is anticipated to hold around these levels for some time. “I expect we will need to maintain a restrictive stance of monetary policy for some time to fully restore balance to demand and supply and bring inflation back to our 2% longer-run goal,” Williams said.

U.S. rate futures have priced in a 28.9% chance of a 25 basis point rate hike at the conclusion of the Fed’s November meeting and a 37.6% probability of a 25 basis point rate increase at the December meeting.

The highlight of the upcoming week will be the U.S. Nonfarm Payrolls report for September. Also, investors will be monitoring a spate of economic data, including the U.S. JOLTs Job Openings, ADP Nonfarm Employment Change, S&P Global Composite PMI, S&P Global Services PMI, Factory Orders, ISM Non-Manufacturing PMI, ISM Non-Manufacturing Prices, Crude Oil Inventories, Exports, Imports, Initial Jobless Claims, Trade Balance, Average Hourly Earnings, Private Nonfarm Payrolls, and Unemployment Rate.

In addition, several Fed officials will be making appearances this week, including Williams, Mester, Bostic, Bowman, Goolsbee, Barkin, Daly, and Waller.

Meanwhile, Federal Reserve Chair Jerome Powell and Philadelphia Fed President Patrick Harker are scheduled to engage in a roundtable discussion with workers, small business owners, and community leaders later today.

Today, all eyes are focused on the U.S. ISM Manufacturing PMI in a couple of hours. Economists, on average, forecast that September ISM Manufacturing PMI will stand at 47.7, compared to the previous value of 47.6.

Also, investors will likely focus on U.S. ISM Manufacturing Prices data, which came in at 48.4 in August. Economists foresee the September figure to be 48.6.

U.S. S&P Global Manufacturing PMI will be reported today as well. Economists foresee this figure to stand at 48.9 in September, compared to 47.9 in August.

In the bond markets, United States 10-year rates are at 4.626%, up +1.10%.

The Euro Stoxx 50 futures are down -0.29% this morning as investors digested regional manufacturing data while also awaiting remarks from Fed Chair Jerome Powell to gain insight into the central bank’s interest rate trajectory. Losses in healthcare stocks are leading the overall market lower. A survey showed on Monday that manufacturing activity in the Eurozone continued to be stuck in a severe and broad-based downturn last month. In corporate news, Vivendi Se (VIV.FP) rose over +2% after Barclays upgraded the French media company to Overweight from Equal Weight.

Spain’s Manufacturing PMI, Italy’s Manufacturing PMI, France’s Manufacturing PMI, Germany’s Manufacturing PMI, Eurozone’s Manufacturing PMI, Eurozone’s Unemployment Rate, and U.K.’s Manufacturing PMI were released today.

The Spanish September Manufacturing PMI has been reported at 47.7, stronger than expectations of 46.5.

The Italian September Manufacturing PMI came in at 46.8, stronger than expectations of 45.7.

The French September Manufacturing PMI stood at 44.2, stronger than expectations of 43.6.

The German September Manufacturing PMI arrived at 39.6, weaker than expectations of 39.8.

Eurozone September Manufacturing PMI came in at 43.4, in line with expectations.

Eurozone August Unemployment Rate was at 6.4%, in line with expectations.

U.K. September Manufacturing PMI stood at 44.3, stronger than expectations of 44.2.

Japan’s Nikkei 225 Stock Index (NIK) closed down -0.31%, while the Chinese market was closed for a holiday.

Japan’s Nikkei 225 Stock Index gave up early gains and closed lower, weighed by weakness in energy and healthcare stocks. The Bank of Japan’s Tankan survey showed Monday that confidence among Japan’s large manufacturers picked up more than expected, while sentiment among non-manufacturers surged to the highest level in 32 years in the three months to September. Separately, a survey showed on Monday that Japan’s factory activity fell at the fastest pace in seven months in September. Meanwhile, Japanese government bond yields climbed to decade highs on Monday, leading the country’s central bank to announce additional bond-buying operations. On the positive side, the yen retreated to an about 11-month low, boosting export-oriented stocks. In other news, a summary of the central bank’s policy meeting last month indicated that officials were showing signs of being more inclined toward considering policy revisions. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +2.61% to 18.88.

The Japanese Tankan Large Manufacturers Index stood at 9 in the third quarter, stronger than expectations of 6.

The Japanese Tankan Large Non-Manufacturers Index came in at 27 in the third quarter, stronger than expectations of 24.

The Japanese September Manufacturing PMI arrived at 48.5, weaker than expectations of 48.6.

Meanwhile, an official factory survey showed on Saturday that China’s factory activity expanded in September for the first time in six months, aligning with a series of indicators suggesting that the world’s second-largest economy has begun to stabilize. At the same time, a private-sector survey showed on Sunday that the country’s factory activity expanded at a slower pace in September, while services activity expanded at its slowest pace of the year in September.

The Chinese September Manufacturing PMI stood at 50.2, in line with expectations.

The Chinese September Non-Manufacturing PMI came in at 51.7, stronger than expectations of 51.5.

The Chinese September Caixin Manufacturing PMI was at 50.6, weaker than expectations of 51.2.

The Chinese September Caixin Services PMI arrived at 50.2, weaker than expectations of 52.0.

Pre-Market U.S. Stock Movers

NVIDIA Corporation (NVDA) climbed over +1% in pre-market trading after Goldman Sachs upgraded the stock to Conviction Buy from Buy.

Toast Inc (TOST) fell more than -1% in pre-market trading after Mizuho downgraded the stock to Neutral from Buy.

Li Auto Inc (LI) rose over +1% in pre-market trading after the company set a new monthly record with 36,060 vehicle deliveries in September.

Xpeng Inc (XPEV) gained about +1% in pre-market trading after announcing that its deliveries jumped by 12% m/m and 81% y/y to 15,310 units in September.

Insulet Corporation (PODD) soared over +3% in pre-market trading after Jefferies upgraded the stock to Buy from Hold.

Datadog Inc (DDOG) rose more than +3% in pre-market trading after Piper Sandler upgraded the stock to Overweight from Neutral.

You can see more pre-market stock movershere

Today’s U.S. Earnings Spotlight: Monday - October 2nd

Comtech (CMTL), Upexi (UPXI), Rite Aid (RAD).

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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.