September S&P 500 E-Mini futures (ESU24) are trending down -0.65% this morning as investors geared up for the highly anticipated U.S. jobs report to gauge the extent of the Federal Reserve’s easing.
In yesterday’s trading session, Wall Street’s major indices closed mixed. McKesson (MCK) plunged over -9% and was the top percentage loser on the S&P 500 after the medical distributor issued below-consensus Q2 adjusted EPS guidance. Also, Copart (CPRT) slid more than -6% and was the top percentage loser on the Nasdaq 100 after reporting weaker-than-expected Q4 EPS. In addition, C3.ai (AI) slumped over -8% after the enterprise software maker reported weaker-than-expected Q1 subscription revenue. On the bullish side, Tesla (TSLA) climbed more than +4% after announcing plans to roll out its Full Self Driving system in China and Europe in the first quarter of next year, subject to regulatory approvals. Also, Amazon.com (AMZN) rose over +2% and was the top percentage gainer on the Dow after Cantor Fitzgerald initiated coverage of the stock with an Overweight rating and a $230 price target.
The ADP National Employment report released on Thursday showed that U.S. private nonfarm payrolls increased by 99K in August, significantly lower than the consensus figure of 144K and the smallest increase in 3-1/2 years. Also, the U.S. August ISM services index unexpectedly rose to 51.5, stronger than expectations of 51.3. In addition, U.S. Q2 nonfarm productivity was revised upward to +2.5% q/q from +2.3% q/q, while Q2 unit labor costs were revised lower to +0.4% q/q from +0.9% q/q. Finally, the number of Americans filing for initial jobless claims in the past week fell -5K to 227K, compared with the 231K expected.
“[Friday’s] payroll report could be softer than expected given the slowdown in ADP estimates,” said Jeffrey Roach at LPL Financial. “If the payroll report surprises investors and comes in weaker than expected, the likelihood of a 50 basis-point cut increases at the upcoming Fed meeting.”
Meanwhile, U.S. rate futures have priced in a 57.0% chance of a 25 basis point rate cut and a 43.0% probability of a 50 basis point rate cut at the Fed’s September meeting.
Today, all eyes are focused on the U.S. monthly payroll report, set to be released in a couple of hours. Economists, on average, forecast that August Nonfarm Payrolls will come in at 164K, compared to July’s figure of 114K.
A survey conducted by 22V Research showed that 44% of investors expect a “risk-on” market reaction to the jobs report, 27% anticipate “risk-off,” and 29% foresee a “negligible/mixed” response.
U.S. Average Hourly Earnings data will also be closely watched today. Economists expect August figures to be +0.3% m/m and +3.7% y/y, compared to the previous numbers of +0.2% m/m and +3.6% y/y.
The U.S. Unemployment Rate will be reported today as well. Economists expect this figure to ease to 4.2% in August from 4.3% in July.
In addition, market participants will be looking toward speeches from New York Fed President John Williams and Fed Governor Christopher Waller.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 3.701%, down -0.84%.
The Euro Stoxx 50 futures are down -0.93% this morning, heading for the worst week since the early August meltdown, as investors remained cautious ahead of the key U.S. jobs report due later today. Energy and bank stocks led the declines on Friday. Data from the Federal Statistical Office released Friday revealed that Germany’s monthly industrial production fell much more than expected in July, heightening the risk that the Eurozone’s largest economy is heading into a second consecutive quarter of contraction. Separately, Eurostat’s third estimate released Friday showed that the Eurozone economy expanded at a slower pace in the three months ending in June than initially projected. Meanwhile, the European Central Bank is widely anticipated to resume its course of interest rate cuts next week after taking a pause in July. In corporate news, Elis Sa (ELIS.P.DX) tumbled over -15% following a Reuters report that the workplace supplies provider had made an acquisition offer to Vestis, a former uniform rentals division of Aramark.
Germany’s Exports, Germany’s Imports, Germany’s Industrial Production, Eurozone’s Employment Change, and Eurozone’s GDP data were released today.
The German July Exports came in at +1.7% m/m, stronger than expectations of +1.2% m/m.
The German July Imports stood at +5.4% m/m, stronger than expectations of +0.3% m/m.
The German July Industrial Production has been reported at -2.4% m/m, weaker than expectations of -0.4% m/m.
Eurozone Employment Change arrived at +0.2% q/q and +0.8% y/y in the second quarter, in line with expectations.
Eurozone GDP came in at +0.2% q/q and +0.6% y/y in the second quarter, compared to expectations of +0.3% q/q and +0.6% y/y.
Asian stock markets today closed in the red. China’s Shanghai Composite Index (SHCOMP) closed down -0.81% and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.72%.
China’s Shanghai Composite Index closed lower today, dropping below the key 2800 level this week as economic uncertainties, persistent deflationary pressures, and the absence of strong policy support continued to dampen sentiment. Chinese stocks were also under pressure due to weak global sentiment, driven by recession concerns following disappointing U.S. economic data. Healthcare, technology, and energy stocks led the declines on Friday. At the same time, brokerage stocks advanced after Guotai Junan Securities agreed to acquire rival Haitong Securities, sparking expectations of further industry consolidation. Meanwhile, the People’s Bank of China hinted at more easing on Thursday, but investors viewed the signal as an official acknowledgment of economic weakness. Zou Lan, head of the PBOC’s monetary policy department, stated at a press briefing on Thursday that there remains some scope to reduce the reserve requirements for banks, emphasizing that the central bank will persist in enacting policies to bolster economic recovery. In other news, the Biden administration intends to impose export controls on critical technologies such as quantum computing and semiconductor products, aiming to align key allies in a U.S.-led effort to hinder advancements in China and other adversarial nations. Investors are now awaiting Chinese inflation and trade data due next week to gain further insights into the health of the world’s second-largest economy.
Japan’s Nikkei 225 Stock Index ended lower today, falling for the fourth consecutive session as the strengthening yen continued to weigh on sentiment. The benchmark index recorded its first losing week since early August. Technology stocks led the declines on Friday. Data from the Ministry of Internal Affairs and Communications released on Friday indicated that Japanese household spending increased less than anticipated in July as consumers continued to be cautious about increasing their expenditures amid rising prices. Nevertheless, it marked the first increase since April. Separately, preliminary data from the Cabinet Office showed that Japan’s leading economic index, which is used to gauge the economic outlook for a few months ahead on data such as job offers and consumer sentiment, improved in July. Meanwhile, the Japanese yen hit a 1-month high against the dollar on Friday amid expectations that the BOJ will raise interest rates further due to persistent inflationary pressures and rising wages. BOJ policymakers recently signaled that they will make further adjustments to monetary policy if their economic and price forecasts materialize, with markets pricing in another rate hike in December. In corporate news, Seven & I Holdings slid over -1% after rejecting a $38.5 billion buyout offer from Canada’s Alimentation Couche-Tard. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -0.07% to 29.07.
The Japanese July Household Spending arrived at -1.7% m/m and +0.1% y/y, weaker than expectations of -0.2% m/m and +1.2% y/y.
The Japanese July Leading Index was at 109.5, stronger than expectations of 109.4.
Pre-Market U.S. Stock Movers
Broadcom (AVGO) plunged over -9% in pre-market trading after the semiconductor and software giant issued weaker-than-expected Q4 revenue guidance.
UiPath (PATH) surged more than +9% in pre-market trading after the company posted upbeat Q2 results and raised its FY25 revenue forecast.
Samsara (IOT) gained over +3% in pre-market trading after the company reported better-than-expected Q2 results and lifted its full-year guidance.
Smith & Wesson Brands (SWBI) slumped more than -8% in pre-market trading after reporting weaker-than-expected Q1 revenue.
Super Micro Computer (SMCI) fell nearly -3% in pre-market trading after JPMorgan downgraded the stock to Neutral from Overweight.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Friday - September 6th
BRP Inc (DOO), ABM Industries (ABM), Brady (BRC), Genesco (GCO).
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