December S&P 500 E-Mini futures (ESZ24) are trending up +0.18% this morning as investors braced for the all-important U.S. jobs report to further gauge the size of the next Federal Reserve interest rate cut.
In yesterday’s trading session, Wall Street’s major indices closed lower. Constellation Brands (STZ) slid over -4% and was the top percentage loser on the S&P 500 after the company reported weaker-than-expected Q2 revenue. Also, Tesla (TSLA) fell more than -3% and was the top percentage loser on the Nasdaq 100 after Bloomberg reported that Chief Information Officer Nagesh Saldi was departing from the company. In addition, Levi Strauss (LEVI) slumped over -7% after the company reported weaker-than-expected Q3 revenue and cut its full-year revenue growth guidance. On the bullish side, MarketAxess Holdings (MKTX) climbed more than +7% and was the top percentage gainer on the S&P 500 after posting a record total average daily volume of $45.2 billion in September, an increase of 8.6% m/m and 52.5% y/y.
Economic data released on Thursday showed that the U.S. ISM services index rose to 54.9 in September, stronger than expectations of 51.7 and the fastest pace of expansion in 19 months. Also, the U.S. September S&P Global services PMI was revised lower to 55.2 from the preliminary estimate of 55.4. In addition, U.S. factory orders unexpectedly fell -0.2% m/m in August, weaker than expectations of +0.1% m/m. Finally, the number of Americans filing for initial jobless claims in the past week rose +6K to 225K, compared with the 222K expected.
“Amid robust consumer spending, the large services sector continues to add backbone to the expansion, likely weighing toward a smaller quarter-point rate cut from the Fed in November,” Sal Guatieri, senior economist at BMO Capital Market, said in a note.
U.S. rate futures have priced in a 69.3% probability of a 25 basis point rate cut and a 30.7% chance of a 50 basis point rate cut at November’s monetary policy meeting.
Meanwhile, market participants continue to keep a close watch on developments in the Middle East. Investors are worried that Israel may soon launch retaliatory strikes on Iran, possibly targeting Iran’s oil facilities, in response to Tehran’s missile attack on Israel.
In other news, U.S. dockworkers agreed to end a three-day strike that had disrupted trade along the U.S. East and Gulf coasts. The International Longshoremen’s Association and the U.S. Maritime Association announced on Thursday that they have extended their prior contract until January 15th, according to a joint statement from the two organizations.
Today, all eyes are focused on the U.S. monthly payroll report, which is set to be released in a couple of hours. Economists, on average, forecast that September Nonfarm Payrolls will come in at 147K, compared to August’s figure of 142K.
U.S. Average Hourly Earnings data will also be closely watched today. Economists expect September figures to be +0.3% m/m and +3.8% y/y, compared to the previous numbers of +0.4% m/m and +3.8% y/y.
The U.S. Unemployment Rate will be reported today as well. Economists expect this figure to hold steady at 4.2% in September.
In addition, market participants will be anticipating a speech from New York Fed President John Williams.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 3.853%, down -0.10%.
The Euro Stoxx 50 futures are up +0.14% this morning yet still on track for a weekly loss, with investors gearing up for the highly-anticipated U.S. jobs report. Energy and real estate stocks outperformed on Friday, while media stocks lost ground. Data from statistics agency Insee released on Friday showed that France’s monthly industrial production unexpectedly surged in August. Meanwhile, investors will turn their attention to speeches from ECB officials Luis de Guindos and Frank Elderson later in the day. In other news, Bloomberg reported that the European Union voted on Friday to impose tariffs of up to 45% on electric vehicles from China. In corporate news, DSV A/S (DSV.C.DX) climbed over +6% after the transport company raised $5.5 billion in a share issue without resorting to a discount to partially fund its acquisition of Schenker.
France’s Industrial Production data was released today.
The French August Industrial Production stood at +1.4% m/m, stronger than expectations of +0.3% m/m.
Japan’s Nikkei 225 Stock Index (NIK) closed up +0.22%, while mainland Chinese markets were closed for a holiday.
China’s Shanghai Composite Index was closed for the week-long National Day holiday. Mainland China’s financial markets will reopen on Tuesday, October 8th.
Japan’s Nikkei 225 Stock Index closed slightly higher today on expectations of a comprehensive economic package from the new government. Energy and utility stocks led the gains on Friday. However, the benchmark index recorded a weekly decline, marking its sharpest weekly drop in a month. Meanwhile, Japan’s new prime minister has directed his cabinet ministers to develop a comprehensive economic package, marking his initial move toward ensuring the country fully emerges from deflation. Shigeru Ishiba stated on Friday that the stimulus package will concentrate on alleviating the burden of rising living costs, boosting growth, and bolstering relief and preparedness measures for natural disasters. “We need to make three years of intensive efforts to ensure that we overcome deflation without the risk of reversing the virtuous cycle,” Ishiba said in his order to the ministers. In corporate news, Sanyo Shokai surged over +10% after announcing a buyback. Also, Seven & I Holdings gained more than +3% after Bloomberg reported that the company approached potential buyers for its Ito-Yokado stores and supermarkets as part of a restructuring effort amid a takeover approach from Canada’s Alimentation Couche-Tard. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -6.03% to 25.09.
Pre-Market U.S. Stock Movers
Spirit Airlines (SAVE) plummeted over -42% in pre-market trading after the Wall Street Journal reported that the budget airline and its bondholders had discussed a potential bankruptcy filing following its failed merger with JetBlue Airways.
Morgan Stanley (MS) gained about +0.8% in pre-market trading after HSBC upgraded the stock to Buy from Hold with a price target of $118.
Warner Music (WMG) fell over -1% in pre-market trading after BofA downgraded the stock to Underperform from Neutral with a price target of $30.
CVS Health (CVS) rose more than +1% in pre-market trading after TD Cowen upgraded the stock to Buy from Hold with a price target of $85.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Friday - October 4th
Apogee (APOG).
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