The S&P 500 Index ($SPX) (SPY) today is down by -0.53%, the Dow Jones Industrials Index ($DOWI) (DIA) is down by -0.77%, and the Nasdaq 100 Index ($IUXX) (QQQ) is off by -0.51%.
Stocks are struggling to pick a direction ahead of Friday's key jobs report. The Dow Jones Industrials fell to a 2-week low, while the Nasdaq-100 briefly turned positive earlier, headlined by a +3.4% rise in Nvidia (NVDA) after CEO Jensen Huang told CNBC that demand for the company's Blackwell chips is “insane.”
However, spiking oil prices (CLX24) have weighed on equity benchmarks this afternoon, after President Biden told reporters he has discussed the possibility of a retaliatory strike on Iran's oil infrastructure with Israel.
The prospect of escalating conflict in the Middle East has dampened the appetite for risk assets and is weighing on stocks. Tensions mounted after Israeli warplanes attacked Beirut when eight Israeli soldiers were killed in southern Lebanon in battles against Hezbollah. The markets are awaiting Israel’s response to Tuesday’s missile barrage from Iran after Israeli Prime Minister Netanyahu vowed to retaliate, saying Iran “made a big mistake” and “will pay.”
Stocks recovered from their worst levels as soft-landing prospects improved after the Sep ISM services index climbed to a 19-month high. Also, energy stocks rose after WTI crude oil jumped more than +4% to a 1-month high.
US weekly initial unemployment claims rose +6,000 to 225,000, showing a slightly weaker labor market than expectations of 221,000.
The US Sep ISM services index rose +3.4 to 54.9, stronger than expectations of 51.7 and the fastest pace of expansion in 19 months.
US Aug factory orders unexpectedly fell -0.2% m/m, weaker than expectations of +0.1% m/m.
The markets are looking ahead to Friday's monthly US payroll report for market direction. Sep nonfarm payrolls are expected to climb +150,000, and the Sep unemployment rate is expected to remain unchanged at 4.2%.
The markets are discounting the chances at 100% for a -25 bp rate cut at the November 6-7 FOMC meeting and at 34% for a -50 bp rate cut at that meeting.
Overseas stock markets today are mixed. The Euro Stoxx 50 fell to a 1-week low and is down by -1.01%. China's Shanghai Composite is closed for the week-long National Day holiday. Japan's Nikkei Stock 225 closed up by +1.97%.
Interest Rates
December 10-year T-notes (ZNZ24) today are down by -10 ticks. The 10-year T-note yield is up +5.3 bp to 3.834%. Dec T-notes today fell to a 1-month low, and the 10-year T-note yield rose to a 1-month high of 3.836%. An increase in inflation expectations is weighing on T-notes after the 10-year breakeven inflation rate rose to a 2-month high today at 2.238%. T-notes added to their losses today after the US Sep ISM services index rose more than expected to a 19-month high, a hawkish factor for Fed policy that dampened the chances of a 50 bp rate cut at the next FOMC meeting.
Losses in T-notes were limited after US weekly initial unemployment claims rose more than expected, a dovish factor for Fed policy. Also, heightened geopolitical risks in the Middle East still support safe-haven demand for T-notes.
European government bond yields today are mixed. The 10-year German bund yield is up +5.9 bp to 2.151%. The 10-year UK gilt yield is down -0.3 bp to 4.022%.
The Eurozone Sep S&P composite PMI was revised upward by +0.7 to 49.6 from the previously reported 48.9.
Eurozone Aug PPI fell -2.3% y/y, right on expectations.
Bank of England (BOE) Governor Bailey said the BOE could become a "bit more aggressive" and "a bit more activist" in its approach to cutting interest rates if the news on inflation continued to be good.
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 95% for the October 17 meeting.
US Stock Movers
Humana (HUM) is down more than -3% after Bank of America downgraded the stock to underperform from neutral.
Constellation Brands (STZ) is down more than -2% after reporting Q2 comparable net sales of $2.92 billion, below the consensus of $2.93 billion.
Stellantis NV (STLA) is down more than -3% after Barclays downgraded the stock to equal weight from overweight.
Levi Strauss (LEVI) is down more than -7% after reporting Q3 net revenue of $1.52 billion, below the consensus of $1.55 billion, and cut its full-year net revenue forecast to up +1% from a previous forecast of +1% to +3%.
Automotive semiconductor makers are under pressure after Bloomberg Intelligence said automotive semiconductor makers could face bigger downgrades than the market anticipates as the electric vehicle sector may enter a deeper downturn. As a result, STMicroelectronics NV (STM), ON Semiconductor Corp (ON), and NXP Semiconductors NV (NXPI) are down more than -1%.
Tractor Supply (TSCO) is down more than -1% after Evercore ISI downgraded the stock to in-line from outperform.
Hims & Hers Health (HIMS) is down more than -14% after the FDA said Eli Lilly’s weight-loss drugs are no longer considered to be in shortage in the US, which threatens to undercut sales at Hims who was selling compounded semaglutide to treat obesity.
Wolfspeed (WOLF) is down more than -6% after Mizuho Securities downgraded the stock to underperform from neutral with a price target of $8.
Uranium and nuclear energy stocks are climbing today after Nikkei reported that Alphabet is considering using a carbon-free source for its power needs. As a result, Vistra (VST) is up more than +7% to lead gainers in the S&P 500, and Constellation Energy (CEG) is up more than +4%.
Energy stocks are moving higher today as WTI crude soared more than +4% to a 1-month high. As a result, Valero Energy (VLO) is up more than +3%. Also, APA Corp (APA), Marathon Petroleum (MPC), and Diamondback Energy (FANG) are up more than +2%. In addition, Haliburton (HAL), Phillips 66 (PSX), Devon Energy (DVN), Marathon Oil (MRO), and Occidental Petroleum (OXY) are up more than +1%.
Southwest Airlines (LUV) is up more than +2% to lead gainers in the S&P 500 after Citigroup raised its price target on the stock to $31.50 from $28.25.
Wolverine World Wide (WWW) is up more than +5% after BNP Paribas Exane upgraded the stock to outperform from neutral with a price target of $22.
Northern Oil & Gas (NOG) is up more than +2% after Jeffries initiated coverage on the stock with a buy recommendation and a price target of $53.
Accenture Plc (ACN) is up more than +1% after announcing a partnership with Nvidia to create a unit that helps clients use generative AI.
Earnings Reports (10/3/2024)
AngioDynamics Inc (ANGO), Constellation Brands Inc (STZ).
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