December S&P 500 E-Mini futures (ESZ25) are up +0.14%, and December Nasdaq 100 E-Mini futures (NQZ25) are up +0.32% this morning, buoyed by hopes for Federal Reserve interest-rate cuts and optimism surrounding artificial intelligence.
Futures on the Nasdaq 100 outperformed after a deal propelled OpenAI to become the world’s most valuable startup, boosting AI optimism. OpenAI’s valuation jumped to $500 billion after current and former employees sold roughly $6.6 billion worth of stock. The ChatGPT owner also reached agreements with South Korea’s Samsung Electronics and SK Hynix to supply chips for its Stargate project, lifting chip-related stocks worldwide.
However, gains in U.S. equity futures are limited as the U.S. government shutdown continues. In a shutdown, government offices continue essential functions, but nonessential tasks are halted, paychecks are suspended, and many workers are furloughed until Congress passes new funding. The impact on both individuals and the economy hinges on whether the shutdown lasts for days or weeks, and on whether the White House proceeds with its plans to fire workers during the funding lapse. At a White House press conference on Wednesday, Vice President JD Vance said he does not expect the shutdown to last long, adding that layoffs will occur if it extends for days or weeks.
Key economic data that the Fed would normally take into account for policy is likely to be delayed, including Friday’s jobs report. A prolonged shutdown could also delay the release of U.S. inflation data scheduled for mid-October.
Chicago Fed President Austan Goolsbee said on Wednesday that the absence of official data during the U.S. government shutdown will make it more difficult for policymakers to interpret the economy. The Fed is “going into a period where you’re trying to figure out: Is this a transition?” Goolsbee said. “And if you’re not going to get the data, it’s just that much harder.”
“The U.S. shutdown remains a huge story, and there’s still no sign of a climbdown from either side,” Deutsche Bank said.
In yesterday’s trading session, Wall Street’s three main equity benchmarks closed higher, with the S&P 500 and Nasdaq 100 notching new record highs. AES Corp. (AES) surged over +16% and was the top percentage gainer on the S&P 500 after the Financial Times reported that BlackRock’s Global Infrastructure Partners was nearing a $38 billion deal to buy the company. Also, pharmaceutical stocks extended their rally on optimism after Pfizer’s deal with the White House, with Biogen (BIIB) climbing more than +10% to lead gainers in the Nasdaq 100 and AstraZeneca Plc (AZN) rising over +9%. In addition, Nike (NKE) advanced more than +6% after the world’s largest sportswear company posted better-than-expected FQ1 results. On the bearish side, Corteva (CTVA) slumped over -9% and was the top percentage loser on the S&P 500 after the company said it would split its seed and pesticide businesses into two separate companies.
The ADP National Employment report released on Wednesday showed that U.S. private nonfarm payrolls unexpectedly fell -32K in September, weaker than expectations of +52K and the largest decline in 2-1/2 years. At the same time, the U.S. ISM manufacturing index rose to a 7-month high of 49.1 in September, stronger than expectations of 49.0. Also, the U.S. September S&P Global manufacturing PMI remained unrevised at 52.0, in line with expectations.
“Investors have been conditioned to buy the dip. The economic data was not good, but it was not horrible either, and it is enough to solidify a rate cut this month despite the hawkish tone that we have heard recently from most Fed governors,” said Joe Gilbert, portfolio manager at Integrity Asset Management. “In the absence of further government data, the market has fully baked in an October cut, which is positive on the margin for the markets as interest rates appear on a glide path lower.”
Meanwhile, U.S. rate futures have priced in a 100% chance of a 25 basis point rate cut at the Fed’s monetary policy committee meeting later this month.
In other news, Fed Governor Lisa Cook will stay at the central bank until at least January after the Supreme Court issued a notice on Wednesday delaying a ruling on her termination.
Today, investors will focus on speeches from Dallas Fed President Lorie Logan and Chicago Fed President Austan Goolsbee.
In light of the government shutdown, the publication of weekly jobless claims and August factory orders data, originally set for today, will likely be delayed.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.095%, down -0.32%.
The Euro Stoxx 50 Index is up +1.03% this morning, extending a record-breaking rally. Technology stocks jumped on Thursday, tracking their U.S. peers higher. Sentiment was also boosted after South Korea’s Samsung Electronics and SK Hynix signed letters of intent to supply memory chips for OpenAI’s data centers. Also, pharmaceutical stocks extended their rally as the U.S.-Pfizer deal helped ease some uncertainty in the sector. In addition, automobile stocks climbed, led by a more than +7% surge in Stellantis NV (STLAP.FP) after it reported a 6.4% increase in Q3 U.S. sales. Meanwhile, data from Eurostat released on Thursday showed that the Eurozone’s unemployment rate unexpectedly rose in August, raising the likelihood that the European Central Bank will cut interest rates next year after a period of pauses. In other news, Italy’s main business lobby, Confindustria, on Thursday lowered its economic growth forecast for this year to 0.5% from 0.6%, citing the impact of U.S. tariffs and geopolitical tensions on exports. In corporate news, Ferrari NV (RACE.M.DX) gained over +2% after HSBC upgraded the stock to Buy from Hold. At the same time, Experian Plc (EXPN.LN) slumped over -5% after FICO announced the launch of a cost-cutting direct license program for mortgage lending, which would cut out the margin that companies like Experian earn on the FICO credit score itself.
Eurozone’s Unemployment Rate was released today.
The Eurozone August Unemployment Rate was 6.3%, weaker than expectations of 6.2%.
Japan’s Nikkei 225 Stock Index (NIK) closed up +0.87%, while mainland China’s financial markets were closed for a holiday.
Japan’s Nikkei 225 Stock Index closed higher today, tracking overnight gains on Wall Street. Pharmaceutical and chip-related stocks led the gains on Thursday. Sentiment in the region also improved after OpenAI reached a deal with South Korea’s Samsung Electronics and SK Hynix to supply memory chips, bolstering enthusiasm for AI. Meanwhile, Japan’s 10-year government bonds fell after weak demand at Thursday’s auction, highlighting concerns over the ruling party’s upcoming leadership election and rising risks of a Bank of Japan rate hike. In other news, BMI analysts raised their 2025 Japan growth forecast to 1.0% from 0.4%, citing stronger-than-expected economic performance in the first half of the year. Foreign investors offloaded a net 2 trillion yen ($13.60 billion) worth of Japanese long-term bonds in the week through September 27th, the largest selloff in a year, fueled by rising expectations of potential BOJ rate hikes, according to data from the Ministry of Finance. Foreigners also sold Japanese stocks on a net basis for the third consecutive week, totaling 963.3 billion yen. Bank of Japan Deputy Governor Shinichi Uchida said on Thursday that the central bank will keep raising interest rates if economic and price developments align with its forecasts. Investor focus is now on BOJ Governor Kazuo Ueda’s speech on Friday. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed down -1.44% to 25.29.
The Japanese September Household Confidence came in at 35.3, stronger than expectations of 35.1.
China’s Shanghai Composite Index was closed today for the National Day holiday. Mainland China’s financial markets will reopen on Thursday, October 9th.
Pre-Market U.S. Stock Movers
Most members of the Magnificent Seven stocks advanced in pre-market trading, with Tesla (TSLA) and Nvidia (NVDA) rising over +1%.
Fair Isaac (FICO) climbed more than +7% in pre-market trading after introducing new pricing models that will enable credit report providers to directly access FICO scores.
Celanese (CE) gained over +1% in pre-market trading after Citi upgraded the stock to Buy from Neutral with a price target of $53.
Bloom Energy (BE) fell over -2% in pre-market trading after Mizuho downgraded the stock to Neutral from Outperform with a price target of $79.
RH (RH) dropped more than -1% in pre-market trading after William Blair downgraded the stock to Market Perform from Outperform.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Thursday - October 2nd
AngioDynamics (ANGO).
