December S&P 500 E-Mini futures (ESZ25) are up +0.48%, and December Nasdaq 100 E-Mini futures (NQZ25) are up +0.63% this morning, pointing to a higher open on Wall Street as Treasury yields moved lower, while investors await U.S. President Donald Trump’s high-stakes meeting with congressional leaders to prevent a government shutdown.
Top congressional leaders will meet with President Trump at the White House one day before federal funding lapses if the two parties fail to agree on a short-term spending bill. Republicans aim to pass a seven-week stopgap spending bill before negotiating any deals, while Democrats are demanding billions in healthcare funding before agreeing to a GOP plan. Raising the stakes, White House budget director Russ Vought directed agencies to prepare lists of employees to fire if funding lapses, going beyond the temporary furloughs and missed paychecks seen in past shutdowns.
This week, investors also look ahead to remarks from Federal Reserve officials as well as a slew of U.S. economic data, with a particular focus on Friday’s nonfarm payrolls report. However, in the event of a federal government shutdown, the jobs report will be postponed if the Department of Labor follows an operational contingency plan outlined earlier this year.
In Friday’s trading session, Wall Street’s major equity averages ended in the green. Electronic Arts (EA) surged over +14% and was the top percentage gainer on the S&P 500 and Nasdaq 100 after The Wall Street Journal reported that the company was in advanced talks to go private in a roughly $50 billion deal. Also, chip stocks rallied after The Wall Street Journal reported that the Trump administration was considering a policy requiring U.S. firms to manufacture domestically as many chips as they import, with GlobalFoundries (GFS) climbing more than +8% and Intel (INTC) rising over +4%. In addition, Paccar (PCAR) advanced more than +5% after President Trump announced a 25% tariff on imports of heavy trucks. On the bearish side, Costco Wholesale (COST) fell over -2% and was the top percentage loser on the S&P 500 and Nasdaq 100 after the bulk retailer reported weaker-than-expected FQ4 U.S. comparable sales growth.
Data from the U.S. Department of Commerce released on Friday showed that the core PCE price index, a key inflation gauge monitored by the Fed, rose +0.2% m/m and +2.9% y/y in August, in line with expectations. Also, U.S. August personal spending climbed +0.6% m/m, stronger than expectations of +0.5% m/m, and personal income rose +0.4% m/m, stronger than expectations of +0.3% m/m. At the same time, the University of Michigan’s U.S. September consumer sentiment index was unexpectedly revised lower to a 4-month low of 55.1, weaker than expectations of 55.5.
“Despite another month of elevated inflation, [Friday’s] PCE report was in-line across the board. That gives investors some relief that the current status quo will remain intact, and that the Fed will remain on track to cut rates two more times this year,” said Bret Kenwell at eToro.
Richmond Fed President Tom Barkin said on Friday that although both unemployment and inflation have diverged from the targets, he sees only limited risk of further deterioration. At the same time, Fed Vice Chair for Supervision Michelle Bowman reaffirmed her stance that officials should act “decisively and proactively to address decreasing labor market dynamism and emerging signs of fragility.”
Cleveland Fed President Beth Hammack told CNBC’s Squawk Box Europe on Monday that the U.S. central bank must keep a restrictive monetary policy stance to bring inflation down to its 2% target. “It’s a challenging time for monetary policy. We are being challenged on both sides of our mandate,” Hammack said.
U.S. rate futures have priced in an 89.3% chance of a 25 basis point rate cut and a 10.7% chance of no rate change at the conclusion of the Fed’s October meeting.
The U.S. September Nonfarm Payrolls report will be the main highlight this week. Recent soft labor market data prompted the Fed to lower interest rates at its latest meeting, and many expect additional rate cuts in the coming months. HSBC analysts anticipate another “soft” nonfarm payrolls report, which they say would effectively “rubber stamp” a rate cut in October. Analysts also noted that any revisions to prior data will be scrutinized following significant downward revisions in recent months. Ahead of the key jobs report, additional insights into the health of the U.S. labor market will come from the JOLTs Job Openings, ADP Nonfarm Employment Change, and Initial Jobless Claims. Other noteworthy data releases include the U.S. Conference Board’s Consumer Confidence Index, the Chicago PMI, the S&P/CS HPI Composite - 20 n.s.a., the S&P Global Manufacturing PMI, the ISM Manufacturing PMI, Construction Spending, Factory Orders, Average Hourly Earnings, the S&P Global Services PMI, the ISM Non-Manufacturing PMI, and the Unemployment Rate.
Market participants will also parse comments from a slew of Fed officials. Fed Vice Chair Philip Jefferson, Fed Governor Christopher Waller, Cleveland Fed President Beth Hammack, New York Fed President John Williams, St. Louis Fed President Alberto Musalem, Atlanta Fed President Raphael Bostic, Boston Fed President Susan Collins, Chicago Fed President Austan Goolsbee, and Dallas Fed President Lorie Logan are scheduled to speak this week.
In addition, several notable companies, including shoemaker Nike (NKE), cruise ship operator Carnival (CCL), payroll processing firm Paychex (PAYX), and snack maker ConAgra Brands (CAG), are slated to release their quarterly results this week.
Today, investors will focus on U.S. Pending Home Sales data, which is set to be released in a couple of hours. Economists expect the August figure to rise +0.2% m/m following a -0.4% m/m drop in July.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.143%, down -1.05%.
The Euro Stoxx 50 Index is up +0.34% this morning, starting the new week on an upbeat note, though worries over the approaching U.S. government shutdown are capping gains. Healthcare and mining stocks outperformed on Monday. At the same time, bank stocks lost ground. Preliminary data released on Monday showed that Spain’s annual inflation rate accelerated in September, reinforcing expectations that the European Central Bank will keep holding off on additional interest rate cuts. Separately, a survey showed that Eurozone businesses grew less pessimistic about their prospects in September after a U.S.-EU agreement eased some uncertainty over the tariffs they will face when exporting to the U.S. Investors are now awaiting preliminary inflation data for France and Germany, the Eurozone’s largest economies, on Tuesday, and for the Eurozone as a whole on Wednesday. In corporate news, GSK Plc (GSK.LN) rose over +2% after the drugmaker announced that Emma Walmsley will step down as CEO and be succeeded by insider Luke Miels in January.
Spain’s CPI (preliminary), Eurozone’s Business and Consumer Survey, and Eurozone’s Consumer Confidence data were released today.
The Spanish September CPI fell -0.4% m/m and rose +2.9% y/y, weaker than expectations of -0.2% m/m and +3.1% y/y.
Eurozone’s September Business and Consumer Survey came in at 95.5, stronger than expectations of 95.2.
Eurozone’s September Consumer Confidence stood at -14.9, in line with expectations.
Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed up +0.90%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.69%.
China’s Shanghai Composite Index closed higher today as sentiment was boosted by evidence that policies to tackle overcapacity and deflation in the economy were starting to take effect. Technology stocks jumped on Monday following news that Moore Threads Technology, an AI chipmaker competing with Nvidia, received regulatory approval to list on the tech-focused board in Shanghai. Also, shares of automakers and solar energy companies climbed on signs that Beijing’s crackdown on price wars is beginning to show results. Chinese industrial profits climbed 20.4% from a year earlier in August, marking the first increase in four months, according to data from the National Bureau of Statistics released over the weekend. Also, factory deflation eased for the first time in six months. Dilin Wu, a strategist at Pepperstone Group, said that part of the rebound reflected last year’s low base and the government’s recent efforts to curb overcapacity in sectors such as electric vehicles and heavy industry, adding that the figures provided the market with “a welcome confidence boost.” Meanwhile, expectations of additional stimulus grew after the People’s Bank of China said on Friday it would enhance coordination between monetary and fiscal policies to bolster economic growth. Goldman Sachs anticipates that China will lower interest rates and banks’ required reserve ratio in the fourth quarter. In corporate news, Miniso gained over +1% in Hong Kong after unveiling plans to spin off its pop-culture collectibles division and list it separately in Hong Kong. Investors are now awaiting PMI data due on Tuesday, with attention on whether the official manufacturing gauge remains below the key 50 level for a sixth consecutive month.
Japan’s Nikkei 225 Stock Index closed lower today, dragged down by ex-dividend stocks. Automobile, financial, and industrial stocks underperformed on Monday. Monday marked the ex-dividend date for many Japanese companies, meaning investors who purchase shares on or after Monday will not receive the upcoming dividend payout. Yutaka Miura, senior technical analyst at Mizuho Securities, said, “As the benchmarks have risen to such high levels, I think many investors are selling to secure profits, now that the benefit of dividends is gone.” A stronger yen also weighed on the benchmark index as expectations of a Bank of Japan rate hike continued to build. BOJ policy board member Asahi Noguchi said on Monday that the necessity of raising rates is greater than ever and that the upside risks to the economy currently outweigh the downside risks. Meanwhile, investors are also cautious ahead of the ruling Liberal Democratic Party’s leadership vote on Saturday. On the economic front, data from the Cabinet Office released on Monday showed that Japan’s July leading economic indicators index, which gauges the economic outlook for a few months ahead based on data such as job offers and consumer sentiment, was revised upward. Investors are awaiting speeches from other BOJ policy board members this week, with Governor Kazuo Ueda’s remarks on Friday being the highlight. He speaks two days after the central bank publishes its Tankan survey of business sentiment. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed down -1.58% to 25.58.
The Japanese July Leading Index came in at 106.1, stronger than expectations of 105.9.
Pre-Market U.S. Stock Movers
Merus N.V. (MRUS) jumped over +38% in pre-market trading after Genmab agreed to acquire the company for $8 billion in cash.
U.S.-listed shares of cannabis-related companies soared in pre-market trading after President Trump on Sunday shared a video highlighting the health benefits of hemp-derived cannabidiol. Canopy Growth (CGC) is up over +20% and Cronos Group (CRON) is up more than +10%.
Lam Research (LRCX) rose over +2% in pre-market trading after Deutsche Bank upgraded the stock to Buy from Hold with a price target of $150.
Applovin (APP) gained more than +2% in pre-market trading after Phillip Securities initiated coverage of the stock with an Accumulate rating and $725 price target.
General Dynamics (GD) advanced over +1% in pre-market trading after Seaport Research upgraded the stock to Buy from Neutral with a $376 price target.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Monday - September 29th
Carnival Corp (CCL), Jefferies Financial (JEF), Vail Resorts (MTN), Progress (PRGS), IDT (IDT), Repositrak (TRAK).
