The December S&P 500 futures (ESZ23) are showing a positive trend, up by +0.43% in early morning trading. This surge comes in response to dovish-leaning statements from Federal Reserve officials and reports of a potential meeting between U.S. and Chinese leaders. Investors are eagerly anticipating the release of the Federal Reserve’s preferred inflation gauge while maintaining a positive sentiment.
In Thursday’s trading session, Wall Street’s primary indices closed in the green, with Jabil Circuit Inc (NYSE:JBL) leading the way with a remarkable surge of over +18% after the U.S.-based manufacturing company posted better-than-expected Q4 earnings. Additionally, mega-cap growth stocks performed well, with Meta Platforms Inc (NASDAQ:META) rising approximately +2% and Alphabet Inc (NASDAQ:GOOGL) gaining more than +1%. Meanwhile, Peloton Interactive Inc (NASDAQ:PTON) saw a significant boost of over +5% following the announcement of a five-year strategic global partnership with Lululemon Athletica. On the downside, CarMax Inc (NYSE:KMX) witnessed a substantial drop of more than -13% and claimed the title of the top percentage loser on the benchmark S&P 500. This downturn came after the used-car retailer reported weaker-than-expected quarterly profit figures. Similarly, Micron Technology Inc (NASDAQ:MU) experienced a decline of over -4% after the memory maker issued mixed Q1 guidance.
The U.S. Department of Commerce reported that the third estimate of Q2 GDP remained unchanged at +2.1% q/q. Additionally, U.S. August pending home sales took a hit, reaching their lowest level since 2020 with a decline of -7.1% m/m, significantly weaker than the anticipated -0.8% m/m. However, the number of Americans filing for jobless claims in the past week saw a slight increase to 204K, surpassing expectations of 215K. This suggests resilience in the labor market.
Chicago Fed President Austan Goolsbee cautioned that policymakers could risk overshooting on interest rates by placing too much emphasis on the notion that substantial job losses are necessary to curb inflation. Goolsbee believes that the Fed has a unique opportunity to defeat inflation without negatively impacting the economy. Richmond Fed President Thomas Barkin also chimed in, indicating that policymakers have time to evaluate whether further measures are necessary to combat inflation. He emphasized that insights from the labor market could be valuable in this assessment.
U.S. rate futures have factored in a 17.2% chance of a 25 basis point rate hike at the November meeting and a 30.9% probability of a 25 basis point rate increase at the December FOMC meeting.
In other news, the Wall Street Journal reported discussions between China’s Vice Premier He Lifeng and Foreign Minister Wang Yi regarding possible visits to the United States. This marks preparations for a potential summit between Xi Jinping and Joe Biden.
Today, all eyes are on the U.S. core personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred measure of inflation. Economists are forecasting that the core PCE price index will come in at +0.2% m/m and +3.9% y/y in August, compared to previous values of +0.2% m/m and +4.2% y/y.
Investors will also closely monitor the U.S. Chicago PMI, which stood at 48.7 in August, with economists expecting the September figure to be 47.6. Additionally, the U.S. Michigan Consumer Sentiment Index for September is anticipated to be 67.7, down from August’s value of 69.5. U.S. Personal Spending data for August is expected to show an increase of +0.4% m/m, compared to the previous figure of +0.8% m/m.
In the bond markets, United States 10-year rates currently stand at 4.536%, reflecting a decline of -1.32%.
Across the Atlantic, the Euro Stoxx 50 futures have risen by +0.74% this morning. This uptick follows the release of significant regional economic data and comes ahead of a crucial U.S. inflation report. Luxury stocks are leading the market higher, supported by Bank of America strategists upgrading their view on the sector to Overweight. Rate-sensitive technology stocks have also gained ground as Eurozone government bond yields retreated from multi-year highs.
Eurostat’s flash reading, released on Friday, indicated that the Eurozone’s headline inflation fell to its lowest level in two years in September, with underlying inflation experiencing its most significant decline since August 2020. In corporate news, Adidas Ag (ADS.D.DX) witnessed a notable surge of over +6% after its U.S. peer, Nike, exceeded profit estimates on Thursday.
In terms of economic data from Europe, the UK’s GDP for the second quarter came in at +0.2% q/q and +0.6% y/y, aligning with expectations. German August Retail Sales disappointed with a reading of -1.2% m/m, while the German September Unemployment Change surpassed expectations at +10K, leaving the unemployment rate unchanged at 5.7%. In France, the September CPI revealed a decline of -0.5% m/m and an annual increase of +4.9% y/y, falling short of expectations. Similarly, Italy’s September CPI showed a +0.2% m/m change and a +5.3% y/y increase, which closely matched expectations. Eurozone’s September CPI was reported at +4.3% y/y, below the anticipated +4.5% y/y, while Eurozone’s Core CPI for September arrived at +4.5% y/y, weaker than the expected +4.8% y/y.
In Asian markets, Japan’s Nikkei 225 Stock Index (NIK) closed down slightly at -0.05%, while the Chinese market was closed for a holiday. The Nikkei’s performance reflects investor caution due to a barrage of economic data from Japan, coupled with uncertainty surrounding a potential U.S. government shutdown and the ongoing auto workers strike. The Nikkei has experienced a decline of more than 4% in the third quarter, marking its first quarterly drop since last September. Core inflation in Japan’s capital decelerated for the third consecutive month in September but remained above the Bank of Japan’s 2% target for the 16th straight month. Meanwhile, Japan’s seasonally adjusted factory output remained flat in August from the previous month, while retail sales exceeded expectations in August with a year-on-year growth of +7.0%. Chip-related stocks and tech names outperformed in Japan, mirroring gains seen among their U.S. counterparts. Advantest, a chip-testing equipment maker, climbed by about +3%, and chip-testing equipment giant Tokyo Electron rose by more than +2%. The Nikkei Volatility index, which gauges implied volatility in Nikkei 225 options, closed down -2.18% at 18.40.
Japan’s September Tokyo Core CPI came in at +2.5% y/y, slightly below expectations. Additionally, Japan’s August Unemployment Rate was reported at 2.7%, missing expectations by a small margin. August Industrial Production stood at 0.0% m/m, stronger than anticipated at -0.8% m/m. Retail Sales in August grew by +7.0% y/y, surpassing expectations.
Meanwhile, Hong Kong stocks experienced a surge on Friday, driven by optimism surrounding spending during China’s Golden Week holiday and the potential meeting between U.S. and Chinese leaders.
In pre-market trading, several U.S. stocks made notable moves:
- Nike Inc (NYSE:NKE) saw an increase of over +8% after the world’s largest sportswear maker surpassed Wall Street estimates for Q1 profit and projected a 100 basis point increase in Q2 gross margins.
- Editas Medicine Inc (NASDAQ:EDIT) experienced a surge of more than +7% after Stifel upgraded the stock from Hold to Buy.
- FedEx Corporation (NYSE:FDX) gained about +0.6% following HSBC’s initiation of coverage with a Buy rating.
- Ball Corporation (NYSE:BALL) rose by over +1% after Jefferies upgraded the stock from Hold to Buy.
- Bumble Inc (NASDAQ:BMBL) soared more than +4% after Loop Capital upgraded the stock from Hold to Buy.
Today’s U.S. earnings spotlight includes Carnival Corp (NYSE:CCL), Lovesac (NASDAQ:LOVE), Comtech (NASDAQ:CMTL), and Natuzzi (NYSE:NTZ) on September 29th.
Featured Image: Freepik @ BillionPhotos
Author Faith Yakubu 
