September S&P 500 futures (ESU23) have dipped by -0.23%, while September Nasdaq 100 E-Mini futures (NQU23) are down -0.37% this morning. Investors are expressing apprehensions that elevated oil prices could potentially trigger inflationary pressures and hinder the global economic growth outlook.
During Tuesday’s trading session, the major Wall Street indexes concluded in the red. Homebuilder stocks faced a setback as the yield on the 10-year Treasury note reached a one-week high. Lennar Corporation (NYSE:LEN) experienced a sharp drop of over -4% and Toll Brothers Inc (NYSE:TOL) slumped by more than -5%. Additionally, Xylem (NYSE:XYL) saw a decline of over -4% following the announcement of CEO Decker’s retirement at year-end, with COO Pine set to take over as CEO. On a positive note, Airbnb Inc (NASDAQ:ABNB) surged by more than +7% and became the top gainer on the tech-heavy Nasdaq 100 after its inclusion in the S&P 500. Energy stocks also made gains as WTI crude prices rose by over +1% to reach a 10-month high, driven by additional supply cuts from Saudi Arabia and Russia.
Federal Reserve Governor Christopher Waller stated on Tuesday that policymakers have the flexibility to proceed cautiously with tightening policies, given recent data indicating a continued easing of inflation. Waller emphasized, “There is nothing that is saying we need to do anything imminent anytime soon.”
Meanwhile, U.S. rate futures have implied a 7.0% probability of a 25 basis point rate increase at the September FOMC meeting and a 40.5% chance of a 25 basis point rate hike at the November monetary policy meeting.
Today’s attention is squarely focused on the U.S. ISM non-manufacturing index, set to be released in a couple of hours. Economists, on average, anticipate that the August ISM Non-Manufacturing PMI will come in at 52.5, compared to the previous reading of 52.7.
Investors will also be closely monitoring the U.S. S&P Global Composite PMI, which stood at 52.0 in July. Economists foresee the August figure to be 50.4.
The U.S. S&P Global Services PMI is another key data point to watch today, with economists expecting the August figure to be 51.0, compared to July’s value of 52.3.
Additionally, U.S. Trade Balance data is scheduled for release today, with economists forecasting a figure of -68.00B in July, compared to the previous number of -65.50B.
In the bond markets, the yield on the United States 10-year Treasury notes currently stands at 4.261%, down -0.21%.
Euro Stoxx 50 futures have declined by -0.68% this morning following disappointing German factory orders data and concerns over rising oil prices and inflation. Data released on Wednesday showed that German industrial orders fell more than expected in July, indicating ongoing challenges for Europe’s largest economy. Meanwhile, European Central Bank Governing Council member Klaas Knot suggested that markets may be underestimating the likelihood of an interest rate increase in September. In corporate news, Telefonica Sa (TEF.E.DX) saw a more than +1% rise in its stock price after Saudi Arabia’s STC Group acquired a 9.9% stake in the Spanish telecom giant, valued at 2.1 billion euros, becoming its top shareholder.
Today’s economic releases included Germany’s Factory Orders, the U.K.’s Construction PMI, and Eurozone’s Retail Sales data:
- German July Factory Orders posted a weaker-than-expected -11.7% month-on-month decline, compared to expectations of -4.0%.
- U.K. August Construction PMI came in at 50.8, surpassing expectations of 50.5.
- Eurozone July Retail Sales showed a -0.2% month-on-month and -1.0% year-on-year decrease, slightly below expectations of -0.1% and -1.2% respectively.
Asian stock markets closed in positive territory today, with China’s Shanghai Composite Index (SHCOMP) up +0.12% and Japan’s Nikkei 225 Stock Index (NIK) up +0.62%.
China’s Shanghai Composite saw marginal gains, driven by the performance of property and energy stocks. State media Securities Times suggested the potential removal of property sales and purchase restrictions in most non-tier 1 cities, leading to optimism among investors. Hong Kong-listed mainland property developers also rose as investors anticipated further easing measures for the sector. Sunac China, one of the country’s largest private developers, surged by over +60% after being included in the Stock Connect program, while its property services arm, Sunac Services Holdings, indicated consideration of a special dividend. Energy stocks benefited from Saudi Arabia and Russia extending their voluntary supply cuts through the end of the year. The focus now shifts to Chinese trade data, scheduled for release on Thursday.
Wang Tao, chief China economist at UBS, remarked, “China’s current economic woes are caused by both cyclical and structural factors, thus requiring measures on both fronts. To put the economy on a stronger recovery path, the most urgent task is to prevent property activities from sliding further.”
Japan’s Nikkei 225 Stock Index closed higher for the eighth consecutive session today, boosted by dovish comments from Bank of Japan board member Hajime Takata. Takata noted some progress toward raising Japanese inflation and wage growth but emphasized the need to “patiently maintain the current massive monetary stimulus.” This suggests that the BOJ is inclined to retain its ultra-loose policy in the coming months. The weaker yen rate since November provided a boost to export-oriented stocks, including automakers like Honda Motor Co Ltd (+1%) and Toyota Motor Corp (+2%). Chip stocks also gained ground, with Advantest climbing by about +3%. Additionally, insurance and bank stocks advanced due to an increase in long-term bond yields, creating a more favorable investment environment. The Nikkei Volatility, which considers the implied volatility of Nikkei 225 options, closed down -2.39% at 17.14.
Tony Sycamore, a market analyst at IG, commented, “Dollar-yen continues to climb and is making the whole export sector in Japan more competitive.”
In pre-market trading, notable U.S. stock movers include:
- Enbridge Inc (ENB), down over -7%, following the announcement of agreements with Dominion Energy to acquire East Ohio Gas Co, Questar Gas, and Public Service Company of North Carolina for a total value of $14 billion.
- AeroVironment Inc (AVAV), is up more than +14%, after posting upbeat Q1 results and raising its FY24 guidance.
- Mitek Systems Inc (MITK), soaring over +15%, thanks to stronger-than-expected Q1 results and an improved FY23 forecast.
- Gitlab Inc (GTLB), gaining more than +6%, following upbeat Q2 results and strong Q3 and FY24 guidance.
- First Solar Inc (FSLR), is up over +2%, after Morgan Stanley upgraded the stock to Equal Weight from Underweight.
- Celanese Corporation (CE) gained about +3% after KeyBanc upgraded the stock to Overweight from Sector Weight.
Today’s U.S. earnings spotlight includes Core Main (NYSE:CNM), Descartes Systems (NASDAQ:DSGX), GameStop Corp (NYSE:GME), Sprinklr (NYSE:CXM), American Eagle Outfitters (NYSE:AEO), ChargePoint Holdings (NYSE:CHPT), Intapp (NASDAQ:INTA), Verint (NASDAQ:VRNT), Phreesia (PHR), Dave & Buster’s Entertainment (NASDAQ:PLAY), Photronics (NASDAQ:PLAB), Yext (NYSE:YEXT), Couchbase (NASDAQ:BASE), Calavo Growers (NASDAQ:CVGW), Argan (NYSE:AGX), Cantaloupe (NASDAQ:CTLP), Daktronics (NASDAQ:DAKT), and Torrid Holdings (NYSE:CURV).
Featured Image: Freepik @ Polycube
Author Faith Yakubu 
