December S&P 500 E-Mini futures (ESZ24) are up +0.21%, and December Nasdaq 100 E-Mini futures (NQZ24) are up +0.30% this morning as global risk sentiment got a boost after Beijing announced one of its most aggressive economic stimulus packages since the pandemic.
In yesterday’s trading session, Wall Street’s major indexes closed in the green. Tesla (TSLA) climbed nearly +5% and was the top percentage gainer on the S&P 500 and Nasdaq 100 after Barclays said it expects the company’s Q3 deliveries to exceed consensus estimates, which could drive continued stock strength. Also, Intel (INTC) advanced more than +3% and was the top percentage gainer on the Dow after Bloomberg reported that Apollo Global Management had offered to make a multibillion-dollar investment in the chipmaker. In addition, Walmart (WMT) gained over +1% after Melius Research LLC initiated coverage of the stock with a Buy rating and a price target of $95. On the bearish side, Regeneron Pharmaceuticals (REGN) slid more than -4% and was the top percentage loser on the S&P 500 and Nasdaq 100 after a federal judge in West Virginia rejected the company’s motion for a temporary injunction against Amgen, which recently received FDA approval for the biosimilar eye drug Pavblu.
Economic data released on Monday showed that the U.S. S&P Global manufacturing PMI unexpectedly fell to 47.0 in September, weaker than expectations of 48.6 and the steepest pace of contraction in 15 months. Also, the U.S. September S&P Global services PMI fell to 55.4, better than expectations of 55.3.
“This is a somewhat inconclusive report, and therefore it shouldn’t alter Fed expectations dramatically,” said Adam Crisafulli at Vital Knowledge. “The flash PMIs do suggest the U.S. economy is on reasonably sound footing, especially compared to Europe.”
Chicago Fed President Austan Goolsbee stated on Monday that interest rates need to be reduced “significantly” to protect the U.S. labor market and bolster the economy. “As we’ve gained confidence that we are on the path back to 2%, it’s appropriate to increase our focus on the other side of the Fed’s mandate - to think about risks to employment,” Goolsbee said. “That likely means many more rate cuts over the next year.” Also, Minneapolis Fed President Neel Kashkari said that he anticipates lowering interest rates by smaller, quarter-point moves at each of the central bank’s two remaining meetings this year. “As we go forward, I expect, on balance, we will probably take smaller steps unless the data changes materially,” Kashkari said.
Meanwhile, U.S. rate futures have priced in a 49.1% probability of a 25 basis point rate cut and a 50.9% chance of a 50 basis point rate cut at the November FOMC meeting.
Today, all eyes are focused on the U.S. Conference Board’s Consumer Confidence Index, set to be released in a couple of hours. Economists, on average, forecast that the September CB Consumer Confidence index will stand at 103.9, compared to last month’s figure of 103.3.
Also, investors will focus on the U.S. S&P/CS HPI Composite - 20 n.s.a., which arrived at +6.5% y/y in June. Economists foresee the July figure to be +5.9% y/y.
The U.S. Richmond Manufacturing Index will be reported today as well. Economists estimate this figure to come in at -13 in September, compared to the previous value of -19.
In addition, market participants will be anticipating a speech from Fed Governor Michelle Bowman.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 3.791%, up +1.38%.
The Euro Stoxx 50 futures are up +1.28% this morning, tracking a rally in Asia after the People’s Bank of China unveiled a raft of stimulus measures to boost the Chinese economy. China is a key export market for many of Europe’s leading companies, which have faced challenges due to a decline in demand as Chinese consumers have reduced their spending. Mining, luxury, and automobile stocks outperformed on Tuesday. Investors also dismissed disappointing PMI data from the Eurozone, Germany, and France released on Monday and instead concentrated on the potential for further rate cuts from the economic bloc. Meanwhile, a survey released on Tuesday showed that German business sentiment fell more than anticipated in September. In corporate news, Smiths Group Plc (SMIN.LN) slumped over -7% after the U.K. engineering firm reported weaker-than-expected annual profit.
Germany’s Ifo Business Climate Index, Germany’s Business Expectations, and Germany’s Current Assessment data were released today.
The German September Ifo Business Climate Index has been reported at 85.4, weaker than expectations of 86.1.
The German September Business Expectations stood at 86.3, in line with expectations.
The German September Current Assessment came in at 84.4, weaker than expectations of 86.1.
Asian stock markets today settled in the green. China’s Shanghai Composite Index (SHCOMP) closed up +4.15%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.57%.
China’s Shanghai Composite Index closed sharply higher today, notching its biggest daily gain since July 2020, after the nation’s central bank unveiled stimulus measures aimed at achieving this year’s economic growth target and curbing a selloff in the equity market. Consumer products and brokerage stocks led the gains on Tuesday. In a rare briefing on Tuesday, People’s Bank of China Governor Pan Gongsheng announced that the PBOC will reduce the reserve requirement ratio, the amount of cash that banks are required to hold as reserves, by 50 basis points. Also, the seven-day reverse repurchase rate, China’s main policy rate, will be lowered to 1.5% from 1.7%, a move that Pan said would reduce borrowing costs of the PBOC’s medium-term lending facility by 30 basis points. In addition, China will cut rates on existing mortgage loans, and Pan anticipates that mortgage rates will, on average, decrease by about 50 basis points. The minimum downpayment for second homes will be lowered to 15% from 25%. Meanwhile, Pan stated that more easing is forthcoming, with another reduction in bank reserve requirements anticipated before the end of the year. The central bank also announced that it would provide 500 billion yuan (around $70 billion) in loans to funds, brokers, and insurers for purchasing Chinese stocks, as part of an initiative to support the country’s struggling stock market. It announced plans to allocate an additional 300 billion yuan to fund share buybacks by listed companies. Analysts, however, warn that the rally might soon lose steam as some of the fundamental problems plaguing China’s economy, such as deflationary pressures, remain unsolved. In corporate news, Yonghui Superstores surged about +10% after Miniso announced plans to purchase a nearly 30% stake in the Chinese supermarket operator.
Meanwhile, the Reserve Bank of Australia maintained its cash rate target at 4.35% for a seventh consecutive meeting and reiterated that it is not “ruling anything in or out” regarding policy.
Japan’s Nikkei 225 Stock Index closed higher today as trading resumed after a long weekend, with Wall Street’s overnight gains and dovish remarks from Bank of Japan Governor Kazuo Ueda boosting investor sentiment. Consumer and healthcare stocks led the gains on Tuesday. A survey released on Tuesday showed that while manufacturing activity in Japan continued to contract in September, overall business momentum was driven by a growing service sector. Meanwhile, BOJ Governor Kazuo Ueda stated on Tuesday that the central bank could take its time analyzing market and global economic developments when setting monetary policy, indicating that it was in no hurry to raise interest rates further. Ueda reaffirmed that the BOJ will increase interest rates if trend inflation progresses toward its 2% target as anticipated. Investor attention is now directed toward the release of the minutes from the BOJ policy meeting scheduled for Thursday, which could provide insights into potential policy normalization. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +9.41% to 26.62.
The Japanese September au Jibun Bank Japan Manufacturing PMI (preliminary) arrived at 49.6, weaker than expectations of 49.9.
Pre-Market U.S. Stock Movers
Visa (V) fell over -2% in pre-market trading after Bloomberg reported that the U.S. Justice Department plans to file a lawsuit against the company, alleging that it illegally monopolized the U.S. debit card market.
Salesforce (CRM) rose about +2% in pre-market trading after Piper Sandler upgraded the stock to Overweight from Neutral with a price target of $325.
Uber Technologies (UBER) gained more than +1% in pre-market trading after Raymond James resumed coverage of the stock with a Strong Buy rating and a $90 price target.
Walmart (WMT) advanced over +1% in pre-market trading after Truist upgraded the stock to Buy from Hold with a price target of $89.
Starbucks (SBUX) slid more than -2% in pre-market trading after Jefferies downgraded the stock to Underperform from Hold with a price target of $76.
Hawaiian Electric Industries (HE) plunged over -11% in pre-market trading after pricing its previously announced public offering of approximately 54 million shares at $9.25 per share.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Tuesday - September 24th
AutoZone (AZO), KB Home (KBH), Thor Industries (THO), Progress (PRGS), Worthington Industries (WOR), Stitch Fix (SFIX).
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