September S&P 500 futures (ESU23) are up +0.18%, and September Nasdaq 100 E-Mini futures (NQU23) are up +0.26% this morning as market participants looked ahead to the release of the Fed’s favorite inflation gauge while also awaiting Friday’s nonfarm payrolls report.
In Friday’s trading session, Wall Street’s major averages closed higher. Hasbro (HAS) climbed over +5% and was the top percentage gainer on the S&P 500 after Stifel raised its price target on the stock to $94 from $79. Also, Hostess Brands Inc (TWNK) soared more than +21% after Reuters reported that the maker of Twinkies snacks is exploring a sale. In addition, Affirm Holdings Inc (AFRM) surged over +28% after the provider of buy now, pay later financing posted upbeat Q4 results and provided above-consensus Q1 revenue guidance. On the bearish side, Marvell Technology Inc (MRVL) fell more than -6% after the company posted Q2 results and Q3 guidance that was largely in-line with expectations. Also, Hawaiian Electric Industries Inc (HE) plunged over -18% after the company said it drew down most of its $375M revolving credit facilities and suspended its dividend, and S&P Global Ratings cut its rating further into junk territory.
Data on Friday showed that the University of Michigan’s gauge of consumer sentiment came in at 69.5 in August, weaker than expectations of 71.2. At the same time, the University of Michigan’s August year-ahead inflation expectations rose to 3.5%, stronger than expectations of 3.3%.
Speaking at the Jackson Hole Symposium, Federal Reserve Chair Jerome Powell described the recent decline in inflation as a “positive development” but also emphasized that it remained too high. “We are prepared to raise rates further if appropriate and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective,” Powell said. He added that policymakers at upcoming monetary policy meetings would “proceed carefully” on whether to raise interest rates again.
“No alarms and no surprises. Fed Chair Powell’s Jackson Hole speech repeated many of the themes he discussed after the July FOMC meeting: the Fed is data dependent, ‘will proceed carefully,’ and is prepared to tighten further if the labor market is no longer easing,” said Michael Feroli, chief U.S. economist at JPMorgan.
Meanwhile, U.S. rate futures have priced in a 19.5% probability of a 25 basis point rate increase at the September FOMC meeting and a 51.0% chance of a 25 basis point rate hike at the November FOMC meeting.
In other news, U.S. Commerce Secretary Gina Raimondo opened talks with Chinese government officials on Monday, emphasizing the critical significance of maintaining a stable economic relationship between the world’s two largest economies.
The highlight of the upcoming week will be the U.S. Nonfarm Payrolls report for August. Also, investors will be monitoring a spate of economic data, including the U.S. Core PCE Price Index, CB Consumer Confidence, JOLTs Job Openings, S&P/CS HPI Composite - 20 n.s.a., ADP Nonfarm Employment Change, GDP (preliminary), GDP Price Index (preliminary), Pending Home Sales, Crude Oil Inventories, Initial Jobless Claims, Personal Income, Personal Spending, Average Hourly Earnings, Private Nonfarm Payrolls, Unemployment Rate, S&P Global Manufacturing PMI, ISM Manufacturing PMI, and ISM Manufacturing Prices.
The U.S. economic data slate is largely empty on Monday.
In the bond markets, United States 10-year rates are at 4.233%, down -0.23%.
The Euro Stoxx 50 futures are up +0.73% this morning, tracking Friday’s gains on Wall Street and a rally in Asia after China announced measures to support its ailing stock market. Technology and construction stocks led the gains on Monday. Meanwhile, ECB President Christine Lagarde said Friday that the ECB will “set interest rates at sufficiently restrictive levels for as long as necessary to achieve a timely return of inflation to our 2% medium-term target.” In corporate news, Valneva Se (VLA.FP) rose over +1% after the company reported positive initial Phase 3 safety data in adolescents for its single-dose chikungunya virus vaccine candidate.
The European economic data slate is mainly empty on Monday.
Asian stock markets today settled in the green. China’s Shanghai Composite Index (SHCOMP) closed up +1.13%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +1.73%.
China’s Shanghai Composite today closed higher following the government’s reduction of stamp duty on stock trades, marking the first such reduction since 2008, and a commitment to slowing down the pace of initial public offerings. In a brief statement on Sunday, the finance ministry said it was reducing the 0.1% duty on stock trades “to invigorate the capital market and boost investor confidence.” Also, local stock exchanges decreased their margin financing requirements. In addition, the securities regulator, China Securities Regulatory Commission, stated its intention to decelerate the pace of initial public offerings and implement stricter oversight on major shareholders’ share reductions. In corporate news, Xpeng Inc. surged over +10% after the Chinese electric car company said it would acquire ride-hailing giant Didi’s smart electric vehicle unit, and the two companies would form a strategic partnership. At the same time, China Evergrande Group tumbled more than -78% after the real estate developer’s shares resumed trading in Hong Kong following a 17-month break. Investor focus is now squarely on Chinese purchasing manager indexes for August, due on Thursday.
“The policy package sent a clear signal to boost investor confidence as the market hit the bottom,” said analysts at China Asset Management Co.
Japan’s Nikkei 225 Stock Index closed sharply higher today, primarily driven by gains in industrial, real estate, and energy shares as investors opted to buy back stocks following losses at the end of the previous week. At the same time, tourism-related stocks underperformed on Monday due to concerns regarding the impact of a ban on the country’s products by China. China imposed a comprehensive ban on all seafood imports from Japan following the discharge of treated radioactive water from a damaged nuclear power plant into the Pacific Ocean. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -2.60% to 18.39.
“Short-term investors bought back stocks after the sharp declines on Friday and also gains on Wall Street in the previous session underpinned sentiment,” said Takehiko Masuzawa, trading head at Phillip Securities Japan.
Pre-Market U.S. Stock Movers
3M Company (MMM) climbed about +5% in pre-market trading following a Bloomberg report indicating the company’s tentative agreement to a settlement of more than $5.5 billion over 300,000 lawsuits alleging the sale of defective combat earplugs to the U.S. military.
Jabil Circuit Inc (JBL) rose more than +3% in pre-market trading following the announcement on Sunday that Chinese electric vehicle maker BYD Electronic had agreed to acquire the company’s mobility business in China for about $2.2 billion.
L3Harris Technologies Inc (LHX) fell nearly -1% in pre-market trading after Bernstein downgraded the stock to Market Perform from Outperform.
Crowdstrike Holdings Inc (CRWD) dropped over -2% in pre-market trading after Morgan Stanley downgraded the stock to Equal Weight from Overweight.
NVIDIA Corporation (NVDA) rose about +1% in pre-market trading after Phillip Securities upgraded the stock to Buy from Accumulate.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Monday - August 28th
Heico (HEI), Reata Pharma (RETA), Elastic (ESTC), Freedom (FRHC), Seaboard (SEB), Sprott Physical Gold and Silver Trust (CEF), International Bancshares (IBOC), Prospect Capital (PSEC), Adams Diversified Equity Closed (ADX), Gabelli Dividend & Income Closed (GDV), Naas Tech ADR (NAAS), Ivanhoe Electric (IE), Veradigm (MDRX), FinVolution Group (FINV), Afya (AFYA), EQRx (EQRX), Dorchester Minerals (DMLP), Sabine Royalty Trust (SBR), Nordic American Tankers (NAT), Noah (NOAH).
On the date of publication, Oleksandr Pylypenko did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
