Stocks Set to Open Higher as Investors Await Key U.S. Inflation Data and Fed Speak

December S&P 500 E-Mini futures (ESZ24) are up +0.19%, andDecember Nasdaq 100 E-Mini futures (NQZ24) are up +0.25% this morning as market participants looked ahead to speeches from Federal Reserve officials, earnings reports from several notable companies, and the release of the Fed’s favorite inflation gauge later in the week.

In Friday’s trading session, Wall Street’s major averages ended mixed. FedEx (FDX) plunged over -15% and was the top percentage loser on the S&P 500 after the delivery services giant reported weaker-than-expected Q1 adjusted EPS and cut its full-year guidance. Also, semiconductor stocks lost ground, with ON Semiconductor (ON) slumping more than -5% and GlobalFoundries (GFS) falling nearly -4%. In addition, Lennar (LEN) slid over -5% after the company reported weaker-than-expected Q3 net new orders and offered soft Q4 gross margin guidance. On the bullish side, Nike (NKE) climbed more than +6% and was the top percentage gainer on the Dow after announcing that Elliot Hill will return as President and Chief Executive Officer, effective October 14th. Also, Intel (INTC) gained over +3% after the Wall Street Journal reported that Qualcomm approached the chipmaker about a potential takeover. 

“The market is still trying to recalibrate because, yes, there were some market participants that may have expected 50 basis points but a lot of people didn't,” said Sid Vaidya, U.S. chief wealth strategist at TD Wealth in New York. 

Fed Governor Christopher Waller stated Friday that favorable inflation data, rather than concerns about the labor market, persuaded him to back policymakers’ decision to reduce interest rates by a half percentage point at the September FOMC meeting. “What’s got me a little more concerned is inflation is running softer than I thought,” Waller said in an interview on CNBC. Waller noted that he would likely support quarter-point reductions at the next two Fed policy meetings, in November and December, if the economy evolves as he anticipates. “If labor market data worsens, or if the inflation data continues to come in softer than everybody was expecting, then you can see going at a faster pace,” he said. At the same time, Fed Governor Michelle Bowman said that lowering interest rates by 50 basis points could risk signaling that the central bank was declaring victory over inflation prematurely. “The committee’s larger policy action could be interpreted as a premature declaration of victory on our price stability mandate,” Bowman said in a statement released Friday. “I believe that moving at a measured pace toward a more neutral policy stance will ensure further progress in bringing inflation down to our 2% target.”

U.S. rate futures have priced in a 48.5% chance of a 25 basis point rate cut and a 51.5% chance of a 50 basis point rate cut at the conclusion of the Fed’s November meeting.

In the coming week, the August reading of the U.S. core personal consumption expenditures price index, the Fed’s preferred inflation gauge, will be the main highlight. Also, investors will be monitoring a spate of other economic data releases, including U.S. GDP (third estimate), CB Consumer Confidence Index, S&P/CS HPI Composite - 20 n.s.a., Richmond Manufacturing Index, Building Permits, New Home Sales, Crude Oil Inventories, Durable Goods Orders, Core Durable Goods Orders, Initial Jobless Claims, Pending Home Sales, Goods Trade Balance (preliminary), Personal Income, Personal Spending, Wholesale Inventories (preliminary), and Michigan Consumer Sentiment Index.

Meanwhile, Fed Chair Jerome Powell is set to deliver pre-recorded opening remarks at Thursday’s 2024 U.S. Treasury Market Conference hosted by the Federal Reserve Bank of New York, marking his first comments since last week’s press conference. A host of other Fed officials will also be making appearances throughout the week, including Bostic, Goolsbee, Kashkari, Bowman, Kugler, Collins, Williams, Cook, and Barr.

Several notable companies like Micron Technology (MU), Costco Wholesale (COST), Accenture (ACN), BlackBerry (BB), and AutoZone (AZO) are scheduled to release their quarterly results this week.

Today, all eyes are focused on the U.S. S&P Global Manufacturing PMI preliminary reading, set to be released in a couple of hours. Economists, on average, forecast that the September manufacturing PMI will come in at 48.6, compared to last month’s value of 47.9.

Also, investors will focus on the U.S. S&P Global Services PMI, which stood at 55.7 in August. Economists foresee the preliminary September figure to be 55.3.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 3.747%, up +0.52%.

The Euro Stoxx 50 futures are down -0.08% this morning as investors digested weaker-than-expected flash PMI data from the region. Bank stocks lost ground on Monday. A survey released Monday showed that Eurozone business activity contracted unexpectedly this month as the growth in the bloc’s dominant services industry stalled and the manufacturing downturn intensified. Meanwhile, market participants are anticipating a slew of other crucial economic data from the region throughout the week, including consumer price figures from France and Spain, employment data from Germany, and consumer confidence data from the Eurozone. Remarks from European Central Bank officials will also capture investors’ attention this week, with Frank Elderson and Piero Cipollone scheduled to speak later in the day. In other news, Spain’s Economy Minister Carlos Cuerpo stated in a TV interview on Monday that the nation’s government will increase its 2024 economic growth forecast to 2.7% from the current 2.4%. In corporate news, Commerzbank (CBK.D.DX) slumped over -5% after the German government said late on Friday that it had no plans to sell additional shares in the country’s second-largest lender.

France’s Manufacturing PMI (preliminary), France’s Services PMI (preliminary), Germany’s Manufacturing PMI (preliminary), Germany’s Services PMI (preliminary), Eurozone’s Manufacturing PMI (preliminary), Eurozone’s Composite PMI (preliminary), and Eurozone’s Services PMI (preliminary) data were released today.

The French September Manufacturing PMI arrived at 44.0, weaker than expectations of 44.3.

The French September Services PMI was at 48.3, weaker than expectations of 53.0.

The German September Manufacturing PMI stood at 40.3, weaker than expectations of 42.4.

The German September Services PMI arrived at 50.6, weaker than expectations of 51.1.

Eurozone September Manufacturing PMI came in at 44.8, weaker than expectations of 45.7.

Eurozone September Composite PMI has been reported at 48.9, weaker than expectations of 50.6.

Eurozone September Services PMI arrived at 50.5, weaker than expectations of 52.3.

China’s Shanghai Composite Index (SHCOMP) closed up +0.44%, while Japanese markets were closed for a holiday.

China’s Shanghai Composite Index closed higher today as sentiment was lifted by expectations that the country might intensify efforts to stimulate growth. Software and bank stocks led the gains on Monday. China’s central bank cut a short-term policy rate and pumped more liquidity into the financial system on Monday as part of its ongoing efforts to stimulate the economy. The People’s Bank of China reduced the 14-day reverse repurchase interest rate by 10 basis points to 1.85% and injected 74.5 billion yuan ($10.6 billion) of liquidity through the policy tool, saying it wanted to “keep quarter-end liquidity adequate at a reasonable level in the banking system.” Meanwhile, China announced plans for an unusual economic briefing by three top financial regulators on Tuesday, sparking expectations that Beijing might unveil significant stimulus measures to bolster its struggling economy. Authorities announced on Monday that central bank governor Pan Gongsheng will conduct a press conference tomorrow on financial support for economic development, together with heads of the National Financial Regulatory Administration and the China Securities Regulatory Commission. Some economists believe authorities might reveal policy actions such as cuts to policy rates or reductions to the reserve requirements for banks, along with additional measures to tackle the property crisis. In corporate news, Darbond Technology surged over +13% on plans to purchase a 53% stake in epoxy molding compounds manufacturer Hengsuo Huawei Electronics. Also, Xiaomi gained more than +3% in Hong Kong after the company’s CEO, Lei Jun, announced the release date for a new product lineup.

Japan’s Nikkei 225 Stock Index was closed today for the Autumnal Equinox Day holiday. The markets will reopen on Tuesday.

Pre-Market U.S. Stock Movers

Intel (INTC) gained over +2% in pre-market trading after Bloomberg reported that Apollo Global Management had offered to make an equity-like investment of up to $5 billion in the chipmaker.

Microsoft (MSFT) fell about -0.6% in pre-market trading after DA Davidson downgraded the stock to Neutral from Buy.

General Motors (GM) dropped nearly -2% in pre-market trading after Bernstein downgraded the stock to Market Perform from Outperform.

Keurig Dr Pepper (KDP) rose more than +1% in pre-market trading after Citi upgraded the stock to Buy from Neutral with a price target of $43.

Palantir Technologies (PLTR) slid over -1% in pre-market trading after Raymond James downgraded the stock to Market Perform from Outperform.

Analog Devices (ADI) and Microchip Technology (MCHP) fell more than -1% in pre-market trading after Truist downgraded the stocks to Hold from Buy.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Monday - September 23rd

AAR (AIR), Red Cat Holdings (RCAT).

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