S&P Futures Tread Water as Key U.S. Inflation Data Looms

December S&P 500 E-Mini futures (ESZ24) are trending down -0.04% this morning as investors braced for the release of the Federal Reserve’s first-line inflation gauge, which will offer further insights into the trajectory of U.S. interest rates.

In yesterday’s trading session, Wall Street’s major indexes ended in the green. Micron Technology (MU) surged over +14% and was the top percentage gainer on the S&P 500 and Nasdaq 100 after the memory chipmaker posted upbeat Q4 results and provided a strong Q1 revenue forecast. Also, Southwest Airlines (LUV) climbed more than +5% after the carrier lifted its Q3 revenue-per-capacity guidance and unveiled a new $2.5 billion stock buyback program. In addition, Accenture (ACN) gained over +5% after the company reported better-than-expected Q4 results and issued above-consensus Q1 revenue guidance. On the bearish side, Super Micro Computer (SMCI) tumbled over -12% and was the top percentage loser on the S&P 500 and Nasdaq 100 after the Wall Street Journal reported the U.S. Justice Department is investigating the company.

The U.S. Commerce Department said Thursday that the Q2 GDP growth estimate remained at +3.0% (q/q annualized) in its final print, in line with expectations. Also, U.S. August durable goods orders were unchanged m/m, better than the -2.8% m/m expected, while core durable goods orders rose +0.5% m/m, stronger than expectations of +0.1% m/m. In addition, U.S. pending home sales rose +0.6% m/m in August, weaker than expectations of +0.9% m/m. Finally, the number of Americans filing for initial jobless claims in the past week unexpectedly fell -4K to a 4-month low of 218K, compared with 224K expected.

“If there’s a problem in the labor market, it’s not showing up in the weekly jobless claims data. Numbers like this will likely keep soft-landing hopes alive and well,” said Chris Larkin at E*Trade from Morgan Stanley.

Fed Governor Lisa Cook stated Thursday that she “wholeheartedly” backed the central bank’s decision last week to reduce interest rates by a half percentage point, pointing to a cooling labor market and easing inflation. “In thinking about the path of policy moving forward, I will be looking carefully at incoming data, the evolving outlook, and the balance of risks,” Cook said.

Meanwhile, U.S. rate futures have priced in a 49.2% chance of a 25 basis point rate cut and a 50.8% probability of a 50 basis point rate cut at the November FOMC meeting.

Today, all eyes are focused on the U.S. core personal consumption expenditures price index, the Fed’s preferred price gauge, which is set to be released in a couple of hours. Economists, on average, forecast that the core PCE price index will stand at +0.2% m/m and +2.7% y/y in August, compared to the previous figures of +0.2% m/m and +2.6% y/y.

U.S. Personal Spending and Personal Income data will also be closely monitored today. Economists forecast August Personal Spending to be at +0.3% m/m and August Personal Income to come in at +0.4% m/m, compared to the July numbers of +0.5% m/m and +0.3% m/m, respectively.

U.S. Wholesale Inventories preliminary data will come in today. Economists anticipate the August figure to be +0.2% m/m, matching the +0.2% m/m recorded in July.

The U.S. Michigan Consumer Sentiment Index will be reported today as well. Economists estimate this figure to arrive at 69.0 in September, compared to 67.9 in August.

In addition, market participants will be looking toward a speech from Fed Governor Michelle Bowman.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 3.783%, down -0.32%.

The Euro Stoxx 50 futures are up +0.36% this morning as investors welcomed lower-than-expected inflation data from France and Spain. Investor sentiment was further lifted by the Chinese government’s efforts to stimulate the economy, announced earlier in the week. Automobile, chemical, and household goods stocks outperformed on Friday. Preliminary data from statistics agency Insee released Friday indicated that France’s annual inflation rate dropped in September to its lowest level since July 2021. Separately, provisional data from the National Statistics Institute released Friday showed that the annual inflation rate in Spain eased in September to its lowest level since March 2021. In addition, data from the European Commission showed that economic confidence in the Eurozone waned in September, pulled down by deteriorating sentiment in industry. Meanwhile, investors increased their bets on a 25 basis point interest rate cut by the ECB at the October meeting, following recent inflation data, with an 80% probability now being priced in for such a move. In corporate news, Moncler Spa (MONC.M.DX) climbed over +9% after French luxury giant LVMH secured a deal to invest in Double R, an investment vehicle controlled by Moncler.

France’s CPI (preliminary), Spain’s CPI (preliminary), Spain’s GDP, Germany’s Unemployment Rate, Germany’s Unemployment Change, Eurozone’s Business and Consumer Survey, and Eurozone’s Consumer Confidence data were released today.

The French September CPI arrived at -1.2% m/m and +1.2% y/y, better than expectations of -0.7% m/m and +1.6% y/y.

The Spanish September CPI came in at -0.6% m/m and +1.5% y/y, better than expectations of -0.1% m/m and +1.9% y/y.

The Spanish GDP has been reported at +0.8% q/q and +3.1% y/y in the second quarter, compared to expectations of +0.8% q/q and +2.9% y/y.

The German September Unemployment Rate was at 6.0%, in line with expectations.

The German September Unemployment Change stood at 17K, weaker than expectations of 13K.

Eurozone September Business and Consumer Survey arrived at 96.2, weaker than expectations of 96.5.

Eurozone September Consumer Confidence came in at -12.9, in line with expectations.

Asian stock markets today settled in the green. China’s Shanghai Composite Index (SHCOMP) closed up +2.88%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +2.32%.

China’s Shanghai Composite Index closed sharply higher today, logging its best weekly performance since 2008, following further implementation of policy announcements made earlier in the week to bolster economic growth. Finance and software stocks led the gains on Friday. The People’s Bank of China cut the interest rate on seven-day reverse repurchase agreements, its key policy rate, by 20 basis points to 1.5%, marking the second reduction in approximately three months. The PBOC also reduced the banks’ reserve requirement ratio by 50 basis points, which is anticipated to release 1 trillion yuan in capital. Meanwhile, China’s industrial profits declined in August, marking another indication of a widespread economic slowdown that has already led leaders to implement robust stimulus measures. The National Bureau of Statistics reported on Friday that industrial profits dropped 17.8% in August from a year earlier, in contrast to the 4.1% increase observed in July. For the first eight months of the year, industrial profits increased by 0.5%, down from the 3.6% rise in the January-to-July period. Market participants are now awaiting additional signals of policy support from Beijing on the fiscal front, which investors consider essential for a more sustainable economic recovery. Reuters reported Thursday that China intends to issue special sovereign bonds totaling approximately 2 trillion yuan ($284.43 billion) this year as part of a new fiscal stimulus. In corporate news, New World Development surged over +21% in Hong Kong as the stock resumed trading following a suspension after the indebted company announced its chief executive officer’s resignation.

Japan’s Nikkei 225 Stock Index closed higher today, tracking overnight gains on Wall Street. Real estate and healthcare stocks led the gains on Friday. Data from Statistics of Japan released on Friday showed that core inflation in Tokyo eased in September due to the impact of energy subsidies, likely providing the Bank of Japan with additional time to assess economic conditions more thoroughly before making its next move. Separately, data from the Cabinet Office showed that Japan’s leading economic index, which is used to gauge the economic outlook for a few months ahead on data such as job offers and consumer sentiment, was revised downward in July. Meanwhile, the yen rallied against the dollar after Shigeru Ishiba won Japan’s ruling Liberal Democratic Party election to become party leader. He will become prime minister next week. Ishiba supports the Bank of Japan’s gradual policy normalization with higher interest rates. In other news, foreign investors withdrew a substantial 1.93 trillion yen ($13.27 billion) from Japanese stocks in the week ending September 21st, marking their ninth net selling week out of the last ten, according to data from the Ministry of Finance. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +1.92% to 26.51.

The Japanese September Tokyo Core CPI has been reported at +2.0% y/y, in line with expectations.

The Japanese July Leading Index was at 109.3, weaker than expectations of 109.5.

Pre-Market U.S. Stock Movers

Costco Wholesale (COST) fell over -1% in pre-market trading after the company reported weaker-than-expected Q4 revenue.

Scholastic (SCHL) climbed more than +8% in pre-market trading after the company posted better-than-expected Q1 results.

Dollar General (DG) fell over -2% in pre-market trading after Citi downgraded the stock to Sell from Neutral with a price target of $73.

Bumble (BMBL) dropped more than -2% in pre-market trading after KeyBanc downgraded the stock to Sector Weight from Overweight.

HP Inc. (HPQ) slid over -1% in pre-market trading after BofA downgraded the stock to Neutral from Buy.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Friday - September 27th

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