Here are five things you must know for Friday, September 30:
1. — Stock Futures Bounce To Close Out Brutal September Trading
U.S. equity futures bounced higher Friday as investors looked to close out the worst month for the S&P 500 since 2008 on a firm note, thanks in part to a modest pullback in Treasury yields and a retreating U.S. dollar.
The Friday gains, however, follow fresh 2022 lows for the Nasdaq Composite last night, as extended declines for both Tesla and Apple pulled the tech benchmark sharply lower amid what appeared to be end-of quarter repositioning my major investment funds.
The S&P 500, meanwhile, is down just under 8% for the month after hitting a November 2020 low by the close of trading Wednesday.
Few positive catalysts look set to drive stocks through the end of the Friday session, and with the Vix index, Wall Street’s so-called ‘fear gauge’ still trading above the 30 point level, traders are braced for another whipsaw session that is likely to closely track movements in Treasury bond yields.
Benchmark 2-year notes were pegged at 4.167% in overnight dealing, pulled lower by a softer U.S. dollar. Solid gains for the pound, which had its best day on foreign exchange markets in more two years at the Bank of England continues to intervene in government bond markets, added to the dollar’s overnight decline.
Inflation prospects, as well as planned central bank rate hikes, remain the market’s central concern, however, underscored by a faster-than-expected September reading for consumer prices in Europe, which rose to a record high of 10%, and jobs data from the U.S. yesterday showing weekly unemployment claims fell to the lowest levels in five months.
Still, European stocks were higher on the session, rising 0.71% in early Frankfurt trading, although the benchmark is on pace for its third consecutive quarterly decline, with a 0.62% gain for the FTSE 100 in London.
On Wall Street, futures contracts tied to the S&P 500 are indicating a 35 point opening bell gain, while linked to the Dow Jones Industrial Average are priced for a 235 point slump. Futures tied to the tech-focused Nasdaq are indicating a 100 point move to the upside.
2. — Inflation Back In Focus As Fed Steps-Up Rate Hike Rhetoric
The Federal Reserve’s preferred inflation gauge, the core PCE Price Index, is expected to show another move higher for the month of August as policymakers continue to press ahead with their plans to raise interest rates over the coming months.
The core PCE reading is likely to mirror that faster-than-expected August reading for headline CPI, which sped to 8.3%, when the data is released by the Bureau of Economic Analysis at 8:30 am Eastern time. Analysts are looking for a year-on-year reading of 4.7% and a big monthly jump of 0.5%.
At least four Fed officials, including Vice Chair Lael Brainard, will make public remarks Friday following the data release, following comments yesterday from Cleveland Fed President Loretta Mester that suggested a bias towards even deeper near-term rate hikes.
Futures traders, however, are quietly pricing-in a greater degree of uncertainty as stocks tumble to fresh two-year lows and the economy flirts with recession. The CME Group’s FedWatch shows bets on a 75 basis point rate hike in November have fallen to 61.2%, down from more than 72.9% last week.
Nike (NKE) shares fell sharply lower in pre-market trading after it cautioned that “substantial markdowns” will be needed to reduce its bloated global inventory, pressuring profit margins for the world’s biggest sports apparel company.
Nike, which topped Street forecasts for its first quarter earnings by a penny, posting a bottom line of 93 cents per share on revenues of $12.7 billion, said inventories rose 44% from last year to $9.7 billion, with an unprecedented 65% surge in it key north American market.
Nike said shifting the goods will likely narrow margins by between 2% and 2.5%, with most of the pressure coming during the current quarter. A surging U.S. dollar, which hit a fresh 20-year peak against its global currency peers earlier this week, will likely clip $4 billion from its annual revenue forecast, Nike said.
Nike shares were marked 9.44% lower in pre-market trading to indicate an opening bell price of $86.33 each.
Micron Technology (MU) shares jumped higher in pre-market trading after a move by the Japanese government to subsidize its chipmaking operations in Hiroshima offset a muted near-term profit outlook.
Micron topped Street earnings forecasts with a bottom line of $1.30 per share, although revenues were modestly lighter at $6.64 billion. Demand weakness in both PC and smartphone markets, however, kept Micron’s near-term sales estimates firmly below Wall Street’s, with the Boise, Idaho-based chipmaker seeing revenues in the region of $4.25 billion amid a 30% pullback in capex plans.
Japan’s Ministry of Economy Trade and Industry, however, said early Friday that it will provide up to $320 million in subsidizes aimed at helping Micron build its new 1-Beta DRAM chips in Hiroshima following a trade mission lead by U.S. Vice President Kamala Harris.
Micron shares were marked 3.5% higher in pre-market trading to indicate an opening bell price of $51.77 each.
5. — Boeing Faces Tight Timeline For 737 MAX Certification
Boeing (BA) shares were holding onto modest gains in pre-market trading following multiple reports that suggest the planemaker may not meet an end-of-year target for recertification of the 737 MAX.
The Seattle Times reported late Thursday that the U.S. Federal Aviation Administration wants more information from Boeing’s so-called System Safety Assessments, noting that only 10% of the planemaker’s submissions have been accepted as of mid-September.
A letter seen by the Times, and subsequently reported by other media outlets, cautioned Boeing that the outstanding submissions “if the company intends to meet its project plan of completing certification work by December.”
Boeing CEO Dave Calhoun said earlier this month that company was “working to finish” the certification ahead of a December Congressional deadline that will set new standards for flight alert systems.
Boeing shares were marked 0.86% higher in pre-market trading to indicate an opening bell price of $126.41 each.