U.S. equities are little changed Monday morning as investors digest Friday’s much softer employment report against still-elevated long-term Treasury yields and renewed European fiscal concerns. At roughly 5:15 a.m. ET, Dow futures were essentially flat, S&P 500 futures were down about 0.1% and Nasdaq 100 futures were flat to modestly lower. Friday, the S&P 500 gained 0.73%, Nasdaq rose 1.19%, Dow added 0.49% and Russell 2000 advanced about 0.9% as weak payroll growth sharply reduced expectations for another Fed rate increase this month.
The major catalyst Friday was the September employment report. Nonfarm payrolls increased just 29,000 versus roughly 90,000 expected, August payroll growth was revised down to 133,000, and the unemployment rate edged up to 4.2% from 4.1%. Wage growth also moderated. The softer labor data pushed the market-implied probability of an October Fed increase to roughly 18%-23%, down from more than 60% a week earlier. Importantly, the report showed slower hiring rather than a broad surge in layoffs, leaving the market with a more favorable “Fed pause without recession” interpretation for now.
Treasuries nevertheless finished Friday under pressure after an initial post-payroll rally. The 2-year yield rose 6 basis points to 4.84%, the 10-year gained 5 basis points to 5.28% and the 30-year increased 3 basis points to 5.63%. Yields have eased modestly this morning, with the 10-year near 5.26% and the 30-year around 5.61%, but long rates remain restrictive for equity valuations. The divergence between fading near-term Fed-hike expectations and stubbornly high long-term yields continues to point toward concerns around inflation, Treasury supply, fiscal deficits and nominal-growth expectations rather than simply the expected policy rate.
The dollar softened Friday, with the DXY down 0.19 to 101.90. The euro rose 0.10% to $1.1256, sterling gained 0.38% to $1.3244, USD/JPY fell 0.15% to ¥157.84 and EUR/JPY slipped 0.04% to ¥177.66. That move has reversed this morning as the euro drops toward a 17-month low near $1.116 amid concerns over France’s fiscal outlook and political uncertainty. The French-German 10-year yield spread has widened beyond 150 basis points, adding another source of volatility to global bond markets and supporting the dollar despite reduced Fed-hike expectations.
Commodities were softer Friday. November WTI fell $1.39, or 1.50%, to $91.48, while December gold declined $29.60, or 0.70%, to $4,172.70. Oil is falling again this morning, with WTI around $89.50-$90, as Middle East exports recover and additional G7 inventory releases improve the near-term supply picture. That decline offers some relief to inflation expectations after September’s energy-price spike. Gold is rebounding, with U.S. futures around $4,195, supported by fading October Fed-hike expectations and renewed concern around government debt and European fiscal risk.
Today’s domestic calendar centers on the service economy. The final September S&P Global Services PMI is due at 9:45 a.m. ET, following a preliminary reading of 58.7, while the ISM Services PMI follows at 10:00 a.m., with consensus around 55.1 versus 55.4 in August. With manufacturing already showing rising input-cost pressure, investors will pay particular attention to the ISM prices component as well as employment and new orders.
The rest of the week is relatively light on top-tier economic releases. Minutes from the Fed’s September meeting arrive Wednesday, when investors will look for more detail on the debate surrounding last month’s rate increase, while PepsiCo and Delta Air Lines are among the larger companies reporting later in the week.
Sector Highlights
Friday’s advance was relatively broad, with 10 of 11 sectors higher. Consumer Discretionary +1.38% led, followed by Technology +1.06%, Materials +1.00%, Communication Services +0.88% and Industrials +0.78%. Utilities gained 0.37%, Real Estate +0.36%, Energy +0.21%, Consumer Staples +0.16% and Financials +0.01%, while Health Care -0.04% was the only sector to decline. Breadth improved to positive 1.56:1 on the NYSE and 1.34:1 on the Nasdaq, providing better confirmation of the index rally than investors had seen through much of the prior week.
Information Technology
- PTC (PTC) is up roughly 34% premarket after France’s Schneider Electric agreed to acquire the industrial-software company for approximately $22.6 billion, or $205 per share in cash. The offer represents a 42.3% premium to Friday’s close. Schneider is positioning PTC’s engineering and product-lifecycle software alongside its data-center infrastructure, automation and industrial-AI businesses, making the transaction one of the largest strategic software deals of the year.
- Qualcomm (QCOM) is up roughly 3%-4% premarket after signing a broad, multi-year patent agreement with Huawei covering 5G, artificial intelligence, computing and networking technologies. The agreement includes cross-licensing of the companies’ patent portfolios and Qualcomm’s purchase of certain Huawei U.S. patents. The deal removes a meaningful intellectual-property overhang while expanding Qualcomm’s exposure beyond its traditional handset franchise.
- Intel (INTC) is down roughly 3%-4% premarket after Elon Musk said Taiwan Semiconductor Manufacturing is in discussions with Terafab about operating the company’s planned Texas semiconductor facilities. Intel has also been associated with the project, so the potential involvement of TSMC increases uncertainty around Intel’s expected role.
Consumer Discretionary
- Tesla (TSLA) remains in focus after reporting 486,532 third-quarter vehicle deliveries, roughly 2% below the year-ago level but comfortably ahead of Wall Street expectations near 462,000. The better-than-feared result helped lift the shares Friday, although investors increasingly view the auto business as only one element of Tesla’s valuation as capital spending shifts toward robotaxis, AI infrastructure and Optimus.
Industrials
- RTX (RTX) enters the week after its Raytheon unit received a U.S. Navy multiyear contract worth up to $24.4 billion to produce Standard Missile-6 interceptors. The award is part of the Pentagon’s broader effort to rebuild depleted munitions inventories and follows other large multiyear missile-production agreements. Despite strong underlying defense demand, the broader aerospace-and-defense group has fallen sharply from its August highs, creating a disconnect between contracting momentum and recent share-price performance.
Energy
- Exxon Mobil (XOM) is in focus as the U.S. Supreme Court hears its attempt to block a Colorado climate-damages lawsuit brought by Boulder city and county officials. The Trump administration supports Exxon’s argument that federal clean-air law preempts state-level climate claims. The case could have implications well beyond Exxon because nearly 60 similar state and local lawsuits have been filed against energy companies.
Health Care
- Moderna (MRNA) remains in focus ahead of its October 9 addition to the Nasdaq-100, where it will replace Warner Bros. Discovery. The index change creates incremental demand from Nasdaq-100 tracking funds and comes as Health Care continues to lag the broader equity rally.
Consumer Staples
- The earnings calendar is quiet today, but Constellation Brands (STZ) reports Tuesday and PepsiCo (PEP) later this week. Both reports should provide useful reads on consumer price sensitivity, volume trends and companies’ ability to preserve margins as wage growth slows but food and energy costs remain elevated.
