ETFsector.com Daily Trading Outlook, October 1st, 2024
S&P Futures Slightly Lower:
S&P futures down 0.1% Tuesday morning after US equities closed higher Monday, helped by $5B in late session month/quarter-end buying. China tech outperformed, while big tech gained and autos and dollar stores lagged. Asian markets were mixed with the Nikkei up nearly 2% after Monday’s selloff, while Australia lagged. Several markets, including China, were closed for holidays. European markets are slightly higher. Treasuries firmer following Monday’s rise in yields after less dovish comments from Powell. Dollar index up 0.2%, gold up 0.4%, Bitcoin futures up 0.7%, and WTI crude down 1.3%.
The market is focused on upcoming labor market data to inform the 25 vs 50 bp rate cut debate for November. Q3 earnings season begins next week with the big banks. China’s policy support, US election uncertainty, and potential strikes at US East/Gulf Coast ports are near-term concerns. Middle East tensions continue to be largely ignored by the market.
Economic data:
JOLTS job openings and ISM manufacturing index are the key releases today. Job openings are expected to tick down slightly, while the ISM manufacturing index is likely to remain in contraction. Atlanta Fed President Bostic speaks today, following Monday’s comments that he is open to a 50 bp cut in November if the labor market weakens.
Corporate news:
- PEP-US: Reportedly nearing a $1B+ acquisition of Siete Foods.
- PFE-US: Raising over $3.2B from sale of Haleon shares.
- BA-US: Considering a $10B equity raise.
- CVS-US: Weighing options, including a potential separation of retail and insurance units.
- RMD-US: Shares higher after unveiling a new five-year outlook.
- F-US: Upgraded by Goldman Sachs.
- DIS-US: Downgraded by Raymond James.
- NKE-US: Reports after the close, with some debate over potential FY guidance cuts amidst a CEO change.
Monday Recap: Dow +0.04%, S&P 500 +0.42%, Nasdaq +0.38%, Russell 2000 +0.24%
US equities finished higher on Monday, with the S&P 500 achieving another record close, marking its third straight weekly gain alongside the Nasdaq. Outperformers included China tech, energy, regional banks, life insurers, waste management, and logistics, while big tech showed mixed results. Underperformers included semiconductors, telecoms, industrial metals, asset managers, machinery, homebuilders, travel, leisure, and food. Treasuries were weaker with some curve flattening. The dollar index rose 0.4%, while gold fell 0.3% and Bitcoin futures dropped 4%. WTI crude ended fractionally lower despite continued uncertainties in the Middle East.
Key Macro Developments: The market’s modest upside was attributed to the path of least resistance and month/quarter-end dynamics, despite hawkish remarks from Fed Chair Powell. Powell reiterated that the November decision will be data-driven and suggested that two 25 bp cuts could be the baseline if the economy evolves as expected. This tempered market expectations of a 50 bp cut, reducing the odds of such a move to ~30%. The market is now in a wait-and-see mode ahead of labor market updates, including Tuesday’s JOLTS report and Friday’s September payrolls data.
Fedspeak: Fed Governor Bowman reiterated her preference for a slower pace of easing, while Atlanta’s Bostic expressed openness to a 50 bp cut if the labor market weakens. Chicago’s Goolsbee expects an extended path of rate cuts. The Dallas Fed index for September came in better than expected, though it was negative for the 28th straight month. The Chicago PMI exceeded expectations due to strength in backlogs and employment.
Overnight Markets:
Asian markets were mixed on Tuesday, with Japan’s Nikkei up 2.43%, while the ASX fell 0.43%. China and Korean markets remained closed for holidays. Treasuries firmed, and the yen fell from recent highs. Crude was little changed, while gold was flat.
Corporate News
Information Technology:
- AAPL-US (Apple): Apple pulled out of the latest OpenAI investment round, though MSFT-US (Microsoft) is expected to contribute an additional $1B. OpenAI is reportedly expecting $5B in losses on $3.7B in revenue for this year, though revenue is growing rapidly. Apple is also reportedly exploring a cheaper Vision Pro 2 and smart glasses.
Communication Services:
- SATS-US (EchoStar): DirecTV confirmed it will acquire Dish TV and Sling TV from EchoStar for $1 plus the assumption of $10B in debt. SATS noted the deal will reduce its consolidated debt by ~$11.7B and lower its refinancing needs through 2026 by ~$6.7B. SATS fell 11.5%.
- T-US (AT&T): AT&T is expected to sell its remaining DirecTV stake to TPG for over $7B.
Consumer Discretionary:
- STLA-US (Stellantis): Stellantis revised its FY24 guidance down, citing weak North American performance and rising competition from Chinese EV makers. Adjusted operating income margin is now expected to be 5.5%-7.0%, down from double digits. The stock dropped 12.5%.
- CCL-US (Carnival): Carnival’s EPS and revenue beat expectations, but Q4 guidance disappointed due to net yield concerns.
Health Care:
- BAX-US (Baxter International): Announced that its North Cove, NC production facility was flooded during Hurricane Helene and is currently closed. The facility is the largest US manufacturer of intravenous and peritoneal dialysis solutions. Baxter said it is managing inventory to ensure continuity of patient care.
- CVS-US (CVS Health): Media reports indicated that Glenview Capital would meet with CVS leadership, possibly marking the start of an activist push. CVS gained 2.4%.
- BRKR-US (Bruker): Downgraded to peer perform from outperform at Wolfe Research due to concerns about demand for its instruments and long lead times
Financials:
- BL-US (BlackLine): Upgraded to overweight from equal weight at Morgan Stanley, citing the stock’s low valuation and an unappreciated margin expansion trajectory. Shares rose 4.3%.
Industrials:
- BA-US (Boeing): Union talks with Boeing workers broke off after recent negotiations, with no resolution reached. Boeing also received a safety warning from the NTSB over a rudder hazard on 737s.
Consumer Staples:
- BF.B-US (Brown-Forman): Upgraded to overweight from equal weight at Barclays, which highlighted limited exposure to China and a minimal premium to the longer-term average. Shares increased by 1.8%.
Eco Data Releases | Tuesday October 1st, 2024
S&P 500 Constituent Earnings Announcements | Tuesday October 1st, 2024
Data sourced from FactSet Data Systems
