S&P Futures Little Changed:
S&P futures are flat in Wednesday morning trading after US equities closed higher on Tuesday, with the S&P 500 hitting its 41st all-time high of the year. China-related stocks saw strong gains on the back of fresh stimulus measures, while chemicals, industrial metals, machinery, and select multinationals also performed well. Semiconductors were another standout, with Nvidia (NVDA-US) benefiting from reports that CEO Jensen Huang has finished selling shares. Treasuries were mostly weaker, and the Dollar Index was steady, with notable gains against the yen and sterling. Gold rose 0.3%, Bitcoin futures fell 1.0%, and WTI crude dropped 1.8%.
The market appears to be in a holding pattern ahead of September’s Non-Farm Payrolls (NFP) report next Friday and the start of the Q3 earnings season. The path of least resistance for equities seems to be higher, supported by the combination of a new Fed easing cycle and the soft-landing narrative. Several firms have noted that positioning isn’t a barrier to further gains and highlighted favorable inflow dynamics. However, concerns remain about high valuations, with the S&P 500’s forward P/E ratio now over 21x, and the index trading nearly 20% above average price targets. Additionally, buyback activity has slowed heading into earnings season, and uncertainty around the upcoming elections is increasing.
Today’s economic calendar is relatively light, with just the August new home sales report, expected to show a 6% decline following a 10.6% increase in the previous month. The Treasury will auction $70B in 5-year notes, and Fed Governor Kugler will speak on the economic outlook at 16:00 ET. Things pick up on Thursday with initial claims, durable goods orders, and the final release of Q2 GDP. A barrage of Fed commentary is also scheduled, including pre-recorded remarks from Powell, as well as comments from Collins, Bowman, Williams, Barr, Kashkari, and Cook. The market will closely watch Core PCE inflation on Friday, though the Fed appears more focused on growth risks.
In corporate news, Berkshire Hathaway sold another $863M worth of Bank of America (BAC-US) shares. SAP (SAP-US) was hit by reports of a DOJ investigation into overcharging government agencies. Boeing (BA-US) continues to face strike headlines, with unions showing little interest in the company’s latest offer. KB Home (KBH-US) came under pressure after missing EPS estimates due to weaker gross margins and light orders, although the company noted some improvement in August as rates moderated. Progress Software (PRGS-US) reported Q3 results with positive commentary around the ShareFile acquisition opportunity. Worthington Industries (WOR-US) missed on fiscal Q1 revenue and EPS, citing demand headwinds from higher interest rates and macro uncertainty. Stitch Fix (SFIX-US) dropped sharply after issuing weaker FY25 guidance. Lifeway Foods (LWAY-US) confirmed receiving an unsolicited acquisition proposal from Danone
US Equities Close Higher Tuesday:
US equities finished higher on Tuesday, with the Dow up 0.20%, the S&P 500 rising 0.25%, and the Nasdaq gaining 0.56%. The Russell 2000 increased by 0.17%. The S&P hit its 41st all-time high of the year, with strength in chemicals, industrial metals, and machinery, largely due to China’s stimulus measures. Semiconductors boosted the tech sector, led by Nvidia (NVDA-US), while hotels, transports, and media also outperformed. On the downside, credit cards/payments were weak due to antitrust scrutiny on Visa (V-US), and regional banks remained defensive. The Treasury yield curve continued to steepen for the fifth straight session, with the 2/10 spread nearing +20bp. The Dollar index dropped 0.5%, Gold rose 0.9%, Bitcoin futures increased by 1.1%, and WTI crude gained 1.7%.
The market struggled for meaningful direction as it digested China’s additional policy support measures, though concerns remain about the need for more aggressive fiscal stimulus. Weaker economic data, including softer consumer confidence and Richmond Fed reports, pointed to a cooling labor market. Meanwhile, the combination of Fed easing and hopes of a soft landing remain supportive of risk sentiment, though near-term concerns include negative seasonality and the fading buyback bid ahead of earnings season.
Information Technology
- Smartsheet (SMAR-US) rose 6.5% after confirming a deal to be acquired by Blackstone (BX-US) and Vista Equity for $56.50 per share in cash, an 8.5% premium to Monday’s close.
- Snap (SNAP-US) climbed 3.6% after announcing a partnership with Google (GOOGL-US) to integrate AI capabilities from Google’s Gemini into Snap’s My AI chatbot.
- Salesforce (CRM-US) gained 2.4% following an upgrade to overweight by Piper Sandler, citing AI growth potential and a favorable risk-reward profile.
Industrials
- Thor Industries (THO-US) rose 6.1% after beating FQ4 earnings expectations across all divisions. While margins exceeded estimates, the company provided weak FY25 guidance due to macroeconomic challenges.
- Boeing (BA-US) continues to face labor issues as striking machinists rejected the company’s final offer, declining to vote on the measure.
- Deere (DE-US) ended higher despite threats from former President Trump to impose 200% tariffs if the company moves production to Mexico, as previously announced.
- Triumph Group (TGI-US) fell 4.4% after being downgraded to underperform by BofA Securities, which cited concerns over the company’s reliance on Boeing and Airbus production trends.
Financials
- Visa (V-US) fell 5.5% after reports that the Department of Justice is preparing to file an antitrust lawsuit over its debit-card business.
- Liberty Broadband (LBRDK-US) surged 25.9% after submitting a counterproposal to merge with Charter Communications (CHTR-US), proposing a tax-free, all-stock transaction set to close by June 2027.
- Blackstone (BX-US) gained after reaching a final deal to acquire Smartsheet (SMAR-US) alongside Vista Equity.
Consumer Discretionary
- Freeport-McMoRan (FCX-US) rose 8.0% after media reports suggested Indonesia is still in talks to acquire an additional 10% of Freeport Indonesia.
- AutoZone (AZO-US) fell after missing earnings expectations due to deferrals in its discretionary merchandise categories.
- Costco (COST-US) declined 1.7% after being downgraded to hold by Truist, citing valuation concerns and potential sales headwinds from operational changes.
- Light & Wonder (LNW-US) dropped 19.5% after a US district court granted Aristocrat Leisure a preliminary injunction against LNW’s Dragon Train game.
Health Care
- McKesson (MCK-US) dropped 4.9% after being downgraded to neutral by Baird, following recent earnings misses and a downward revision in expectations.
- Regeneron (REGN-US) fell 4.2% after Leerink Partners downgraded the stock to market perform, citing reduced visibility around the Eylea franchise after a legal setback involving Amgen.
Real Estate
- Invitation Homes (INVH-US) declined 2.6% after agreeing to a $48M settlement with the FTC following allegations of unlawful practices, with the funds set to be used for customer refunds.
Economic Data:
- September Consumer Confidence declined from an upwardly revised August, with both present situation and expectations lower month-over-month.
- Richmond Fed manufacturing index weakened, particularly in employment.
- July FHFA house price index posted a slight increase month-over-month, while the July Case-Shiller 20-city index rose 0.3%, missing expectations.
- Treasury auctioned $69B in 2-year notes, with the yield matching when-issued expectations but with weaker demand than recent auctions
Eco Data Releases | Wednesday September 25th, 2024
S&P 500 Constituent Earnings Announcements | Wednesday September 25th, 2024
Data sourced from FactSet Data Systems
