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Today is the last day of the third quarter, which has been a good one for the stock market. It has been particularly good for the broader market, which has outpaced the mega-cap stocks by a significant degree.
The equal-weighted S&P 500 is up 8.9% for the third quarter and the Russell 2000 is up 8.6% versus a 2.0% gain for the Vanguard Mega-Cap Growth ETF (MGK) and 5.1% gain for the market-cap weighted S&P 500. They're all looking up at the Dow Jones Utilities Average, however, which is up 16.4%.
The equity futures are a little weaker this morning, likely because of an expectation that there could be some consolidation activity after these big moves by the broader market. Participants are also aware that this week will feature a bevy of labor market reports, highlighted by Friday's Employment Situation Report for September, that will heavily influence the market's expectations for the pace and scope of the Fed's future policy moves.
The pace and scope with which China's Shanghai Composite has moved after stimulus actions announced by the PBOC has been astounding. Today featured an 8.1% rally in the Shanghai Composite following news the PBOC has told commercial banks to start lowering mortgage rates in batches. The PBOC also cut the standing lending facility rates for maturities up to one month by 20 basis points.
Including today's move, the Shanghai Composite is up 21.4% over the last five trading sessions. That is going out on a high note alright ahead of the Golden Week holiday, which will keep the Shanghai Composite closed until October 8.
It was different story for Japan's Nikkei. It plunged 4.8% on Monday in a nervous reaction to the notion that the new prime minister stands in favor of the Bank of Japan's tightening campaign.
Notably, European bourses aren't following along with the stimulus push in China like they did last week. They are also lower on this last day of the third quarter, undercut in part by an FY24 profit warning from Stellantis (STLA) that was attributed to a deterioration in the global industry backdrop and increased Chinese competition. STLA is trading 13% lower in pre-market action.
The move here is simply reserved with higher Treasury yields contributing. The 2-yr note yield is up six basis points to 3.62% and the 10-yr note yield is up three basis points to 3.78%.
Currently, the S&P 500 futures are down 14 points and are trading 0.3% below fair value, the Nasdaq 100 futures are down 54 points and are trading 0.3% below fair value, and the Dow Jones Industrial Average futures are down 88 points and are trading 0.2% below fair value.
Not a lot of conviction on the buy side, but not a lot of conviction on the sell side either.
There are rumblings in the background about the escalating conflict between Israel and Hezbollah, a possible East Coast and Gulf Coast dockworkers strike starting tomorrow, a Morgan Stanley downgrade of JPMorgan Chase (JPM) to Equal Weight from Overweight, and likely higher insurance costs coming for many people as property and casualty insurers deal with the destruction of Hurricane Helene.
Market participants are also dealing with some M&A news this morning that includes an agreement whereby DIRECTV will acquire EchoStar's video distribution business, including DISH TV and Sling TV, in exchange for a nominal consideration of $1 plus the assumption of DISH DBS net debt, AT&T (T) selling its remaining stake in DIRECTV to TPG for $7.6 billion in cash payments received from DIRECTV and TPG through 2029, and Verizon (VZ) entering into a definitive agreement for Vertical Bridge to obtain the exclusive rights to lease, operate and manage 6,339 wireless communications towers across all 50 states and Washington, D.C. from subsidiaries of Verizon for approximately $3.3 billion.
