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Briefing.com Summary:
*Oil prices are up (but off their highs) following military incidents in the Middle East.
*GE Aerospace is buying Precision Products for $11.75 billion.
*Treasury yields have remained calm despite the jump in oil prices.
The Labor Day weekend is over, and while we would like to say that it passed without incident, we cannot. There were incidents in the Middle East that have taken oil prices higher.
Currently, the S&P 500 futures are down nine points and are trading 0.2% below fair value, the Nasdaq 100 futures are up 88 points and are trading 0.2% above fair value, and the Dow Jones Industrial Average futures are down 339 points and are trading 0.7% below fair value.
The U.S. and Iran traded strikes, but the incident that has sparked even more attention is the Houthis launching an attack on Saudi Aramco facilities that wounded more than 70 people, according to CNBC. The oil market has responded in kind.
WTI crude futures are up 1.6% to $92.98/bbl, and Brent crude futures are up 1.1% to $98.03. Those moves, which aren't as bad as earlier, have collided with reports that average gasoline prices topped $4.00/gallon on Labor Day for the first time ever; meanwhile, diesel prices hit a record $5.90/gallon.
The fallout for the stock market, however, isn't pronounced. The reason being is that the Treasury market has remained relatively calm amid all of this. The 10-yr note yield peeked its head above 4.81%, but it has settled back down to 4.76%, down three basis points for the day, while the 2-yr note yield is down two basis points to 4.36%.
This steady behavior and gains among the semiconductor stocks have mitigated some of the headline-induced volatility for the stock market, which is coming off a challenging session on Friday that was upended by rising interest rates following the stronger-than-expected August employment report.
Economic data will feature prominently again this week, with the August Producer Price Index and August Consumer Price Index released on Thursday and Friday, respectively. The latter is viewed by many as holding the answer to whether the FOMC will raise rates at next week's meeting.
According to the CME FedWatch Tool, there is a 58.4% probability of a 25-basis-point rate hike, so it is far from a done deal (much like the Iran situation seems to be).
One deal that has been announced today is GE Aerospace (GE) acquiring Precision Products from Warburg Pincus and Berkshire Partners for $11.75 billion in cash and debt. That news is a featured item on a fairly slow morning for corporate news that is packing some punch.
Relatedly, Novartis (NVS) is down 12% after its Phase 3 del-desiran study missed the primary endpoint in myotonic dystrophy, and its Phase 3 HORIZON trial for pelacarsen did not meet its primary endpoint of reducing cardiovascular events versus placebo in the overall study population.
Some stocks moving in a more positive direction are Bloom Energy (BE), Everpure (P), and Illumina (ILMN). They will all be added to the S&P 500 prior to the open on September 21.
