Stock Market Update

[BRIEFING.COM] The stock market has flopped around this last day of September and final day of the third quarter, impeded by a lack of concerted leadership but also supported by a lack of concerted selling interest.

It has been mostly a consolidation trade following a big run, and a hesitation trade in front of several labor market reports this week that will heavily influence the market's expectations about the pace and scope of the Fed's policy moves. The most influential report in that respect will be the September Employment Situation Report, which will be released before the open on Friday.

Prior to that, there will be the employment index in the ISM Manufacturing PMI (Tuesday), the August  JOLTS - Job Openings Report (Tuesday), the September ADP Employment Change Report (Wednesday), the weekly Initial Claims and Continuing Jobless Claims Report (Thursday), and the employment index in the ISM Services PMI (Thursday).

There were some mixed PMI readings for September out of China, but they took a backseat to reports that the People's Bank of China told commercial banks to start lowering mortgage rates in batches and that the standing facility rates for maturities up to one month were cut by 20 basis points.

This latest policy stimulus news, and a healthy fear-of-missing out on further gains, propelled a massive 8.1% gain in the Shanghai Composite on Monday, which will now be closed until October 8 in observance of the Golden Week holiday.

Notably, there wasn't much of a coattails impulse seen in global markets. Japan's Nikkei sank 4.8% in a nervous reaction to the notion that the new prime minister stands in favor of the Bank of Japan's tightening campaign, the STOXX Europe 600 declined 1.0%, and the U.S. market has been trading in a lackluster manner. Also, the iShares China Large-Cap ETF (FXI 32.05, -0.12, -0.3%) is lower.

There are six S&P 500 sectors trading higher and five sectors that are trading lower. The biggest gainer is the communication services sector (+0.5%), which is being led by Meta Platforms (META 572.87, +5.51, +1.0%) and Alphabet (GOOG 166.08, +0.80, +0.5%). There has also been some industry-specific M&A news.

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 21.84, -0.06, -0.3%) is 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 44.85, -0.03, -0.1%) 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.

The biggest sector laggard is the materials sector (-0.9%), which is wrapping up a strong quarter (+8.9%), having outperformed the market-cap weighted S&P 500 (+5.1%) by a wide margin.

Another laggard of note is the consumer discretionary sector (-0.5%). It is being pressured by weakness in Amazon.com (AMZN 186.15, -1.82, -1.0%) and Carnival Corp. (CCL 17.98, -0.57, -3.1%), which topped fiscal Q3 estimates but issued Q4 EPS guidance below consensus.

The 2-yr note yield is up four basis points to 3.60% and the 10-yr note yield is up two basis points to 3.77%.

Reviewing today's economic data:

• The September Chicago PMI checked in at 46.6 (Briefing.com consensus 46.2) versus 46.1 in August.
  • The dividing line between expansion and contraction is 50.0, so the September reading implies that manufacturing activity in the Chicago Fed region contracted in September but at a slower pace than August.