Stock Market Update

The S&P 500 futures are down 15 points and are trading 0.3% below fair value, the Nasdaq 100 futures are down 95 points and are trading 0.5% below fair value, and the Dow Jones Industrial Average futures are down 53 points and are trading 0.2% below fair value.

Early indications point to a modestly lower open for the major U.S. indices, which is in stark contrast to the 8.1% stimulus-driven, fear-of-missing-out rally in China's Shanghai Composite. The latter will be closed through October 7 for the Golden Week holiday. Today's advance followed some mixed PMI data, as well as news that the People's Bank of China (PBOC) 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.

Notably, there hasn't been the same carryover impact globally today like there was last week in the wake of China's stimulus moves. Asian markets were mixed, including a material 4.8% decline for Japan's Nikkei, as investors worried about the new prime minister supporting the BOJ's tightening campaign, and European bourses are lower across the board with an FY24 profit warning from Stellantis (STLA 13.87, -2.19, -13.6%) weighing on sentiment.

The dip here is likely a case of some profit-taking interest following what has been a good month and quarter for the major indices, and ahead of a big week for employment news that will heavily influence the market's thinking about the pace and scope of the Fed's rate cuts.

In corporate news:

• EchoStar (SATS 28.05, +0.01, +0.04%): 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 22.15, +0.25, +1.1%): sells remaining stake in DIRECTV to TPG; expects to receive approximately $7.6 billion in cash payments from DIRECTV and the Buyer through 2029
• Verizon (VZ 45.09, +0.20, +0.5%): entered 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, including certain commercial benefits.
• Bank of America (BAC 39.25, -0.15, -0.4%): 10% owner Berkshire Hathaway's (BRK.A / BRK.B) Warren Buffett sold 11,678,366 shares at $39.25 - $39.90 worth approx. $460.7 mln
• CVS Health (CVS 63.86, +2.48, +4.0%): Glenview Capital wants changes at CVS, according to The Wall Street Journal
• JPMorgan Chase (JPM 208.90, -1.60, -0.8%): Morgan Stanley downgrades to Equal Weight from Overweight
• Microsoft (MSFT 426.80, -1.22, -0.3%): OpenAI anticipates around $3.7 bln in annual sales in 2024, surging to $11.6 bln next year; however, expects $5.0 bln in losses this year, according to New York Times; Apple (AAPL 229.43, +1.64, +0.7%) no longer in discussions to invest in OpenAI, according to The Wall Street Journal
• Stellantis (STLA 13.87, -2.19, -13.6%): lowers guidance for FY24 citing deterioration in global industry backdrop and increased Chinese competition
• NIO Inc. (NIO 7.42, +0.90, +13.8%): enters RMB3.3 bln investment in NIO China from strategic investors

Reviewing overnight developments:

• Equity indices in the Asia-Pacific region began the week on a mixed note. Japan's Nikkei: -4.8%, Hong Kong's Hang Seng: +2.4%, China's Shanghai Composite: +8.1%, India's Sensex: -1.5%, South Korea's Kospi: -2.1%, Australia's ASX All Ordinaries: +0.7%.
  • In economic data:
    • China's September Manufacturing PMI 49.8 (expected 49.4; last 49.1) and Non-Manufacturing PMI 50.0 (expected 50.4; last 50.3). September Caixin Manufacturing PMI 49.3 (expected 50.5; last 50.4) and Caixin Services PMI 50.3 (expected 51.6; last 51.6)
    • Japan's August Industrial Production -3.3% m/m (expected -0.5%; last 3.1%) and August Retail Sales 2.8% yr/yr (expected 2.6%; last 2.7%). August Housing Starts -5.1% yr/yr (expected -3.3%; last -0.2%) and Construction Orders 8.7% yr/yr (last 62.8%)
    • South Korea's August Industrial Production 4.1% m/m (last -3.9%); 3.8% yr/yr (last 5.2%). August Retail Sales 1.7% m/m (last -2.0%) and Service Sector Output 0.2% m/m (last 0.3%)
    • Australia's August Private Sector Credit 0.5% m/m, as expected (last 0.5%)
    • New Zealand's September ANZ Business Confidence 60.9 (last 50.6)
  • In news:
    • Japan's Nikkei (-4.8%) reversed sharply from a two-month high as the market responded to news of a new prime minister who supports the Bank of Japan's tightening campaign.
    • China's Shanghai Composite (+8.1%) cruised to its best level since May 2023, continuing its stimulus-sparked rally after China's September PMI readings showed essentially a standstill in both manufacturing (49.8) and non-manufacturing (50.0) sectors. The People's Bank of China instructed 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.
• Major European indices trade in the red. STOXX Europe 600: -1.0%, Germany's DAX: -0.6%, U.K.'s FTSE 100: -0.8%, France's CAC 40: -1.6%, Italy's FTSE MIB: -1.8%, Spain's IBEX 35: -0.7%.
  • In economic data:
    • Germany's August Import Price Index -0.4% m/m, as expected (last -0.4%); 0.2% yr/yr (last 0.9%)
    • U.K.'s Q2 GDP 0.5% qtr/qtr (expected 0.6%; last 0.7%); 0.7% yr/yr (expected 0.9%; last 0.3%). Q2 Current Account -GBP28.4 bln (expected -GBP32.5 bln; last -GBP13.8 bln). Q2 Business Investment 1.4% qtr/qtr (expected -0.1%; last 0.6%); 0.2% yr/yr (expected -1.1%; last -1.8%). September Nationwide HPI 0.7% m/m (expected 0.3%; last -0.2%); 3.2% yr/yr (last 2.4%). August Consumer Credit GBP1.295 bln (last GBP1.231 bln) and August Mortgage Approvals 64,860 (expected 64,000; last 62,500)
    • Italy's August non-EU trade surplus EUR2.69 bln (last surplus of EUR6.04 bln). September CPI -0.2% m/m, as expected (last 0.2%); 0.7% yr/yr (expected 0.8%; last 1.1%)
    • Spain's July Current Account surplus EUR5.79 bln (last surplus of EUR5.02 bln)
    • Swiss September KOF Leading Indicators 105.5 (expected 101.0; last 105.0)
  • In news:
    • The U.K.'s Q2 GDP reading was revised down to 0.5% from 0.6% but mortgage issuance in August exceeded expectations.
    • Germany will release its flash CPI for September at 8:00 ET, which is expected show a deceleration in the yr/yr rate to 1.7% from 1.9% in August.
    • The French government may impose a temporary extra tax on companies that generate more than EUR1 bln in revenue.