Stock Market Update

The stock market is on track for a lower opening after the major averages closed modestly higher yesterday and solidified a strong month of September.

The market benefitted from a rally in the healthcare sector after Pfizer (PFE 25.61, +0.13, +0.5%) announced a pricing deal with the White House, while the technology sector also captured a nice gain.

The federal government shut down at midnight last night, and while the market has largely expected this for some time, there are some lingering concerns about extensive government layoffs and the delay of key economic data ahead of the October FOMC meeting. 

Today's economic data, which includes the September ISM Manufacturing Index will be unaffected, though Friday's Employment Situation Report risks being unreleased.

The MBA Mortgage Applications Index for the week ended September 27 decreased 12.7%, from a prior increase of 0.6%.

In corporate news:

• Delta Airlines (DAL 57.40, +0.65, +1.2%) was upgraded to Buy from Hold at Jefferies, with a target of $70.
• Nike (NKE 73.17, +3.44, +4.9%) beats EPS expectations by $0.22 and beats on revenues.
• Starbucks (SBUX 84.35, -0.25, -0.3%) will close dozens of stores in New York City, according to The New York Post.
• Tesla (TSLA 443.50, -1.22, -0.3%) sales have increased in some European countries, according to Reuters

Reviewing overnight developments:

Equity indices in the Asia-Pacific region ended Wednesday on a mostly higher note while markets in China and Hong Kong were closed for holidays. Japan's Nikkei: -0.9%, Hong Kong's Hang Seng: HOLIDAY, China's Shanghai Composite: HOLIDAY, India's Sensex: +0.9%, South Korea's Kospi: +0.9%, Australia's ASX All Ordinaries: UNCH.

In news:

• Hong Kong will reopen tomorrow while China's markets will remain closed through next Wednesday.
• Taiwan rejected the request for even split of chip production in Taiwan and the U.S. Japan's Manufacturing PMI remained in contraction in September (48.5) while South Korea's reading (50.7) returned to expansion.
• South Korea's September exports reached their highest level since March 2022 with continued strength in chip exports.
• The Bank of Japan will reduce its bond purchases in Q4 by about 11%. The Reserve Bank of India left its policy rate at 4.00% against expectations for a 25-basis point cut.

In economic data:

• Japan's Q3 Tankan All Big Industry Capex 12.5% (last 11.5%). Q3 Big Manufacturers Outlook Index 12 (expected 13; last 12) and Q3 Large Non-Manufacturers Index 34 (expected 33; last 34). September Manufacturing PMI 48.5 (expected 48.4; last 49.7)
• South Korea's September trade surplus $9.56 bln (expected surplus of $7.81 bln; last surplus of $6.51 bln). September Imports 8.2% yr/yr (expected 5.6%; last -4.1%) and Exports 12.7% yr/yr (expected 7.2%; last 1.2%). September Manufacturing PMI 50.7 (last 48.3)
• Singapore's Q3 URA Property Index 1.2% qtr/qtr (last 1.0%) o India's September Manufacturing PMI 57.7 (expected 58.5; last 59.3)
• Australia's September Manufacturing PMI 51.4 (expected 51.6; last 51.6). September AIG Construction Index 12.3 (last 1.0) and AIG Manufacturing Index -13.2 (last -20.9). September Commodity Prices -0.1% yr/yr (last -5.0%)
• New Zealand's August Building Consents 5.8% m/m (last 5.3%)

Major European indices trade in the green. Eurozone's Manufacturing PMI (49.8) returned to contraction in September. STOXX Europe 600: +0.7%, Germany's DAX: +0.5%, U.K.'s FTSE 100: +0.7%, France's CAC 40: +0.4%, Italy's FTSE MIB: +0.2%, Spain's IBEX 35: +0.3%.

In news:

• The European Commission is planning to increase tariffs on steel imports to about 50%.
• European Central Bank policymaker De Guindos said that fiscal policy could result in higher yields in the EU.
• Meanwhile, Bank of England policymaker Mann said that keeping rates unchanged is the appropriate move, claiming that current policy is relatively loose.

In economic data:

• Eurozone's September Manufacturing PMI 49.8 (expected 49.5; last 50.7). Flash September CPI 0.1% m/m (last 0.1%); 2.2% yr/yr, as expected (last 2.2%). Flash Core CPI 0.1% m/m (last 0.3%); 2.3% yr/yr, as expected (last 2.3%)
• Germany's September Manufacturing PMI 49.5 (expected 48.5; last 49.8)
• U.K.'s September Nationwide HPI 0.5% m/m (expected 0.2%; last -0.1%); 2.2% yr/yr (expected 1.8%; last 2.1%). September Manufacturing PMI 46.2, as expected (last 46.2)
• France's September Manufacturing PMI 48.2 (expected 48.1; last 50.4)
• Italy's September Manufacturing PMI 49.0 (expected 49.9; last 50.4) Spain's September Manufacturing PMI 51.5 (expected 53.8; last 54.3)
• Swiss August Retail Sales -0.2% yr/yr (expected 0.5%; last 0.9%) and September Manufacturing PMI 46.3 (expected 47.9; last 49.0)