Pre-Market Brief: Stocks Mixed as Key U.S. Payrolls Data Looms

Morning Markets

December S&P 500 futures (ESZ22) are trending down -0.12% this morning after three major US benchmark indices extended declines for the second successive trading session as investors digested remarks from several Federal Reserve officials about the path of future interest rate hikes ahead of the crucial monthly U.S. jobs report. Three major U.S. stock indexes were weighted down primarily by losses in the Telecoms, Utilities, and Financials sectors.

Chicago Fed President Charles Evans said the Fed “has further to go,” foreseeing interest rates to rise to about 4.5%-4.75% by the spring of 2023, marking ongoing growth in house and car prices as primary drivers of core inflation. “Inflation is high right now, and we need a more restrictive setting of monetary policy,” Evans added. Minneapolis Fed president Neel Kashkari hit the same tone, saying the Fed was “quite a ways away” from pausing rate hikes.

Meanwhile, U.S. rate futures have priced in a 29.7% chance of a 50 basis point rate increase and a 70.3% chance of a 75 basis point hike at November's monetary policy meeting.

Today, market participants will be closely monitoring the U.S. Nonfarm Payrolls report in a couple of hours for further clues into the path and the pace of rate increases. Economists, on average, forecast that September Nonfarm Payrolls will stand at 250K, compared to the previous figure of 315K. At the same time, U.S. September Unemployment Rate is expected to be steady at 3.7%.

“The job market is still solid but is softening. As the unemployment rate ticks higher, wage growth will likely slow, taming some of the inflationary pressure in the U.S. economy,” said Bill Adams, a chief economist for Comerica Bank. 

Also, investors are likely to focus on the U.S. Average Hourly Earnings data, which was at +0.3% m/m and +5.2% y/y in August. Economists foresee the September figure to come in at +0.3% m/m and +5.1% y/y.

U.S. September Private Nonfarm Payrolls data will be reported today. Economists forecast this number to be 265K, compared to the previous value of 308K.

Canada's Employment Change data will come in today as well. Economists foresee the September figure to come in at +20.0K, compared to the previous value of -39.7K.

In the bond markets, United States 10-Year rates are at 3.843%, up +0.49%.

The Euro Stoxx 50 is up +0.23% this morning, pulling back slightly to round out a volatile week. However, those gains are likely to be fragile as recession fears resumed amid signs that central banks would keep the monetary policy tightening to combat inflation. At the same time, semiconductor companies edged lower after weak reports from Samsung and Advanced Micro Devices.

Switzerland's Unemployment Rate n.s.a., Germany's Industrial Production, Germany's Retail Sales, and France's Trade Balance data were released today. 

Switzerland's September Unemployment Rate n.s.a. has been reported at 1.9%, stronger than expectations of 2.0%.

The German August Industrial Production was -0.8% m/m, weaker than expectations of -0.5% m/m.

The German Retail Sales stood at -1.3% m/m in August, weaker than expectations of -1.1% m/m.

The French August Trade Balance came in at -15.3B, weaker than expectations of -14.8B. 

Asian stock markets today closed in the red as fears of an aggressive Federal Reserve grew ahead of key U.S. labor data. Japan’s Nikkei 225 Stock Index (NIK) closed down -0.71%, while the Chinese market was closed for the holidays.

Japan’s Nikkei 225 Stock Index dropped today, pulling back from a two-week high reached on Thursday, driven by losses in tech stocks after U.S. chipmaker Advanced Micro Devices cut its quarterly revenue forecast. In addition, rising inflation, a weakening yen, and mixed economic data keep the economic outlook uncertain. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down 2.47% to 22.88.

Japan's Household Spending came in at -1.7% m/m and +5.1% y/y in August, weaker than expectations of +0.2% m/m and +6.7% y/y.

Pre-Market U.S. Stock Movers

Advanced Micro Devices Inc (AMD) dropped more than -5% in pre-market trading after the company's preliminary Q3 results reflected lower-than-expected Client segment revenue. In addition, Piper Sandler lowered its price target on AMD to $90 from $140.

NVIDIA Corporation (NVDA) slid about -3% in pre-market trading on AMD's guidance cut.

DraftKings Inc (DKNG) rose about +8% in pre-market trading after a report of an exclusive partnership with ESPN, according to Bloomberg.

Avenue Therapeutics Inc (ATXI) plunged over -50% in pre-market trading after the company priced its underwritten public offering of 3,636,365 common and pre-funded units.

Levi Strauss & Co Class A (LEVI) fell over -5% in pre-market trading after the company delivered a mixed Q3 report. Also, the company reeled its full-year revenue and EPS forecasts amid supply chain problems, inflation, a strong dollar, and consumer spending shifts.

Blue Apron Holdings Inc (APRN) soared about +2% in pre-market trading after the company completed its previously announced at-the-market equity offering program.

Today’s U.S. Earnings Spotlight: Friday - October 7th

Kewpie ADR (KWPCY), Trinity Place Holdings Inc (TPHS), TSR (TSRI), Schmitt (SMIT).

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