Stocks hold on to healthy September gains as Powell talks interest rates

The S&P 500 Index ($SPX) (SPY) is down -0.06% today, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.37% and the Nasdaq-100 Index ($IUXX ) (QQQ ) is down -0.20%. Stock prices fell slightly today, but were little changed overall after the strong gains in the major stock indices in September.

Fed Chairman Jerome Powell said at the National Association for Business Economics conference this afternoon: “If the economy performs broadly as expected, policy will move toward a more neutral stance over time.” But we are not on a predetermined course. The risks are two-sided and we will continue to make our decisions session by session. As we consider further policy adjustments, we will carefully review the incoming data, the evolving outlook and the balance of risks. Overall, the economy is in solid shape; We intend to use our tools to keep it there.”

Earlier, Fed Governor Bowman's hawkish comments pushed up T-note yields and weighed on stocks as she said core inflation remained “uncomfortably” above the Fed's 2 percent target, bolstering the case for a “moderate” approach to cutting interest rates.

Today's better-than-expected US economic news supports soft landing prospects and is bullish for stocks. The September MNI Chicago PMI unexpectedly rose +0.5 to 46.6, beating expectations of -0.1 to 46.0. The Dallas Fed's September Manufacturing Outlook Survey also unexpectedly rose +0.7 to a 20-month high of -9.0, beating expectations of a decline to -10.8.

Today's corporate news is mixed for stocks. Automakers are under pressure today, led by a -13% decline at Stellantis NV (STLA) after the company cut guidance on its full-year adjusted operating income margin forecast. Conversely, Apple (AAPL) rose more than +1% after JPMorgan Chase said delivery times for its latest iPhone suggest slower initial demand for Pro models is “starting to correct.”

Global equity markets continued to see support from today's +8% rise in Chinese shares to a 16-month high. Chinese stocks jumped, extending last week's +12% rally after government leaders stepped up stimulus measures and pledged to support government spending and boost economic growth. Investors flocked to buy Chinese stocks today as financial markets in China remain closed for the week-long National Day holiday next week.

Friday's monthly US payroll report will also draw market attention. Nonfarm payrolls are expected to increase by +146,000 in September and the unemployment rate is expected to remain unchanged at 4.2% in September.

Markets rate the chances of a -25 basis point rate cut at the FOMC meeting on November 6th and 7th at 100% and a -50 basis point rate cut at this meeting at 42%.

Overseas stock markets are mixed on the uptrend today. The Euro Stoxx 50 fell -1.02%. China's Shanghai Composite rose to a 16-month high and closed with a significant gain of +8.06%. Japan's Nikkei Stock 225 fell to a weekly low and closed sharply lower at -4.80%.

Interest rates

December 10-year Treasury bonds (ZNZ24) are down -6 ticks today. The 10-year T-note yield rose +1.5 basis points to 3.766%. Treasury prices are under pressure today as Fed Governor Bowman's hawkish comments weighed on Treasuries when she said core inflation remained “uncomfortably” above the Fed's 2% target. Today's better-than-expected US economic reports for the September MNI Chicago PMI and the Dallas Fed's September survey on the production outlook also weighed on the T-Notes. Additionally, supply pressures are weakening T-Notes as a new corporate bond price is expected to be around $20 billion today, which will likely result in some short hedging in T-Note futures. Government bonds rebounded from their lows today after 10-year German Bunds recovered from early losses and rose on dovish comments from ECB President Lagarde that fueled speculation that the ECB would cut interest rates in October.

European government bond yields are mixed today. The yield on 10-year German federal bonds fell by -0.6 basis points to 2.127%. The 10-year UK government bond yield rose to a 3-1/2-week high of 4.021% and is up +2.6 basis points to 4.003%.

The German CPI in September (EU harmonized) fell to +1.8% year-on-year from +2.0% in August, exactly as expected and the smallest increase in three and a half years.

Italy's consumer price index for September fell to +0.8% year-on-year from +1.2% in August, in line with expectations and the smallest increase in four months.

ECB President Lagarde said ECB policymakers had become more optimistic that they could get inflation under control and “we will take this into account at our next monetary policy meeting in October.”

Swaps discount the chances of the ECB cutting interest rates by -25 basis points for the October 17 meeting at 91%.

US stock trader

Higher T-Note yields are weighing on chip stocks today. Micron Technology (MU) is down more than -3%. NXP Semiconductors NV (NXPI) and ON Semiconductor Corp (ON) are also down more than -2%. Additionally, Nvidia (NVDA), GlobalFoundries (GFS), Intel (INTC), Lam Research (LRCX), Applied Materials (AMAT), Texas Instruments (TXN), and Analog Devices (ADI) are down more than -1%.

Cruise operators are under pressure today after Carnival forecast fourth-quarter Ebitda of about $1.14 billion, below the consensus of $1.15 billion. As a result, Carnival (CCL), Royal Caribbean Cruises Ltd (RCL) and Norwegian Cruise Line Holdings (NCLH) are down more than -2%.

Baxter International (BAX) fell more than -2% after announcing that its North Cove factory in Marion, North Carolina, the company's largest, is currently closed due to flooding from Hurricane Helene.

Automakers are under pressure today, led by a -13% decline at Stellantis NV (STLA) after the company raised its full-year adjusted operating profit margin forecast to 5.5% by 7% from a previous forecast of 9.77% % had decreased. General Motors (GM) is down more than -3% and Ford Motor (F) is down more than -2% on this news.

Boeing (BA) fell more than -2% to lead the Dow Jones Industrials' losers after the machinists' union said strike settlement talks with the company had failed and no further talks were planned.

Freeport-McMoRan (FCX) fell more than -2% after Scotiabank downgraded the stock from Sector Outperform to Sector Perform.

Apple (AAPL) is up more than +1% to lead the Dow Jones Industrials gainers after JPMorgan Chase said delivery times for its latest iPhone suggest slower initial demand for Pro models ” a correction begins.”

CVS Health Corp. (CVS) is up more than +3% and is among the top performers in the S&P 500 after The Wall Street Journal reported that the company will meet with Glenview Capital Management to suggest ways to improve CVS's operations.

Brown-Forman (BF/B) is up more than +1% after Barclays upgraded the stock from Equal Weight to Overweight with a $53 price target.

US-listed Chinese stocks are rising today after the Shanghai Stock Index rose more than +8% to a 16-month high. As a result, Yum China Holdings (YUMC) is up more than +3%. Additionally, PDD Holdings (PDD) and Alibaba Group Holding (BABA) are up more than +2%, and NetEase (NTES) is up more than +1%.

Permian Resources (PR) is up nearly +1% after Goldman Sachs initiated coverage on the stock with a Buy rating and a $19 price target.

Results reports (09/30/2024)

Carnival Corp (CCL) and ReposiTrak Inc (TRAK).

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At the time of publication, Rich Asplund did not hold (either directly or indirectly) any positions in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. For more information, please see Barchart's disclosure policy here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.