U.S. Stocks May See Further Downside In Early Trading

U.S. Stocks May See Further Downside In Early Trading

The major U.S. index futures are currently pointing to a lower open on Monday, with stocks likely to extend the notable weakness seen in the third quarter.

Concerns about the outlook for interest rates may continue to weigh on the markets ahead of the release of the Labor Department’s closely watched monthly jobs report on Friday.

Economists currently expect employment to increase by 163,000 jobs in September after climbing by 187,000 jobs in August, while the unemployment rate is expected to edge down to 3.7 percent from 3.8 percent.

The downward momentum on Wall Street comes even though U.S. lawmakers passed a last minute, temporary spending bill over the weekend to keep the U.S. government open.

U.S. stocks turned weak after a firm start on Friday, and among the major averages, the Nasdaq managed to settle slightly higher, while the Dow and the S&P 500 ended on a negative note.

Concerns over the prospect of a government shutdown and the outlook for interest rates rendered the mood cautious, prompting investors to lighten commitments.

Activity was mostly stock specific, with earnings updates and other corporate news providing some direction.

The Dow, which rose to 33,893.68 in early trading, ended the day’s session at 33,507.50, losing 158.84 points or 0.5 percent. The S&P 500 ended down 11.65 points or 0.3 percent at 4,288.05, while the Nasdaq settled at 13,219.32, gaining 18.05 points or 0.1 percent.

The Dow shed about 2.7 percent in the third quarter, while the S&P 500 and the Nasdaq posted quarterly losses of 3.7 percent and 3.6 percent, respectively.

Nike climbed nearly 7 percent after the company reported a first-quarter bottom-line of $1.45 billion, or $0.94 per share, compared with $1.47 billion, or $0.93 per share in last year’s first quarter.

Carnival shares dropped about 5 percent, with cost pressures outweighing the company’s upbeat forecast.

Travelers Companies, JP Morgan, General Electric, Walmart, Hewlett Packard, Honeywell International, Caterpillar, Merck and Chevron shed 1 to 3 percent.

Wallgreens Boots Alliance surged nearly 6 percent. Micron Technology, Pfizer, Accenture, Tesla, Intel, Walt Disney, Microsoft and Nvidia posted sharp to moderate gains.

In economic news, a report released by the Commerce Department showed personal income in the U.S. increased in line with economist estimates in the month of August, climbing by 0.4 percent after rising by 0.2 percent in July.

The Commerce Department said personal spending also increased by 0.4 percent in August after jumping by an upwardly revised 0.9 percent in July.

Economists had expected personal spending to rise by 0.4 percent compared to the 0.8 percent advance originally reported for the previous month.

The report also said the annual rate of consumer price growth accelerated to 3.5 percent in August from 3.4 percent in July. The modest acceleration matched economist estimates.

Meanwhile, the annual rate of growth by core consumer prices, which exclude food and energy prices, slowed to 3.9 percent in August from 4.3 percent in July. The slowdown also matched expectations.

A report from MNI Indicators said the Chicago Business Barometer fell to 44.1 in September, from 48.7 in August, contracting for the 13th consecutive month.

The University of Michigan said in its report that the consumer sentiment index was revised higher to 68.1 in September from a preliminary 67.7.

Commodity, Currency Markets

Crude oil futures are climbing $0.57 to $91.36 a barrel after slumping $0.92 to $90.79 a barrel last Friday. Meanwhile, after falling $12.50 to $1,866.10 an ounce in the previous session, gold futures are sliding $12.20 to $1,853.90 an ounce.

On the currency front, the U.S. dollar is trading at 149.76 yen versus the 149.37 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.0533 compared to last Friday’s $1.0573.

Asia

Asian stocks ended mostly lower on Monday as weak factory activity data from China and Japan raised fresh concerns about the outlook for global growth.

Legislators in the United States passed a last minute, temporary spending bill over the weekend to keep the U.S. government open, helping limit regional losses.

The temporary funding bill allows the government to continue working until November 17, bringing some relief to the markets.

Markets in mainland China, Hong Kong and South Korea were closed for holidays. Chinese markets will continue to remain closed until the end of this week for the Golden week holiday.

A private survey suggested over the weekend that Chinese factory activity expanded at a slower pace in September as a result of sluggish external demand.

The Caixin/S&P Global manufacturing purchasing managers’ index dropped to 50.6 from 51.0 in the previous month.

A firm dollar weighed on gold and copper prices in Asian trade while oil prices edged up slightly after suffering losses at the end of last week.

Japanese shares reversed early losses to close lower on concerns about rising interest rates.

Japanese factory activity fell at the fastest pace in seven months in September, a survey showed today while the Bank of Japan’s quarterly survey revealed business confidence on the rise.

The Nikkei average 225 Index 0.3 percent lower at 31,759.88, after having climbed 1.7 percent earlier in the day. The broader Topix Index dipped 0.4 percent to 2,314.44.

Technology stocks ended mixed, with Advantest and Screen Holdings rising around 3 percent each, while Tokyo Electron and SoftBank Corp both fell over 1 percent.

Banks performed exceedingly well, with Mitsubishi UFJ Financial and Mizuho Financial rising 1.5 percent and 1 percent, respectively.

Australian markets fell, dragged down by technology and consumer discretionary stocks.

A survey revealed earlier in the day that Australia’s manufacturing industry continued to see deteriorating conditions in September amid a sharper decline in new orders.

The benchmark S&P/ASX 200 Index dropped 0.2 percent to 7,033.20 – reaching its lowest level in around seven weeks ahead of the Reserve Bank’s policy decision on Tuesday under new governor Michael Bullock.

New Zealand’s benchmark S&P/ZX-50 Index dropped half a percent to 11,243.29 ahead of a Reserve Bank of New Zealand policy meeting on Wednesday.

Europe

European stocks gave up early gains to turn lower on Monday as weak regional data offset investor optimism over U.S. lawmakers reaching a deal to avert government shutdown.

Euro zone manufacturing activity remained mired in a deep and broad-based downturn last month, with the HCOB’s final euro zone manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, falling to 43.4 from August’s 43.5.

Another survey showed the downturn in the U.K. manufacturing sector continued in September albeit at a slower pace.

The seasonally adjusted S&P Global/CIPS manufacturing purchasing managers’ index rose slightly to 44.3 from August’s 39-month low of 43.0.

Meanwhile, unemployment rate in the euro area has seen a drop from 6.5 percent to 6.4 percent in August – matching expectations.

While the U.K.’s FTSE 100 Index has fallen by 0.5 percent, the French CAC 40 Index is down by 0.3 percent and the German DAX Index is down by 0.2 percent.

Spanish bank Banco Bilbao Vizcaya Argentaria, S.A. gained 1 percent after it received clearance from the European Central Bank (ECB) for its share buyback program of up to 1 billion euros.

British defense giant BAE Systems advanced 1.5 percent after winning a £4bn submarine contract.

Water company United Utilities rose over 2 percent after reporting trading in line with its expectations for the year ending March 2024 and retaining outlook.

Pennon shares rallied 3 percent. The water and wastewater group said it has traded in line with expectations in its first half ended 30 September.

Melrose rose about 1 percent after staring a GBP500 million share buyback program.

French media group Vivendi jumped 2.3 percent after Barclays upgraded the stock rating to ‘overweight’.

China-exposed LVMH and Hermes International were seeing modest gains after official data showed China’s factory activity in September expanded for the first time since April.

Germany’s Deutsche Bank edged down half a percent on reports that the country’s financial regulator has appointed a special monitor to oversee the lender’s handling of consumer service problems at its Postbank unit.

Insurer Allianz SE was marginally lower after extending the mandate of Oliver Bate as Chairman and Chief Executive Officer.

U.S. Economic Reports

The Institute for Supply Management is scheduled to release its report on manufacturing activity in the month of September at 10 am ET.

The ISM’s manufacturing PMI is expected to inch up to 47.7 in September from 47.6 in August, although a reading below 50 would still indicate a contraction.

Also at 10 am ET, the Commerce Department is due to release its report on construction spending in the month of August. Construction spending is expected to increase by 0.5 percent.