Thursday September 30th

30-09-2021

Dow futures rise more than 100 points as market gets set to close out a losing month

U.S. stock index futures rose slightly on Thursday to close out a volatile and losing month for stocks. Tech stocks bounced a bit in premarket trading after struggling this week because of a rapid rise in rates. The 10-year Treasury yield was slightly lower in early trading. Futures contracts tied to the Dow Jones Industrial Average gained 140 points, or 0.4%. S&P 500 futures added 0.4% and Nasdaq 100 futures gained 0.5%. Chip stocks bounced in premarket trading after losses in the prior session. Nvidia and Micron were higher. Facebook, Apple and Netflix were slightly higher in premarket trading. Stocks also got a boost as Senate Majority Leader Chuck Schumer said late Wednesday that the chamber had reached a deal to avoid a government shutdown this week. Schumer said he would schedule a vote on Thursday for the stopgap measure that would keep the government running into early December. The deal would still need to pass the House. For the month, the Dow is down 2.7%, the S&P 500 is off by 3.6% and the Nasdaq Composite has shed 4.9%. September has lived up to its losing reputation with the market beset by fears of a China property crisis, rising inflation and a late interest rate surge sparked by the Federal Reserve signaling it would start removing stimulus soon. “We wouldn’t get caught up in any end-of-quarter machinations today and continue to advise fading rallies (especially in tech) as the coming weeks will stay rocky,” wrote Adam Crisafulli of Vital Knowledge. The 10-year Treasury yield fell 3 basis points to 1.52% on Thursday (1 basis point equals 0.01%). The rate was at 1.30% to end August before surging to end this month. September’s losses have led to a middling third quarter for the market. For the 3-month period, the Dow is slightly in the red, while the Nasdaq Composite is just about flat. The S&P 500 is up 1.4%. The S&P 500 is still up 16% on the year. October has a reputation for some violent sell-offs but overall is typically the start of a better seasonal performance for stocks. The S&P 500 averages a 0.8% gain for the month, according to the Stock Trader’s Almanac. “September lived up to its reputation and dented stock portfolio returns, but not too badly,” wrote Ed Yardeni of Yardeni Research. “There has been a lot of concern that higher wages, higher energy prices, and higher transportation costs will weigh on earnings for the remainder of this year and into 2022. It’s certainly something we’ll be tracking. But so far, analysts remain relatively sanguine.” Concerns about inflation and supply chain issues continued to hamper stocks. Shares of Bed Bath & Beyond fell more than 20% in premarket trading after the company said those issues hurt the company’s second quarter results, and the news also weighed on fellow retail stocks. Fed Chair Jerome Powell will testify to the House Financial Services Committee at 10 a.m. ET Thursday alongside Treasury Secretary Janet Yellen. Powell told a European Central Bank panel on Wednesday that he was frustrated by persistent inflation. “It’s also frustrating to see the bottlenecks and supply chain problems not getting better — in fact at the margins apparently getting a little bit worse,” Powell said. “We see that continuing into next year probably, and holding up inflation longer than we had thought.” On the data front, initial jobless claims for the prior week came in at 362,000. Economists are expecting a print of 335,000, according to Dow Jones. The Dow and S&P 500 inched higher during regular trading Wednesday. The 30-stock Dow advanced about 90 points for its fifth positive session in the last six, while the S&P 500 gained 0.16%, breaking a 2-day losing streak. The Nasdaq Composite, meanwhile, declined 0.24% for its fourth straight negative session. The technology sector declined again on Wednesday and is now down 4% for the week, making it the worst-performing S&P group. The tech decline came as the 10-year Treasury yield hit a high of 1.56% on Wednesday, after rising to 1.567% on Tuesday. The move higher is pressuring tech stocks since it makes future cash flows look less attractive. Wells Fargo noted that pullbacks are to be expected. “This is a normal re-pricing of risk based on a higher cost of capital and greater market uncertainty,” the firm said Wednesday in a note to clients. Shares in Asia-Pacific were mixed on Thursday, as investors reacted to the release of Chinese factory activity data for September. Mainland Chinese stocks closed higher, with the Shanghai composite up 0.9% to 3,568.17 while the Shenzhen component jumped 1.634% to 14,309.01. Hong Kong’s Hang Seng index, on the other hand, fell 0.55% as of its final hour of trading. Hong Kong-listed shares of developer China Evergrande fell more than 4% in Thursday afternoon trade after Reuters reported that some bondholders did not receive a due coupon payment by the close of Asia business hours on Wednesday. Elsewhere in Japan, the Nikkei 225 slipped 0.31% to close at 29,452.66 while the Topix index declined 0.4% to end the trading day at 2,030.16. Japan is set for a new prime minister after Fumio Kishida won the governing party leadership election on Wednesday. South Korea’s Kospi rose 0.28% to close at 3,068.82. Oil prices held steady on Thursday after rising above $80 a barrel this week, shrugging off bearish factors such as rising U.S. crude oil inventories and a strong dollar amid consensus that a supply deficit will stay for coming months. Brent crude for November delivery was up 21 cents at $78.85 a barrel by 0856 GMT on its expiry day while December loading crude was at $78.35. U.S. oil rose 32 cents to $75.15 a barrel. Gold stabilized on Thursday after two days of losses, helped by a slight pullback in the dollar, but gains were kept in check by expectations that the U.S. Federal Reserve would soon start tapering its monetary support. Spot gold rose 0.2% to $1,729.26 per ounce by 5:20 a.m. ET. U.S. gold futures were up 0.5% at $1,730.70. Gold is being offered some reprieve from the dollar taking a breather, said Han Tan, chief market analyst at Exinity.