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What the Government Shutdown Means for Markets

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What’s in Today’s Report:

  • What the Government Shutdown Means for Markets
  • JOLTS & Case Shiller HPI Takeaways

Markets are trading with a risk-off tone this morning as stock futures are lower, bonds are steady and gold broke out to record highs above $3,900 after the government shutdown for the first time since 2018 at midnight.

Economically, the final Eurozone Manufacturing PMI for September edged up to 49.8 vs. (E) 49.5 while the EU’s Core CPI Flash met estimates at 2.3% y/y but the data is not materially impacting markets with the government shutdown news dominating headlines.

While the implications of the government shutdown will remain top of news, there are multiple important economic reports today including the ADP Employment Report (E: 50K), ISM Manufacturing PMI (E: 49.0), and Construction Spending (E: -0.1%). There is also one Fed official scheduled to speak: Barkin (12:15 p.m. ET).

Some late season earnings to watch include reports from CAG ($0.33) and RPM ($1.87), however, the government shutdown is likely to continue to dominate the newswires today so any signs of progress towards some sort of spending agreement in Congress would likely spark a relief rally while rising political tensions that could prolong the shutdown could prompt further losses in risk assets.

 

Why NVDA Earnings Are So Important

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What’s in Today’s Report:

  • Why NVDA Earnings Are So Important
  •  Why Markets Shrugged Off the Trump-Cook Drama
  • Durable Goods and Case-Shiller Data Takeaways

Futures are flat after a mostly quiet night of news as global traders await AI-behemoth NVDA’s quarterly earnings (due out after the close today).

Economically, Australian CPI jumped from 1.9% to 2.8% vs. (E) 2.3% in July, the latest global inflation release to surprise to the upside which is adding to concerns about a resurgence in price pressures across major economies as a result of the trade war.

There are no noteworthy economic releases in the U.S. today and just one Fed official scheduled to speak: Barkin (12:00 p.m. ET).

There is a 5-Yr Treasury Note auction at 1:00 p.m. ET that could impact markets (yesterday’s solid 2-Yr auction results added a tailwind to the afternoon equity rally) with investors looking for more signs of strong demand.

With the limited list of catalysts today, markets should be quiet and trade with a positioning-style tone as investors await earnings from KSS ($0.33), ANF ($2.27), RY ($2.36), NVDA ($0.94), SNOW (-$0.57), HPQ ($0.75), and CRWD (-$0.19).

NVDA’s results will clearly be the primary focus as the chip-making giant accounts for roughly ~8% of the entire S&P 500; a miss could spark meaningful volatility while a positive surprise would likely see the major indexes make a run at all-time highs.

 

The True Indicator of Banking Stress

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What’s in Today’s Report:

  • The True Indicator of Banking Stress
  • Case Shiller Home Price Index and Consumer Confidence: Charts

Stock futures are trading solidly higher with overseas markets following some positive bank headlines out of Europe and strong price action in Asian tech shares.

BABA announced a corporate restructuring plan that sent shares higher by 14% overnight, boosting sentiment across Asian equity markets and buoying U.S. equity futures with tech leading the way higher.

In Europe, it was reported that UBS has brought back former CEO Sergio Ermotti to oversee the CS takeover which is further easing some of the angst surrounding the recent turmoil in the banking sector.

Looking into today’s session, there is one more housing data release to watch: Pending Home Sales (E: 1.0%) before Fed Vice Chair Barr continues with his Congressional testimony regarding recent bank failures at 10:00 a.m. ET. There is also a 7-Yr Treasury Note auction at 1:00 p.m. ET.

Bottom line, equity markets appear to be stabilizing but the tape does remain thin and tentative with the “pain trade” to the upside. One materially negative headline out of the banking sector or regarding Fed policy, however, could reignite the volatility of recent weeks.

Is It Time to Allocate to Growth?

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What’s in Today’s Report:

  • The Start of 2023 Isn’t the Time to Allocate to Growth
  • Case-Shiller and FHFA House Price Indices
  • Chart: Value Massively Outperformed Growth in 2022

Stock futures are modestly higher in cautious trade this morning with Treasuries largely steady and overseas markets mixed as focus remains on China’s reopening efforts.

China’s government will resume the issuance of passports and visas while Hong Kong dropped PCR testing requirements for travelers, however the rapid move away from “Zero Covid” is beginning to rekindle inflation worries which could become a renewed headwind on equities.

Looking into today’s session, there are two economic reports to watch: Pending Home Sales (E: -0.5%) and the Richmond Fed Manufacturing Index (E: -6) but neither should impact Fed policy expectations or meaningfully move markets in quiet holiday trading.

There are no Fed speakers to watch today but the Treasury will hold a 5-Yr Note auction at 1:00 p.m. ET and following yesterday’s large move higher in yields, surprisingly strong or unexpectedly weak demand could influence equity market trading.