S&P 500 Futures Gain After Warsh’s Remarks; Chip Stocks Extend Slide

December S&P 500 E-Mini futures (ESZ26) are up +0.22% this morning as sentiment improved after Fed Chairman Kevin Warsh offered no indication of an October rate move at an IMF meeting.

Fed Chairman Kevin Warsh refrained from commenting on near-term monetary policy during a discussion at the International Monetary Fund’s meeting in Bangkok Friday morning. Traders interpreted that as another sign the Fed is unlikely to rush into raising rates at its meeting later this month, paring bets on a hike this month to 14.9% following Warsh’s speech from more than 25% on Thursday.

Meanwhile, December Nasdaq 100 E-Mini futures (NQZ26) edged down as chip and AI infrastructure stocks remained under pressure. Micron Technology (MU), Sandisk (SNDK), and Intel (INTC) each fell more than -1% in pre-market trading.

Investors are now awaiting the Federal Reserve’s industrial production report.

In yesterday’s trading session, Wall Street’s major indices ended mostly higher as investors rotated out of chipmakers and into a wider range of stocks as well as bonds. Software stocks climbed, with Intuit (INTU) and ServiceNow (NOW) rising over +6%. Also, defensive healthcare stocks gained, with Alnylam Pharmaceuticals (ALNY) climbing over +4% and Eli Lilly (LLY) rising more than +3%. In addition, International Paper (IP) surged over +6% and was among the top percentage gainers in the S&P 500 after the company said it was in discussions with potential buyers for its Europe, Middle East, and Africa packaging business following unsolicited approaches. On the bearish side, chip and AI infrastructure stocks slid, with Applied Materials (AMAT) and Lam Research (LRCX) dropping more than -3%.

Market participants also parsed a flurry of U.S. economic data on Thursday. The U.S. producer price index for final demand rose +1.3% m/m and +6.3% y/y in September, stronger than expectations of +0.6% m/m and +5.3% y/y. Also, the core PPI, which excludes volatile food and energy costs, rose +0.7% m/m and +5.0% y/y in September, above expectations of +0.3% m/m and +4.4% y/y. In addition, U.S. retail sales rose +0.8% m/m in September, stronger than expectations of +0.3% m/m, and core retail sales, which exclude motor vehicles and parts, rose +0.9% m/m, stronger than expectations of +0.6% m/m. Finally, the number of Americans filing initial jobless claims in the past week rose by 1K to 199K, in line with expectations.

“Producer-price inflation firmed in September as higher energy prices translated to higher transportation costs and wholesalers recovered margins,” said Troy Durie of Bloomberg Economics. “More important for the Fed, PPI components that feed into PCE—namely airfares—came in above expectations, putting more pressure on PCE inflation.”

U.S. rate futures are currently pricing in a 70.7% chance of no rate change and a 29.3% chance of a 25-basis-point rate hike at the FOMC meeting later this month.

Today, investors will focus on U.S. industrial production and manufacturing production data, set to be released in a couple of hours. Economists project industrial production to rise +0.4% m/m and manufacturing production to rise +0.3% m/m in September, compared with August’s figures of no change m/m and -0.3% m/m, respectively.

The U.S. import and export price indexes will also be released today. Economists expect the import price index to climb +0.9% m/m and the export price index to jump +1.0% m/m in September, compared with the previous month’s figures of +0.7% m/m and +0.6% m/m, respectively.

On the earnings front, property and casualty insurer Travelers (TRV), along with regional banks Truist Financial (TFC), M&T Bank (MTB), Citizens Financial (CFG), and Regions Financial (RF), are scheduled to report quarterly results today. According to Bloomberg Intelligence, S&P 500 companies are expected to post an average +25% jump in third-quarter earnings from a year earlier.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 5.10%, up +0.49%.

The Euro Stoxx 50 Index is up +0.69% this morning as investors regained their appetite for risk at the end of a turbulent week. Technology stocks were among the biggest gainers on Friday, tracking a modest rebound in their Asian peers. The sector also drew support from chip-equipment maker Aixtron, which climbed more than +5% after reporting stronger-than-expected Q3 order intake and reaffirming its full-year guidance. In addition, defense, industrial, and automobile stocks climbed. The benchmark index was on track for a weekly gain. Final data from Eurostat released on Friday showed that the Eurozone’s annual inflation rate picked up to +3.8% in September, confirming preliminary estimates. Separate data showed that the Eurozone’s trade balance swung into a deficit in August as higher energy imports and weaker trade in machinery and vehicles weighed on the balance. Meanwhile, Eurozone government bond yields rose on Friday, moving away from multi-week lows hit in the previous session as the rebound in equities dampened demand for safe-haven assets. In other corporate news, Nordex jumped over +12% after the German wind-turbine maker posted upbeat preliminary Q3 EBITDA and raised its full-year EBITDA margin guidance.

Eurozone’s CPI and Core CPI data were released today.

Eurozone’s September CPI rose +0.6% m/m and +3.8% y/y, in line with expectations.

Eurozone’s September Core CPI rose +0.2% m/m and +2.5% y/y, in line with expectations.

Asian stock markets today closed in the green. China’s Shanghai Composite Index ($CHSC) closed up +0.24%, and Japan’s Nikkei 225 Stock Index ($NKY) closed up +1.39%.

China’s Shanghai Composite Index closed slightly higher today after authorities took steps to shore up the stock market by urging companies and state funds to buy shares while guiding some investors to limit selling. Real estate, gold-related, and defense stocks led the gains on Friday. Still, the benchmark index posted losses for the week. Bloomberg News reported that financial regulators convened a meeting on Thursday to discuss measures aimed at stabilizing the market. Authorities also provided informal guidance to several major insurers, directing them to disclose their equity holdings, avoid realizing losses on underwater positions, and align investment decisions with broader economic objectives. In addition, regulators urged the so-called national team to step up stock purchases. Meanwhile, at least 10 AI supply-chain companies, including optical transceiver maker Eoptolink and chip-equipment maker Piotech, announced share buyback plans. A series of technology companies, including chipmakers MetaX Integrated Circuits and Hygon Information Technology, also issued Q3 profit forecasts pointing to rapid growth. In addition, turnover surged in several exchange-traded funds favored by the national team during late-session trading on Friday. Investor attention now turns to China’s third-quarter gross domestic product data, due Monday.

Japan’s Nikkei 225 Stock Index closed higher today as investors snapped up shares after a recent selloff. Overnight gains on Wall Street supported sentiment, which was further buoyed after Fed Chairman Kevin Warsh stopped short of signaling greater urgency to tighten policy despite this week’s hotter-than-expected inflation data. Nearly all sectors ended higher on Friday, with technology and financials among the biggest gainers. Still, the benchmark posted a steep weekly loss. Meanwhile, Japanese government bonds were little changed on Friday, steadying after the previous session’s rally as risk-off sentiment that had driven investors into safe-haven assets eased. Elsewhere, foreign investors bought a net 3.52 trillion yen worth of Japanese stocks in the week ended Oct. 10, marking the largest weekly inflow since Apr. 11, according to Ministry of Finance data. In corporate news, BayCurrent jumped over +17% after the consulting firm announced plans to use excess cash for investments and share buybacks. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed down -10.96% at 32.17.

Pre-Market U.S. Stock Movers

Chip and AI infrastructure stocks slipped in pre-market trading. Micron Technology (MU), Sandisk (SNDK), and Intel (INTC) each fell more than -1%.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Friday - October 16th

The Travelers Companies (TRV), Truist Financial (TFC), M&T Bank (MTB), Citizens Financial Group (CFG), Regions Financial (RF), Ladder Capital (LADR).

On the date of publication, Oleksandr Pylypenko did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.