Daily Markets: Fed’s 'Taper' Timeline in Focus Ahead of Friday's Jobs Report

Today’s Big Picture
Equity indices in Asia rebounded today posting gains across the board except for Japan as Hong Kong’s Hang Seng index surged 3.07% followed by Taiwan’s TAIEX gains of 1.96% and South Korea’s KOSPI index’s 1.76% advance. Chinese equity markets remain closed for Golden Week.
By mid-day trading, the preponderance of equity indices in Europe were moving higher following reports that the European Central Bank is studying a new bond-buying program to prevent market turmoil when emergency purchases get phased out next year, as well as declines in oil prices after Russia offered to ease Europe’s energy crisis.
U.S. futures indicate those equity markets will move higher when markets open later today thanks to a prospective kick-the-can debt ceiling deal in Washington. The bout of debt ceiling uncertainty was only one of several items weighing on equities. Another item, the Fed’s timing for bond purchase tapering, is also in focus with tomorrow's employment report. See today’s Domestic Economy section below for more on that. The velocity of corporate earnings reports will also kick up a notch or two next week.
Data Download
International Economy
The preliminary reading for Japan’s August Leading Economic Index declined to 101.8 in August from July’s final reading of 104.1, hitting the lowest level since February as the country battled the Delta variant.
German Industrial Production for August fell 4% MoM in August, worse than the expected drop of 0.4% and well below the upwardly revised +1.3% July reading.
ECB Governing Council member Yannis Stournaras said that investors shouldn’t expect premature interest-rate increases from the central bank.
Domestic Economy
We suspect that tomorrow’s employment report figure will be the most important economic data point of 2021 and talk about a tense moment. The latest analysis by the St. Louis Fed of real-time employment data from Homebase implies an 818k plunge in employment for the Household survey. To be clear, this is not tomorrow’s Payroll survey from the Bureau of Labor Statistics, but a level like this from the Household survey would historically imply an increase of around only 180k in payrolls while the consensus estimate for Friday’s September number is at 488k vs. August number of 235k.
You may recall that after the last meeting of the Federal Reserve’s Open Market Committee, Chair Powell said that if the payroll number is at decent, a taper would be possible. Bloomberg News has reported that based on its sources that if the actual number comes in at 240k or lower, any taper announcement in November will be off the table.
Yesterday, Senate Minority Leader Mitch McConnell offered a short-term suspension of the U.S. debt ceiling to prevent a national default, giving Democrats time to pass a more permanent solution before the end of the year. The White House is expected to defer to Senate Majority Leader Chuck Schumer and House Speaker Nancy Pelosi to formally accept or reject the offer, with the White House Press Secretary sounding relatively unimpressed, “My understanding is that there has been no formal offer made, a press release is not a formal offer. And regardless, even the scant details that have been reported present a more complicated, more difficult option than the one that is quite obvious.”
Deputy Attorney General Lisa O. Monaco announced the creation of a National Cryptocurrency Enforcement Team (NCET) to tackle complex investigations and prosecutions of criminal misuses of cryptocurrency.
Following yesterday’s further climb in energy prices, U.S. Energy Secretary Jennifer Granholm raised the prospect of releasing crude oil from the government's strategic petroleum reserve at the FT Energy Transition Strategies Summit. Granholm also didn't rule out a ban on crude exports, saying it was an additional tool that could calm markets and bring oil prices down.
Before the market opens, we’ll receive the latest weekly jobless claims data as well as the September Challenger Job Cuts report. During the afternoon, about an hour before U.S. equity markets close for the day, the August Consumer Credit Change report will be published.
Markets
The majority of major market U.S. equity indices shrugged off a weak start to yesterday's trading to finish in positive territory following news of a potential concession on the debt ceiling. Senate Minority Leader McConnell offered Democrats the option to use normal procedures to pass an emergency debt ceiling extension at a fixed dollar amount into December 2021. Also helping to fuel the day’s buy the dip mentality were reports President Biden and Chinese President Xi will hold an online virtual summit by the end of the year. The S&P 500 gained 0.4%, overcoming an early 1.3% decline, while the Nasdaq Composite Index finished the day 0.5% higher and the Dow closed up 0.3%. Lagging was the Russell 2000, which finished the day down 0.6%.
Stocks to Watch
Earnings Announcements & Guidance
Before U.S. equity markets open this morning, ConAgra (CAG), Helen of Troy (HELE), and potato product company Lamb Weston (LW) will be among the companies reporting their quarterly results.
In response to recent media reports and congressional hearings regarding its platforms, Facebook (FB) has delayed the rollout of new products as it conducts “reputational reviews.”
During its Investor Day yesterday, General Motors (GM) announced it targets doubling its annual revenue and expanding its margins to 12-14% by 2030. The company also targets its EV revenue will grow from about $10 billion in 2023 to ~$90 billion annually by 2030 as the company launches EVs in high volume segments. By the end of the decade, GM sees its Cruise revenue reaching $50 billion annually. By the end of the decade. GM also projects annual software and services revenue opportunities in the $20-$25 billion range from a projected 30 million connected vehicles by the end of the decade.
Costco Wholesale (COST) reported September adjusted comparable sales (excluding impacts from gasoline prices and foreign exchange) growth of +9.4% vs +9.1% for August. Net sales for September tallied $19.5 billion, up 15.8% YoY. Overall, comparable sales were up 14.3% vs. 14.2% in August. Comparable sales after stripping out the impact of gas prices and F/X were up 10.0% in the U.S. and 9.4% higher overall vs. +9.1% in August.
Citrix Systems (CTXS) announced it now expects to report revenue at the midpoint to the high end of its previously announced guidance range of $765 to $775 million for its September 2021 quarter. The consensus revenue estimate for the quarter is $779.5 million.
Carnival Cruise Line (CCL) announced plans for more ship restarts for January and February, as it works towards the return of its full fleet sailing from U.S. homeports in the spring of 2022.
MoneyGram International (MGI) announced a partnership with the Stellar Development Foundation, a non-profit organization that supports the development and growth of Stellar, an open-source public blockchain that allows money to be tokenized and transferred anywhere in the world.
Artificial Intelligence lending platform, Upstart (UPST) announced Upstart Auto Retail cloud-based solution enables an enhanced car buying experience for both consumers and dealerships, including AI-enabled financing.
lululemon athletica (LULU) announced it will offer MIRROR, its popular nearly invisible interactive home gym, in nearly 40 lululemon stores across Canada and available for purchase in-store and online beginning on November 22.
IPOs
Life Time Group Holdings (LTH) priced its 39 million share IPO at $18.00 per share, far smaller in size than the target of 46.2 million shares in the $18 to $21 price range.
M&A Activity
Twitter (TWTR) announced it entered into a definitive agreement to sell MoPub to AppLovin Corporation (APP), a leading marketing software company, for $1.05 billion in cash.
InterActiveCorp (IAC) announced an agreement under which its Dotdash digital publishing unit will acquire the entity that will hold Meredith Corporation's (MDP) National Media Group, which is comprised of its Digital and Magazine businesses and its corporate operations.
After Today’s Market Close
Healthcare company Accolade (ACCD) is slated to report its quarterly results. Those looking to get a jump on the earnings reports to be had in the coming days should visit Nasdaq’s earnings calendar page.
On the Horizon
- October 8: Nonfarm payrolls, Wholesale inventories
- October 12: JOLTs report
- October 13: CPI, FOMC Minutes
- October 14: Weekly jobless claims, PPI, Monthly budget statement
- October 15: Retail Sales, Import & Export Prices, NY Empire State Manufacturing, Michigan Consumer Sentiment (preliminary), Business Inventories
Thought for the Day
“Your smile is your logo, your personality is your business card, and the way you make others feel is your trademark.” ~Anonymous
Disclosures
- lululemon athletica (LULU) is a constituent of the Tematica BITA Cleaner Living Index
- lululemon athletica (LULU) is a constituent of the Tematica BITA Cleaner Living Sustainability Screened Index
- Costco Wholesale (COST) is a constituent of the Tematica Research Thematic Dividend All-Stars Index
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.