Nasdaq Futures Edge Down Ahead Of Data Deluge, UAW Strike; Analysts Warn Fed May Not Be Done With Rate Hikes

Benzinga · 09/15/2023 11:33

U.S. stocks could open on a mixed note on Friday, the week’s final trading session, as the spotlight now shifts to the upcoming week’s Fed meeting. The United Auto Workers union’s strike against the Detroit big three could serve as a drag, given its potential ramifications for these companies, the industry, and the broader economy.

A slew of economic data due for the day could also create some volatility in the market.

Cues From Thursday’s Trading:

Buoyed by a strong debut by SoftBank Group Corp. (OTC:SFTBY)-owned Arm Holdings plc ADS (NASDAQ:ARM), the major averages advanced strongly on Thursday. Traders also digested a mixed batch of economic data that showed a faster than expected increase in producer price inflation, in-line retail sales data, and jobless claims data.

The averages opened higher but saw a loss of momentum in early trading. Stocks regained the momentum thereafter, and the indices hovered above the unchanged line before closing notably higher.

The strength was broad-based, with utilities, materials, real estate, energy, communication, technology, and consumer stocks all ending in the green.

The Dow Industrials ended at a one-month high, while the broader S&P 500 Index scaled the psychological resistance of 4,500 for the first time in two weeks.

US Index Performance On Thursday

Index Performance (+/-)Value
Nasdaq Composite+0.81%13,926.05
S&P 500 Index+0.84%4,505.10
Dow Industrials+0.96%34,907.11
Russell 2000+1.40%1,866.63

Analyst Color:

In the wake of the recent economic data, most analysts have penciled in a pause at the September Federal Open Market Committee meeting but expect more rate hikes down the line.

“While the Fed will likely hold its policy stance steady at the next decision September 20, their next change is more likely a hike than a cut,” said Comerica Chief Economist Bill Adams.

“High interest rates will act as an increasing restraint on consumer credit growth in 2024, slowing the growth of car and truck sales, and keeping home sales well below the 2021 and early 2022 pace,” he added.

 Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, said, “The Fed has indicated that they want to slow down the pace of rate increases, and for that reason they are still likely to keep rates unchanged at next week's meeting, but all of the data that is coming in higher than expected (e.g. CPI, PPI, Retail Sales) is going to put pressure on them to raise rates again at the following meeting.”

Futures Today

Futures Performance On Friday

FuturesPerformance (+/-)
Nasdaq 100 -0.04%
S&P 500+0.13%
Dow+0.27%
R2K +0.26%

In premarket trading on Friday, the SPDR S&P 500 ETF Trust (NYSE:SPY) rose 0.17% to $449.53, and the Invesco QQQ ETF (NASDAQ:QQQ) edged up 0.01% to $377.30, according to Benzinga Pro data.

Upcoming Economic Data:

The Labor Department will release its import and export prices report for August at 8:30 a.m. EDT. The month-over-month import price growth is expected to decelerate from 0.4% in July to 0.3% in August. Export prices may have increased by 0.4% compared to 0.7% growth in the previous month.

The first glimpse into manufacturing conditions in September could be gleaned from the New York Federal Reserve’s manufacturing survey. The business conditions index is expected to show continued contraction, albeit at a slower pace, with economists expecting a reading of -10 in September compared to -19 in August.

The Federal Reserve will release its industrial production report for August at 9:15 a.m. EDT. Economists, on average, expect industrial output growth of 0.1% month-over-month, markedly slower than July’s 1% increase. Capacity utilization rate is expected to remain unchanged at 79.3%.

The University of Michigan’s preliminary consumer sentiment survey for September is expected to show a slight improvement from 65.5 in August to 66 in July. Traders may also focus on the survey’s one-year and five-year inflation expectations readings.

Stocks In Focus:

  • Adobe, Inc. (NASDAQ:ADBE) fell over 2% in premarket trading following the release of its quarterly results.
  • Ford Motor Co. (NYSE:F) and General Motors Corp. (NYSE:GM) fell about 1.60% and 1.30% in reaction to the strike by the UAW union.

Commodities, Bonds, Other Global Equity Markets:

Crude oil futures rose 0.49% to $90.60 in early European session on Friday following Thursday’s 1.85% jump.

The benchmark 10-year Treasury note rose 0.036 percentage points to 4.326% on Friday.

Most Asian markets rallied on the back of the strong cues from overnight trading in U.S. stocks, while China bucked the downtrend amid the release of mixed August economic data.

European stocks firmed up in late-morning trading, suggesting the major averages in the region could be in for back-to-back gains. On Thursday, the European Central Bank unexpectedly increased the key interest rate by 25 basis points to 4.50%. The central bank also reduced the growth forecast for the region.

Image: Shutterstock/ solarseven