MARKET WRAPS
Watch For:
Oracle earnings
Today's Headlines/Must Reads
- Earnings Estimates Are Rising, a Welcome Sign for 2023 Market Rally
- Energy Stocks Are Back in the Market's Driver's Seat
- The 11% Yield That Isn't in Your Mutual Fund
- An Important Shift in Fed Officials' Rate Stance Is Under Way
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Opening Call:
Stock futures were higher on Monday, with bond yields steady, as traders eyed a data-rich week.
The week ahead will bring data on consumer prices, producer prices and retail sales. The data will help investors gauge the Federal Reserve's next steps in its campaign to tame inflation. The Fed rate-setting committee is scheduled to meet next week.
For now, the market is pretty certain the Fed will leave borrowing costs at a range of 5.25% to 5.50%.
"Interest rate debates remain a central plank in investor thinking, with more inflationary data to come this week which could move the needle," Interactive Investor said.
Fundstrat, noted that the market was also welcoming a report in the Wall Street Journal suggesting the Fed now thinks "the burden has shifted toward evidence of an accelerating economy to justify higher rates."
Nasdaq futures were looking chipper as shares of Tesla rose nearly 6% on an upgrade from equal-weight to overweight by Morgan Stanley.
The upgrade centers around AI with MS writing that Tesla "has developed an advanced supercomputing architecture that pushes new boundaries in custom silicon and may put Tesla at an asymmetric advantage in a $10 trillion total addressable market."
Overseas
Government bond yields rose in Japan and across Europe as investors assessed the impact of a policy shift in Japan.
Stocks abroad were mixed. European shares gained while equities in Hong Kong and Tokyo fell.
Premarket Movers
ADRs of Alibaba edged higher after its Hong-Kong listed shares declined 2.7%. This followed the departure of Daniel Zhang, former chairman of the e-commerce giant, as chairman and chief executive of its cloud business unit. Alibaba is aiming for a public listing of its cloud unit, the company's second-largest business by revenue.
Alphabet rose 0.5% as the Department of Justice finally will bring its three-year-old antitrust case against Google to trial beginning Tuesday.
Apple shares were up 0.8%, a day before the company's annual fall launch event.
J.M. Smucker is nearing a deal to acquire Twinkies owner Hostess Brands for about $4 billion, The Wall Street Journal reported, citing people familiar with the matter. Hostess Brands was up 6.1%, while Smucker shares were inactive.
Other Stocks to Watch
The rejection of Stellantis's latest offer by the UAW union increases the likelihood of a strike in the U.S., but its length will dictate its effect on the car maker, Equita Sim said. Read more .
Forex:
The current focus for EUR/USD has returned to the relative difference between the U.S and European economies, thus ruling out a near- and medium-term scenario of a decline in the dollar index, https://urldefense.com/v3/__http://XS.com__;!!F0Stn7g!EsI8kcueSPqghaHxw88jZM91UyeoiivPQ-QakKBY9hpkknWRgAsacSOF6UkWZ262P-3i5BQqPdMnar4VC00sJmXkDIWb85e-UHcU7HXCS2Y$ said.
Recent data on the U.S. services sector and jobless claims suggest that while "the U.S. economy continues to demonstrate its strength, the European economy appears to be in a relatively stable state," https://urldefense.com/v3/__http://XS.com__;!!F0Stn7g!EsI8kcueSPqghaHxw88jZM91UyeoiivPQ-QakKBY9hpkknWRgAsacSOF6UkWZ262P-3i5BQqPdMnar4VC00sJmXkDIWb85e-UHcU7HXCS2Y$ said.
Central banks' assessment of the economy will be key ahead of rate decisions by the European Central Bank on Thursday and by the Federal Reserve on Sept. 20.
ING said the euro could edge lower against the dollar ahead of the ECB rate decision, as traders unwind their speculative euro positions.
It added that the dollar is expected to move higher before the release of Wednesday's CPI data, causing the euro to fall in comparison, and EUR/USD could drop below 1.0700 ahead of Thursday.
Read ECB's Rate Decision to Be Key for Euro's Trajectory
Read Yen Firms After BOJ Governor Comments
Energy:
Oil prices edged at the start of the week, but support from shrinking supply from Saudi Arabia and Russia has helped to contain losses.
"Tightness in the physical market is also providing some support," ANZ said, adding that U.S. inventories have fallen to their lowest level since December.
Chinese demand is also strong, with imports rebounding strongly in August."
Metals:
Metal prices were higher on a weaker dollar and the uncertain macroeconomic environment.
Investors this week will be looking to key inflation data points, with U.S. consumer and producer price indexes due.
"Wednesday's CPI Inflation data is September's #1 non-fundamental data point and will move our commodity markets via Fed policy expectations and the U.S. dollar," Peak Trading Research said.
Peak added that bond markets are pricing a 50% probability of another rate hike from the Fed in 2023, with this week's data likely to shift those odds.
U.S. Minerals Exploration
A lack of discovered mineral resources in the U.S. highlights the need for more comprehensive geologic survey, exploration and mapping efforts, to reduce reliance on critical mineral imports, Morgan Stanley said.
"In the case of some battery-making minerals like cobalt, nickel, and vanadium, the U.S. holds an average reserve level of only 0.5% of the total global reserves."
Nickel and cobalt reserves today are particularly low at just 0.4% and 0.8% of the global total, which would only meet U.S. needs for two and nine years, respectively, Morgan Stanley said.
TODAY'S TOP HEADLINES
J.M. Smucker Nears Deal to Buy Hostess
Twinkies owner Hostess Brands is closing in on a sale to J.M. Smucker, a move that would marry the two big names in snacks.
A deal, likely worth something in the neighborhood of $4 billion, could be announced as soon as Monday, assuming the talks don't hit a last-minute snag, according to people familiar with the matter.
Instacart to Target Much-Diminished Valuation Range of Under $10 Billion in IPO
Instacart is targeting a valuation of roughly $8.6 billion to $9.3 billion in its imminent IPO, a fraction of what the grocery-delivery company was previously worth, in the latest sign of diminished investor enthusiasm for private growth companies.
Instacart is set to start marketing its long-anticipated initial public offering to investors as early as Monday, and plans to disclose the expected valuation range then, according to people familiar with the matter. The San Francisco company's plans could still change and it is possible the range could move around as the company receives feedback during the roadshow.
Meta Is Developing a New, More Powerful AI System as Technology Race Escalates
Meta Platforms is setting its sights on OpenAI.
The parent of Facebook and Instagram is working on a new artificial-intelligence system intended to be as powerful as the most advanced model offered by OpenAI, the Microsoft-backed startup that created ChatGPT, according to people familiar with the matter. Meta aims for its new AI model, which it hopes to be ready next year, to be several times more powerful than the one it released just two months ago, dubbed Llama 2.
Land & Buildings Seeks Board Changes at Ventas-Again
Activist investor Jonathan Litt is again seeking board changes at Ventas, the big owner of senior-housing communities.
Litt's Land & Buildings Investment Management says the changes are needed to help reverse underperformance at the real-estate investment trust, according to a letter it plans to send the company's shareholders that was viewed by The Wall Street Journal.
Chevron Appeals to Australian Workplace Arbiter to Resolve Labor Impasse
Chevron has asked Australia's workplace arbiter to intervene to resolve a labor dispute at two giant natural-gas operations after negotiations with union representatives failed and workers began partial strikes at the sites.
The U.S. energy company said Monday that it has filed applications to Australia's Fair Work Commission for so-called intractable bargaining declarations for its Gorgon and Wheatstone downstream facilities. It said it can't see how an agreement will otherwise be reached. Chevron filed an application for its Wheatstone platform a week ago.
Apple's China Dependency Spooks Investors After Ban
China's move to limit Apple's reach is a development that investors have feared for years, signaling that a once-untouchable partner in the country is now ensnared in rising tensions between the world's two foremost superpowers.
For years, Apple has navigated myriad crises in China, including wage disputes, trade tensions and strident Covid-19 lockdowns, often emerging unscathed after a relatively brief period of uncertainty.
Eurozone Braced for Weaker Growth in 2023, 2024, EU Forecasts Say
The eurozone is likely to grow at a slower pace than previously expected this year and next amid weak domestic consumption and flagging global demand, with the powerhouse German economy notably set to shrink, according to fresh figures published by the European Union executive Monday.
The 20-member bloc should book growth of 0.8% this year and 1.3% in 2024, revised down from previous estimates in May of 1.1% and 1.6%, respectively, according to the European Commission.
Japan Financial Stocks Jump as 10-Year Govt Bond Yield Hits 9-Year High
Japanese financial stocks rose sharply Monday morning as the 10-year government bond yield hit a nine-year high after the Bank of Japan's governor said in an interview with local daily Yomiuri that ending negative interest rates would be an option if wage and consumer price gains look sustainable.
(MORE TO FOLLOW) Dow Jones Newswires
09-11-23 0614ET
