After a very volatile day of price action, indexes closed little change after the Senate passed a temporary spending bill to keep the government open but that is likely dead on arrival in the House wanting to curb the deficit spending. With the worries of a shutdown weighing on investors’ minds, they will have to deal with a GDP, Jobless Claims, a flurry of Fed Speakers that include Jerome Powell as well as a handful of notable earnings reports.  The focus will then quickly turn to the Friday Core PCE inflation numbers.  Though a relief rally could begin at any time it may prove to be anemic in light of the government shutdown worries.  Expect the challenging price action to continue.

Overnight Asian markets closed mixed but mostly lower as rising oil and bond yields and more real estate woes plagued China.  European markets have recovered slightly from early lows training around the flatline as leisure stocks suffer from consumer weakness.   Ahead of market-moving economic reports, U.S. Futures are trying to put on a positive face despite all the uncertainties ahead.  Buckle up it is likely to be another volatile day.

Economic Calendar

Earnings Calendar

Notable reports for Thursday include CAN, BB, KMX, JBL, NKE, and MTN.

News & Technicals’

Oil prices reached their highest level in more than a year, as the supply of crude oil in a major storage hub decreased to its lowest level since last summer. The U.S. West Texas Intermediate (WTI) futures, which are the benchmark for U.S. oil prices, rose to $95.03 per barrel during the Asian trading hours, the highest since August 2020. This was driven by the decline in crude oil inventories at Cushing, Oklahoma, which is the delivery point for WTI futures and the largest storage hub in the U.S. According to the latest data from the Energy Information Administration (EIA), the crude oil stocks at Cushing fell by 3.6 million barrels to 34.8 million barrels in the week ending September 17, the lowest since July 2020. The drop in Cushing stocks reflects the strong demand for crude oil in the U.S., as well as the impact of Hurricane Ida, which disrupted the production and transportation of oil in the Gulf of Mexico. The surge in oil prices also reflects the global recovery in oil demand, as well as the ongoing supply constraints from OPEC+ and other producers.

The labor dispute between the United Auto Workers (UAW) union and the three major U.S. automakers, General Motors, Ford Motor, and Stellantis, is escalating as the union threatens to expand its strikes if the negotiations do not make significant progress by Friday morning. The UAW, which represents about 146,000 workers at the three companies, has been on strike since Sept. 15, after the expiration of their labor contracts on Sept. 14. The strikes currently affect about 18,300 workers, or 12.5% of the UAW members, at several plants across the country. The main issues in the negotiations are wages, health care, job security, and electric vehicle production. The UAW announced last week that it would increase its strikes to more plants if the talks did not advance by Sept. 22. However, as of Tuesday, no breakthroughs have been reported, and the union has set a new deadline of 10 a.m. ET on Sept. 24. If the deadline is not met, the UAW said it will announce more strikes at more plants, potentially disrupting the production and sales of the automakers.

Evergrande, the Chinese property giant that is facing a debt crisis, has suspended its shares from trading on the Hong Kong stock exchange since Sept. 16. This is not the first time that the company has halted its shares from trading. In March 2020, Evergrande also suspended its shares, citing a major restructuring plan. The shares did not resume trading until Aug. 28, 2021, after a 17-month hiatus. However, the company’s troubles did not end there. Earlier this month, Evergrande postponed a meeting with its creditors, where it was supposed to discuss a debt restructuring plan. The company has about $300 billion of debt and has been struggling to pay its suppliers, contractors and investors. The situation has sparked fears of a possible default and contagion in the Chinese and global markets.

The stock market ended a very volatile day with little change, waiting on market-moving economic data and the worries of a government shutdown. The Senate approved a temporary funding bill to prevent a government shutdown, but it looks like it will be dead on arrival at the House of Representatives, which is attempting to curtail the massive deficit spending. Yields also rose, with the 2-year Treasury yield reaching over 5.1% and the 10-year yield closing around 4.6% as the dollar continued to surge higher with the oil sector. Today the bulls and bears will look for inspiration in the GDP, Jobless Claims, and a handful of notable consumer-based earnings. We will also have a flurry of Fed members speaking including Jerome Powell as we wait on Friday’s Core PCE inflation figures.  We are overdue for a relief rally but keep in mind if it should begin it could be muted by government shutdown worries.

Trade Wisely,

Doug