On the first trading day of October aa the fourth quarter begins, stock futures showed mixed results following a surprisingly strong performance in September. The S&P 500 and the Dow both reached closing records in the previous session, buoyed by Federal Reserve Chair Jerome Powell’s statement that the central bank is “not on any preset course” regarding future rate policy decisions. Investors are also keeping an eye on upcoming economic data, with the U.S. Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey for August set to be released on Tuesday morning, along with the S&P Global U.S. Manufacturing Purchasing Managers’ Index and the ISM Manufacturing PMI readings.

European stocks began October on a positive note, buoyed by the news that euro zone inflation has fallen below 2% for the first time since mid-2021, according to preliminary data released on Tuesday. Despite this overall positive trend, Renault shares dropped by 3.6%, placing them at the bottom of France’s CAC 40 index. This decline extends the losses seen in the auto sector from the previous session, reflecting ongoing industry pressures. Additionally, German inflation data released on Monday indicated a decrease in the consumer price index to 1.8% in September.

The financial markets in South Korea, Hong Kong, and mainland China are closed due to a public holiday. Mainland China will remain closed for the rest of the week in observance of the Golden Week holiday. Meanwhile, in Japan, business optimism among large manufacturers has remained steady, showing no change. However, sentiment among large non-manufacturers has seen a slight improvement, rising to +34 from +33 in the third quarter.

Economic Calendar

Earnings Calendar

Notable reports for Thursday before the bell include AYI, MKC, PAYX, & UNFI. After the bell reports include CLAM, LW, NKE, & RGP.

News & Technicals’

Federal Reserve Chair Jerome Powell stated on Monday that the recent half percentage point interest rate cut should not be seen as an indication that future rate adjustments will be equally aggressive. Speaking to the National Association for Business Economics, Powell emphasized that the Fed is “not on any preset course” regarding monetary policy. He expressed confidence in the strength of the economy and anticipated that inflation would continue to decrease.

Between 2014 and 2015, the Chinese stock market experienced a dramatic surge, doubling in value over six months as leverage increased significantly, noted Aaron Costello, regional head for Asia at Cambridge Associates. However, he pointed out on Monday that the current market conditions are different, with less dramatic gains and lower leverage levels. Costello reassured that “we’re not in the danger zone yet,” but he also highlighted the uncertainty surrounding whether economic growth will be robust enough to sustain a long-term market rally.

CVS Health’s board has enlisted advisors to conduct a strategic review of its business amidst potential activist pressure and a significantly depressed stock price, according to sources familiar with the situation. This review has been in progress for some time, though it remains uncertain what actions, if any, will be taken. Following the news, CVS shares saw a rise of approximately 2.5% in after-hours trading on Monday.

Starting at 12:01 a.m. ET on October 1, approximately 50,000 longshoremen from the International Longshoremen’s Association (ILA) began a strike at East Coast and Gulf Coast ports, stretching from New England to Texas. This marks the union’s first strike since 1977, following unsuccessful contract negotiations with port ownership. The strike affects a significant portion of U.S. trade, as 43%-49% of all U.S. imports and billions of dollars in monthly trade pass through these ports. The ILA, the largest maritime union in North America, rejected a proposal from the port management group USMX on Monday, which included a nearly 50% wage increase over six years.

As the fourth quarter begins traders will be hoping for a follow-through to the sharp afternoon rally that occurred yesterday that squeaked out new records in Dow and SP-500.  Market breadth, however, continued to decline with the indexes remaining in a choppy consolidating condition. Keep in mind that the big bank reports don’t begin until Oct. 11^th so as we wait, don’t be surprised to see choppy light volume conditions persist.  Middle eastern tensions continue to grow the longshoreman strike adds another layer of uncertainty for the traders to digest.

Trade Wisely,

Doug