There is a sense of lethargy in the equity futures market this morning, as participants remain fatigued by the sight of rising interest rates and the thought that policy rates could still have higher to go.
Currently, the S&P 500 futures are down 13 points and are trading 0.3% below fair value, the Nasdaq 100 futures are down 48 points and are trading 0.3% below fair value, and the Dow Jones Industrial Average futures are down 79 points and are trading 0.2% below fair value.
These are modest declines, but they follow on the heels of large losses last week for the major indices.
A poor showing from the mega-cap stocks drove those losses, but there was a general buyers’ strike as it seemed no one wanted to cross the picket line to buy stocks with rates rising, oil prices rising, UAW strike temperatures rising, and the threat of a government shutdown rising.
There hasn’t been any news this morning to turn the tide of broader market sentiment.
One bit of good news, though, is that reports indicate a tentative three-year deal has been reached between the studios and the Writers Guild of America to end the writers’ strike. That has provided some uplift for the studio stocks, but it has not been a broader market booster.
That’s due partially to the understanding that the UAW strike, which has the potential to be much more disruptive from an economic standpoint, is still on with targeted strikes extending this past Friday to the parts and distribution centers for General Motors (GM) and Stellantis (STLA).
Other items in focus include a tough outing for Chinese markets after property developer Evergrande reportedly said it cannot issue new debt and is scrapping a planned $35 billion debt restructuring, and ongoing chatter that the U.S. government is likely to shut down October 1 because of an inability to reach agreement on a continuing resolution to keep the government funded.
It is possible, then, that the August Personal Income and Spending Report, which is slated for release this Friday and contains the Fed’s preferred inflation gauge in the form of the PCE Price Index, will be the last government release for a bit. That will all depend on when a continuing resolution can be passed by Congress.
For now, with the 10-yr note yield at 4.51%, the stock market has a continuing resolution to stay on the defensive.
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Originally Posted September 25, 2023 – A continuing resolution to remain on the defensive
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