Keeping a Nervous Eye on Rates and Oil Prices

The equity market has a mixed disposition this morning as participants have taken a conservative line ahead of today’s open.

Currently, the S&P 500 futures are down six points and are trading 0.1% 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 22 points and are trading in-line with fair value.

There is some underlying angst on this quarterly options expiration day with market rates and oil prices continuing to press higher. The 10-yr note yield is up four basis points to 4.33% and WTI crude futures are up 0.3% to $90.40.

The equity market has held up well so far this week in spite of the higher rates and oil prices. The S&P 500 is up 1.1%, the Nasdaq Composite is up 1.2%, and the Russell 2000 is up 0.8%.

Nonetheless, buyer conviction would be expected to subside if rates and oil prices continue to rise.

Beyond those factors, the main news item today is that the UAW and the Big Three automakers were unable to reach a deal on a new contract. Consequently, the UAW has launched targeted strike actions at three manufacturing plants (one for each of the automakers).

This is not a surprise to the market given the tenor of remarks leading up to the deadline, but that doesn’t mean it is a good thing for the economy, and it will become less of a good thing the longer it persists given the reach and importance of auto manufacturing supply chains.

In some better news, China reported an acceleration in industrial production and retail sales data for August that was also better than expected. Later this morning (9:15 a.m. ET), industrial production data for the U.S. will be released.

Earlier, the September New York Empire State Manufacturing Index checked in at 1.9 (Briefing.com consensus -10.0) following a -19.0 print for August. The dividing line between expansion and contraction is 0.0 for this series. Notably, the index for future business conditions increased six points to 26.3, which is the highest level in more than a year.

Import prices for August, meanwhile, jumped 0.5% following a 0.1% increase in July. Excluding fuel, import prices declined 0.1% on the heels of a 0.1% decline in July. Export prices rose 1.3% after a 0.5% increase in July. Excluding agricultural products, export prices increased 1.7% in the wake of a 0.6% increase in July.

On a year-over-year basis, import prices were down 3.0% (-0.8% ex fuel) while export prices were down 5.5% (-5.3% ex ag).

In corporate news, Adobe (ADBE) posted better than expected fiscal Q3 results but its fiscal Q4 guidance was underwhelming. It is trading down 3.7% in pre-market action, which has been a drag on the Nasdaq 100 futures. Walt Disney (DIS) is up 0.5% with speculation swirling that it might be looking to sell ABC. The company said it has not made any decisions about divesting ABC at this time. In any case, the notion that it could sell ABC seems to be overshadowing a Bloomberg report that Disney+ subscribers are likely to come in below the company’s forecast.

—

Originally Posted September 15, 2023 – Keeping a nervous eye on rates and oil prices