One bit of good news coming off the extended Labor Day weekend is that Goldman Sachs has lowered its probability of the U.S. suffering a recession to just 15% from 20%. The bad news so to speak is that this good news is contributing to an uptick in market rates.
The 2-yr note yield is unchanged at 4.88% (after hitting 4.93% earlier) but the 10-yr note yield is up four basis points to 4.21%. Those moves have generated some modest headwinds for the equity market, which traded with the wind at its back for most of last week.
Another holdback component has been the weaker-than-expected Caixin Services PMI report out of China. That number checked in at 51.8, which was weaker than expected and down from 54.1 in July. A number above 50.0 is indicative of expansion, but the pullback from July also signifies a deceleration in activity for China’s services sector.
The S&P 500 futures are down five points and are trading 0.1% below fair value, the Nasdaq 100 futures are down 34 points and are trading 0.3% below fair value, and the Dow Jones Industrial Average futures are up 20 points and are trading fractionally above fair value.
Overall, there isn’t much conviction in the futures trade, so things could get better after the open just as readily as they could get worse.
The hesitation now is partly a function of last week’s solid returns, which came on light volume, and some assumptions that the market might have a little cooling off period.
Hong Kong’s Hang Seng Index was downright frigid in Tuesday’s trading. It declined 2.1%, driven by losses in property issues and the soft Caixin number.
The only U.S. economic release on today’s calendar is the July Factory Orders Report. That’s won’t be a market-moving report, but Wednesday’s lineup, which features the August ISM Non-Manufacturing Index, could be.
The main drivers this morning have a mostly company-specific angle. For instance, Airbnb (ABNB) is up 5.8% and Blackstone (BX) is up 3.7% following the news after Friday’s close that they will be added to the S&P 500 effective prior to the open on Monday, September 18.
In turn, Oracle (ORCL) is up 2.0% after being upgraded to Overweight from Equal Weight at Barclays and Dow component American Express (AXP) is up 0.8% after being upgraded to Outperform from Sector Perform at RBC Capital Markets.
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Originally Posted September 5, 2023 – Slow return from Labor Day weekend
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