Morning in New York: Indices Seek Equilibrium

A daily review and forecast of events in the U.S. stock market by Mikhail Denislamov, Deputy Director of Capital Markets Research at Freedom Broker.

Core PCE for August came in below forecasts, which reduced the probability of a Fed rate hike in October. However, yields on long-term Treasuries remain high. This was partly driven by the Chicago Purchasing Managers’ Index (PMI), which was released yesterday. The index came in at 58.8, compared with market consensus estimates of 51.2. Pressure from the bond market today could be mitigated by strong September data from the ISM Manufacturing Purchasing Managers’ Index (PMI) (consensus: 55 points; August: 54.6). Analysts at Freedom Broker forecast a result of 55.1 points. The investment community will focus particularly on the price and employment components of the index. If the PMI exceeds market expectations, it will drive further increases in bond yields and heighten concerns about the sustainability of inflation. The week’s key macroeconomic release will be the Labor Department’s September report, scheduled for October 2. The consensus estimate for nonfarm payrolls is 85,000.

The consensus estimate for the number of unemployment insurance claims is 200,000, following 197,000 the previous week.

About ten Federal Reserve officials are scheduled to speak, including John Williams, president of the Federal Reserve Bank of New York, as well as Board members Christopher Waller and Philip Jefferson. The day before, Minneapolis Fed President Neel Kashkari called current inflation too high and advocated for a further rate hike.

The Federal Trade Commission (FTC) has launched an investigation into OpenAI, Anthropic, and other companies in the AI sector to assess the risks to consumers posed by agent-based AI systems.

WTI has rebounded following a correction below the $90-per-barrel mark and is once again trading in the $90–92 range. Oil shipments from the Middle East are returning to normal following the resumption of operations on the Saudi East-West pipeline. There is still no significant progress in negotiations between the U.S. and Iran. A potential restriction on diesel fuel shipments from the U.S. remains an additional factor affecting petroleum product prices. The White House has called on France and Germany to tap into their strategic reserves of this product, warning of possible export restrictions.

Before the market opens, Accenture (ACN), McCormick (MKC), and Acuity (AYI) will report earnings; after the market closes, Nike (NKE) will release its results.

U.S. index futures are showing mixed trends, with the Nasdaq 100 leading the way following Micron’s (MU) strong earnings report and outlook. We assess the risk balance for the upcoming session as neutral. The aforementioned PCE data and strong results from AI companies are supporting buyers. High yields on long-term Treasuries increase the likelihood of further Fed policy tightening.

— Micron (MU) is trading flat following the release of its earnings report. The company’s revenue rose 379% year-over-year to $54.2 billion. Adjusted EPS exceeded consensus, reaching $33.42. The guidance for the first quarter of fiscal year (FY) 2027 projects revenue of $61.5 billion, compared to the market’s average estimate of $56.8 billion. The company forecasts an adjusted gross margin of 86.3%, down from approximately 87% in the reporting quarter. A significant volume of high-bandwidth memory (HBM) chips for FY 2027 has already been sold. The subdued stock reaction reflects high expectations following massive growth.

— Alphabet (GOOGL) shares are up more than 2% following the unveiling of Gemini 4 Argon. The company stated that the new model leads in 13 out of 19 published metrics. The maximum context size reaches 1 million tokens. Access to the model is limited to trusted cybersecurity experts, as expanding its use requires additional vetting. For Alphabet, the key question remains the timeline for commercial scaling of this product.

— Vicor (VICR) shares are rising by more than 10%. The company raised its third-quarter revenue growth forecast from over 20% to over 30% thanks to increased royalties from a VPD license granted to an unnamed AI developer. This will allow Vicor to generate revenue from the development of AI infrastructure without expanding its own manufacturing capacity.

— Inogen (INGN) shares are up about 3% following the signing of an agreement for Rotech Healthcare to acquire Inogen’s U.S. oxygen equipment rental business for up to $25 million. In the first half of the year, the division generated $24.3 million in revenue for Inogen (down 9.8% year-over-year). Rotech will become a distributor of Inogen’s oxygen concentrators. Its buyback program has been expanded to $45 million.

Most U.S. stock indices ended trading on September 30 in the red. The S&P 500 lost 0.25%, the Dow Jones fell 0.86%, the Russell 2000 fell 0.39%, and the Nasdaq 100 gained 0.23%. Apple (AAPL) and Amazon (AMZN) provided support to the technology sector. Market breadth remained negative. On the NYSE, the number of declining stocks outnumbered advancing stocks by a ratio of 1.74:1, and on the Nasdaq, by a ratio of 1.52:1. Only the IT sector (XLK: +0.64%) closed in positive territory, supported by software developers and hardware manufacturers led by Apple.

The sectors leading the decline were manufacturers of essential goods (XLP: −1.53%), retailers, and healthcare companies (XLV: −1.35%), with the medical equipment segment putting pressure on the sector.

Yields on 10- and 30-year Treasuries reached their highest levels since 2002, rising by 5 and 6 basis points — to 5.3% and 5.64%, respectively, despite a downward revision in the likelihood of further monetary tightening. The corresponding yield on 2-year Treasuries rose by 1 basis point, to 4.89%.

The core PCE index rose 0.2% MoM and 3.0% YoY in August, compared with consensus estimates of 0.3% and 3.3%, while the overall index rose 0.3% MoM and 3.4% YoY. Personal spending for the same month rose 0.9% in line with the consensus estimate, following a 0.2% increase in July, while Freedom Broker had forecast a 0.8% increase. Personal income rose by only 0.2%, compared with a consensus estimate of 0.5%.

According to ADP, the number of new jobs in September was 90,000, compared with an average estimate of 70,000. The August figure was revised to 36,000. U.S. GDP growth for the second quarter, according to the final estimate, was 1.5%, down from the preliminary estimate of 2.2%.

Corporate news also highlighted the divergence between the performance of the technology sector and that of the broader market.

Synopsys (SNPS: +4.8%) shares rose on news of an agreement with OpenAI to develop a model for chip design. Hewlett Packard Enterprise (HPE: +3.9%) reported a $1.2 billion order for AMD Helios racks and raised its growth forecast for the networking business for fiscal year 2027. However, high expectations continued to limit the market’s reaction even to strong results. Jabil (JBL: −10%) shares plummeted, even though the company beat consensus estimates and provided guidance that exceeded market expectations, while Cerebras (CBRS: −8.9%) fell after SemiAnalysis reported that OpenAI’s new model uses Nvidia GPUs. Outside the tech sector, Northrop Grumman (NOC: −4.2%) lost a Navy contract worth over $20 billion for the F/A-XX program to Boeing (BA).

The S&P 500 ended the third quarter up 2.03%, while the Russell 2000 closed down 7.52%, having lost 5.4% in September alone. The positive performance of the major indices is driven by megacaps in the AI sector. At the same time, high borrowing costs and government bond yields continue to put pressure on the broader market.

This article was AI-translated and verified by a human editor