Morning in New York: political uncertainty remains in focus

Daily review and forecast of events on the U.S. stock market from Mikhail Denislamov, Deputy Director of Freedom Capital Markets Research.

Market participants are still focused on the shutdown and the Trump administration's threats to begin mass layoffs of federal employees if negotiations with Democrats in Congress are deemed "absolutely futile." Kevin Hassett, director of the National Economic Council, said preparations for possible action in the absence of progress in the dialog pose additional risks to the economy. Democrats are demanding a permanent extension of health care tax credits under the ACA and assurances of no unilateral spending withdrawal, while Republicans insist the government must be reopened first. A fifth Senate vote on temporary funding and the Democratic alternative is scheduled for Oct. 6. With neither measure receiving the necessary 60 votes for passage. Signals from the budget talks will determine the dynamics of stock quotes and could cause spikes in volatility intraday.

The macroeconomic calendar highlights include the release of preliminary light truck sales data for September (consensus: 10.9 million, August: 11 million), as well as statistics on total light commercial vehicle sales (August: 16.4 million). Lower figures could signal a slowdown in construction and commercial activity, which would put pressure on auto and related stocks.

Constellation Brands A (STZ) will report quarterly earnings after the end of the main session.

Futures on US indices show positive dynamics. We assess the balance of risks as neutral with moderate volatility. We focus on S&P 500 fluctuations in the range of 6690-6760 points (from -0.4% to +0.7% of the previous session's closing level).

- Tesla (TSLA) may unveil a new budget model on Tuesday, October 7, which is relevant due to the expiration of the tax credit for the purchase of electric cars. Against this background, the auto giant's securities are trading slightly plus on the premarket.

- Participants of the OPEC+ deal agreed to increase production by only 137 thousand barrels per day in November, as a month earlier, due to fears of oversupply and a drop in the price of Brent below $65 per barrel.

- Bitcoin (BTC) set a new high, rising above $125k.

- Stellantis (STLA) stock reacted positively to an announced plan to invest $5 billion in its U.S. territory business, signaling the company is looking to rebound from a weak 2024.

-Renault's (RNO.EU) plans to cut 3,000 jobs through agreed layoffs may help the company, which posted a first-half loss of 11.2 billion euros, with margin recovery under a new CEO.

- Rob Williams, vice president of Amazon's devices division (AMZN) , is stepping down from his post a few days after the presentation of new products. This decision is due to the unprofitability of the direction. Corporation stock quotes react neutrally to the news.

October 3 trading on the U.S. stock exchanges ended mixed. S&P 500 added a symbolic 0.01%, Nasdaq 100 fell by 0.43%, Dow Jones rose by 0.51%, Russell 2000 rose by 0.72%.

The shares of the "Magnificent Seven" also did not show a unified dynamics. Quotes Apple (AAPL) showed the strongest result, adding 0.35%, securities Meta (META: -2.27%) were under the most significant pressure. The utilities sector (XLU: +1.16%) was the leader of growth, while manufacturers of consumer second necessity goods (XLY: -0.64%) were the outsiders.

On the third day of the federal government shutdown, the focus has shifted to political fallout that could open the door to compromise. Media outlets are reporting growing White House concerns about the expiration of ACA healthcare subsidies, which will increase vulnerability for Republicans ahead of next year's midterm elections. Meanwhile, the risk of massive layoffs of federal employees remains a key uncertainty with potential economic consequences.

The ISM Services Business Activity Index for September fell to 50 points, its lowest level since Ma, while the forecast was for it to remain at August's 52. The employment index was down for the fourth consecutive month at 47.2, while the price index rose to 69.4 points from 69.2. Survey participants from the construction, utilities, and food processing sectors continue to cite import tariffs as the reason for higher costs.

China has put forward a proposal to invest about $1 trillion in the United States in exchange for fundamental changes in the terms of economic cooperation (removal of restrictions on transactions, reduction of tariffs on the supply of components for Chinese enterprises) and security policy. According to the head of the US Treasury Department Scott Bessent, the upcoming meeting between Donald Trump and Xi Jinping on the margins of the APEC summit may lay the groundwork for the fifth round of trade negotiations between Washington and Beijing.

- Ford Motor (F: +3.7%) shares were supported after Senator Bernie Moreno's statements about a possible easing of existing duties for the U.S. auto industry.

-Entergy Arkansas (ETR: +2%) will power Alphabet's (GOOGL) cloud as well as AI infrastructure projects with a $4 billion investment.

- The Pentagon found fundamental security issues with Palantir Technologies' (PLTR: -7.5%) data exchange system, although the company said all identified problems have now been fixed.

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