Morning in New York: the key inflation indicator for the Fed will set the vector for quotations

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

The key macro event on Friday, September 26, will be the publication of the August Personal Income and Spending Report and the Consumer Expenditure Price Index (PCE) data. It is this information that for the US Federal Reserve is the main indicator of inflation. The consensus forecast suggests a 0.2% m/m rise in core PCE after 0.3% a month earlier, but there is a risk that the indicator will maintain its July pace. Average market benchmark for spending: +0.5% mom, for income: +0.3% mom.

The ideal scenario for the investment community would be that actual data would match forecasts or even weaker inflation figures against the backdrop of increased spending. This would confirm the soft landing of the economy and support risk appetite. However, if the core PCE is higher than expected, it could strengthen the Fed's hawks, who believe that the fight against inflation is not over yet. In this case, strong spending data will be perceived not as a sign of economic stability, but as a factor that will slow down the easing of monetary policy, which may put pressure on the market.

A new wave of Donald Trump's tariff initiatives will be in the focus of attention of the participants of the upcoming trades. On October 1, he announced duties of 100% and 25% on imports of patented drugs and heavy trucks, respectively. This news poses serious risks for the pharmaceutical and industrial sectors and could put them under pressure during the session. In particular, European pharmaceutical manufacturers and truck suppliers from Mexico and Canada are under attack.

Against this background, the news of the White House's approval of the TikTok deal has moved to the background. Although the presidential decree formalizes the transition of the application under the control of American investors led by Oracle (ORCL), the approval of the Chinese authorities is required to complete all procedures, so there is still some uncertainty around the deal.

There are no significant corporate reports scheduled for September 26.

Futures on US indices demonstrate about zero dynamics. We assess the balance of risks as neutral. Increased volatility is expected, especially against the background of the publication of PCE statistics. We focus on S&P 500 fluctuations in the range of 6540-6670 points (from -1% to +1% to the previous session's closing level).

- KNOT Offshore Partners (KNOP) shares are up about 2.5% in pre-market after the release of its quarterly report, which recorded higher operating profit and strong fleet utilization. Investor confidence was also supported by strong liquidity ratios and a stable financial profile.

- Concentrix (CNXC) shares are down more than 21% before the opening of the main session following the release of weak quarterly results. Despite revenue growth, the company faced pressure on operating margins and adjusted earnings, and lowered guidance.

- Shares of Legacy Education (LGCY) are down nearly 12% in pre-market trading following the release of its annual report, which reflected a revenue increase in the range of 40%. Investors took negatively the news about additional reserves and operational difficulties.

- Organogenesis Holdings (ORGO) quotes are down about 11% on the premarket after an update on the results of the Phase 2 clinical trial of the drug ReNu. An analgesic effect was recorded, but key metrics did not reach statistical significance.

- Shares of LightPath Technologies (LPTH) fell nearly 6% after the close of trading amid the release of its quarterly report. Revenue growth of 41% failed to offset a loss per share that exceeded consensus.

- Costco (COST) shares are showing a weak decline in the premarket. In the last reported quarter, the retailer grew revenue by 8.1% YoY to $86.16 bln, and its EPS beat average expectations. However, investors reacted negatively to comparable sales, which increased 6.4%, coming in slightly below the upper end of consensus. Overall, the company has successfully managed inflation and tariff pressures thanks to a focus on its own brands and a 14% YoY increase in membership dues to $1.72 bln.

September 25 trading on the U.S. markets ended in the negative for the third day in a row. S&P 500 lost 0.5%, Nasdaq 100 fell by 0.43%, Dow Jones fell by 0.38%, Russell 2000 fell by 0.98%. Most of the Magnificent Seven stocks were trading in the red. Tesla (TSLA: -4.38%) showed the most notable decline, while Apple (AAPL: +1.81%) provided some support to the market. Energy (XLE: +0.9%) was the leader of growth. The healthcare sector (XLV: -1.66%) was the outsider.

The main driving factor for stock exchange quotations was the publication of strong macroeconomic statistics. The final estimate of GDP growth for the second quarter was raised to 3.8% (consensus: +3.3%) due to stronger consumer demand. The volume of durable goods orders for August increased by 2.9%, although the average expectation was for a 0.3% decline.

Initial jobless claims totaled 218k (consensus: 234k).

All of this data was taken by the market as a hawkish signal, indicating that the economy remains too strong for the Fed to need to rush to cut rates.

Against this background, the comments of the regulator's management representatives were contradictory, but generally cautious. New Governor Stephen Miran again advocated for more aggressive rate cuts. Voting FOMC members Austan Goolsby and Jeffrey Schmid spoke in favor of the need for carefully balanced decisions. As a result, the market revised downward expectations for easing of the MPC before the end of the year. Additional pressure on the sentiment of stock exchange players was exerted by a failed auction of seven-year government bonds, which confirmed fears about the high supply of government debt.

- Intel (INTC: +8.8%) is in talks with TSMC (TSM) to collaborate and invest as part of its strategy to regain its leadership status in the technology sector.

- News of a partnership with HSBC in quantum algorithmic trading supported IBM shares (IBM: +5.2%).

- The failure of key indicators in the second quarter and concerns about the loss of market share led to the collapse of used car retailer CarMax (KMX: -20.1%). Investors were also concerned about the weak results of the financial division and the increase in loan loss provisions.

- Freeport-McMoRan's (FCX: -6.2%) Grasberg mine in Indonesia has ceased operations due to a landslide, which also warned that its fourth-quarter sales will be "negligible."

- The White House has initiated an investigation into imports of medical devices and robotics, which negatively impacted GE HealthCare Technologies (GEHC: -3.4%) stock price.

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