Morning in New York: The Labor Department’s report takes center stage

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.

The main event of the day will be the release of the Labor Department's September statistics. The consensus forecast calls for a decline in nonfarm payrolls from 162,000 in August to 90,000, with the unemployment rate remaining at 4.1% and average hourly wages rising 0.3% month-over-month. Revisions to data for previous months will be of particular interest. Freedom Broker analysts’ forecast for non-farm payrolls is half the consensus estimate: just 45,000. At the same time, we expect the unemployment rate to rise to 4.2%. If this forecast materializes, it would reduce the likelihood of another Fed rate hike and support stocks while maintaining steady consumer demand. A more hawkish signal for the Fed would be a drop in the unemployment rate to 4% amid accelerating wage growth. As a result, the probability of a rate hike in October would rise again, and Treasury yields would continue to climb.

Dallas Fed President Lori Logan stated last night that the current monetary policy stance is not sufficiently curbing inflation and that the rate needs to be raised by at least another 50 basis points. She also noted that the rise in the term premium on long-term bonds could reduce the need for further monetary policy tightening.

Oil prices are pulling back slightly this morning following a sharp rise yesterday: Brent is trading below $100 per barrel, while WTI has fallen below the $90 mark. Prices were supported yesterday by reports of a strengthened U.S. military presence in the Middle East amid a lack of significant progress in U.S.-Iran negotiations and China’s suspension of petroleum product exports, while the resumption of Middle Eastern supplies is limiting the upside.

Tesla (TSLA) is set to report its third-quarter delivery figures this Friday. The company's own guidance projects deliveries of 462,000 vehicles.

U.S. index futures are showing moderately positive momentum, with the Nasdaq-100 leading the gains. We assess the risk balance for the upcoming session as neutral, with heightened volatility that could be triggered by the aforementioned Labor Department report. The yield on 10-year Treasuries remains around 5.25%, which is below the 24-year high of 5.34% reached yesterday. The Fed’s hawkish rhetoric and high oil prices are curbing risk appetite.

— Nike (NKE) shares fell nearly 10% following the company’s release of conservative guidance for fiscal year (FY) 2027. The company expects adjusted EPS in the range of $1.15–1.35, compared to the market consensus of $1.61, and forecasts a high single-digit percentage decline in revenue. Nike’s revenue for the first quarter of FY 2027 declined 4% year-over-year to $11.21 billion, falling short of consensus estimates. Sales in Greater China dropped 22% (-26% on a constant-currency basis). The company also announced a transformation program that aims to generate approximately $2.5 billion in savings by fiscal year 2031 and involves staff reductions. The business recovery is likely to take longer than the market had anticipated.

— ON Semiconductor (ON) shares are rising by more than 6%, while Synaptics (SYNA) shares are up over 14%. With the emergence of a competing bid, the parties have revised the terms of the merger. Under the new terms, ON Semiconductor will pay Synaptics $123 per share in cash instead of a stock swap, and the total purchase price has been reduced from approximately $7 billion to $5.7 billion. The new structure of the deal, which is scheduled to close in mid-2027, eliminates the risk of dilution for ON Semiconductor shareholders.

— Shares of Fair Isaac (FICO) and TransUnion (TRU) fell by approximately 6% and 3%, respectively, following news that the U.S. Federal Housing Finance Agency (FHFA) is preparing to allow mortgage lenders working with Fannie Mae and Freddie Mac to use data from two credit bureaus instead of three. This poses a risk of reduced revenue for the companies in the mortgage segment.

— Amazon (AMZN) is in discussions to transfer approximately $8 billion worth of Grace Blackwell GPUs to a special purpose vehicle (SPV) and subsequently lease them back.

— Venture Global (VG) has entered into a 20-year agreement with ConocoPhillips (COP) to supply 1 million metric tons of LNG per year starting in 2030. Long-term contracts increase the predictability of the company’s future revenue.

— Moderna (MRNA) shares are up 1.5% following the announcement that the company will be added to the Nasdaq-100 Index on October 9, replacing Warner Bros. Discovery (WBD). This will generate additional demand for the pharmaceutical company’s shares from index funds.

Trading on October 1 on U.S. stock exchanges closed slightly higher. The S&P 500 rose 0.19%, the Nasdaq-100 gained 0.31%, the Dow Jones rose by a symbolic 0.04%, and the Russell 2000 gained 0.35%. The gains were driven by buying in chipmaker stocks, while megacaps traded mixed. The energy sector (XLE: +1.95%) led the gains amid rising oil prices following reports of an increased U.S. military presence in the Middle East. The healthcare sector (XLV: -1.32%) lagged behind due to a pullback in pharmaceutical and medical equipment stocks. Telecom stocks (XLC: -0.93%) also underperformed the market due to a decline in media company stock prices.

The yield on 10-year Treasuries reached a high of 5.34%— its highest level since 2002 —during the first half of the trading session, but then turned downward and fell to 5.24% by the close. The yield on 30-year Treasuries stood at 5.61%, while that on 2-year Treasuries was 4.79%. The probability of a Fed rate hike in October fell to about 26%.

Macroeconomic data sent mixed signals. The ISM Manufacturing Purchasing Managers’ Index (PMI) for September fell from 54.6 to 54.5 points (consensus: 55 points; Freedom Broker forecast: 55.1 points). At the same time, the prices sub-index jumped by 6.8 points to 77.9. The number of initial claims for unemployment benefits fell to 197,000, compared to an average estimate of 200,000. Thus, manufacturing activity remained stable, but rising price pressures heightened inflation risks. Federal Reserve Board Member Lisa Cook highlighted the need for further efforts to reduce inflation. Federal Reserve Vice Chair Philip Jefferson acknowledged that more time would be needed to determine the next step in adjusting monetary policy.

Corporate news reflected both sides of the macro picture. Bullish sentiment was bolstered by strong earnings reports and confirmation of high demand for AI infrastructure. Accenture led the gains in the S&P 500 (ACN: +15.8%), which exceeded market consensus estimates for revenue and EPS in the fourth fiscal quarter, as well as for new orders and guidance for fiscal year 2027. The high demand for AI capacity is evidenced by Oracle’s (ORCL: +0.6%) data center lease agreement with Tencent and a 20-year power supply agreement between Constellation Energy (CEG: +1.9%) and Amazon (AMZN: -0.4%). At the same time, companies are reporting rising costs, a trend also indicated by the price component of the September PMI. Acuity (AYI: -3.4%) provided weak guidance for one of its business segments, driven in part by rising memory chip prices. McCormick (MKC: -4.9%) raised its annual cost-inflation forecast and warned of margin compression in the fourth quarter, despite results exceeding average market expectations.

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