Stock Market Update

The S&P 500 futures are up four points and are trading fractionally above fair value, the Nasdaq 100 futures are up 30 points and are trading 0.1% above fair value, and the Dow Jones Industrial Average futures are up 46 points and are trading 0.1% above fair value.

A lot of attention is being paid this morning to a wave of stimulus measures announced by China in effort to fuel stronger economic growth. Principally, the 7-day reverse repurchase rate will be lowered by 20 basis points to 1.50%, the required reserve ratio will be cut by 50 basis points, the down payment requirement for second-home buyers will be reduced to 15% from 25%, and there will be a CNY800 bln ($113 bln) liquidity support facility for stocks.

This news catalyzed a 4.2% gain in the Shanghai Composite and a 4.1% gain in Hong Kong's Hang Seng Index. The carryover effect to foreign markets hasn't been as pronounced, but China's stimulus measures have provided a measure of support. Questions remain, though, as to whether these measures will be enough to jumpstart consumer demand and to fend off deflationary pressures.

The U.S. market isn't primed to rally at today's open, yet it is showing resilience to selling pressure following yesterday's move to new record highs by the Dow Jones Industrial Average and S&P 500.

Elsewhere, the curve-steepening trade in the Treasury market continues ahead of today's $69 billion 2-yr note auction. The 2-yr note yield is up three basis points to 3.61% and the 10-yr note yield is up six basis points to 3.80%.

Today's economic calendar features the July FHFA Housing Price Index and July S&P Case-Shiller Home Price Index at 9:00 a.m. ET, and the September Consumer Confidence Report at 10:00 a.m. ET. Separately, Fed Governor Bowman, who dissented at the September FOMC meeting, preferring a 25-basis points rate cut, is speaking at 9:00 a.m. ET.

In corporate news:

• AutoZone (AZO 2949.40, -99.42, -3.3%): misses by $5.57, reports revs in-line; Q4 total company same store sales increased 0.7%
• Visa (V 283.07, -5.56, -1.9%): DOJ readying antitrust case for debit card monopolization, according to Bloomberg
• Boeing (BA 156.40, +0.10, +0.1%): Machinists union says company's "best and final" contract offer still not good enough and won't vote on it, according to Reuters
• Levi Strauss (LEVI 20.46, +0.04, +0.2%): says it won't be able to meet $9-10 bln revenue target by 2027, according to FT
• Chevron (CVX 149.00, +1.46, +1.0%): FTC expected to okay acquisition of Hess (HES), according to Reuters
• Salesforce (CRM 269.72, +5.51, +2.1%): upgraded to Overweight from Neutral at Piper Sandler; tgt raised to $325
• Costco (COST 914.20, -2.88, -0.3%): downgraded to Hold from Buy at Truist; tgt $873
• Thor Industries (THO 103.00, -0.19, -0.2%): beats by $0.38, beats on revs; guides FY25 EPS below consensus, revs below consensus

Reviewing overnight developments:

• Equity indices ended Tuesday on a mostly higher note with Chinese property names leading the way after the announcement of several stimulus measures. Japan's Nikkei: +0.6%, Hong Kong's Hang Seng: +4.1%, China's Shanghai Composite: +4.2%, India's Sensex: unch, South Korea's Kospi: +1.1%, Australia's ASX All Ordinaries: unch.
  • In economic data:
    • Japan's flash September Manufacturing PMI 49.6 (expected 49.9; last 49.8) and flash Services PMI 53.9 (last 53.7)
    • South Korea's August PPI -0.1% m/m (last 0.3%); 1.6% yr/yr (last 2.6%)
  • In news:
    • The People's Bank of China will lower its reserve requirement ratio by 50 basis points, lower its seven-day repurchase rate by 20 basis points, and could also lower its loan prime rate soon. Down payment requirement for second-home buyers lowered to 15% from 25%.
    • Japan's Manufacturing PMI remained in contraction for the third consecutive month in the flash reading for September.
    • The Reserve Bank of Australia left its cash rate at 4.35%, as expected.
• Major European indices trade on a mostly positive note. STOXX Europe 600: +0.6%, Germany's DAX: +0.7%, U.K.'s FTSE 100: +0.3%, France's CAC 40: +1.4%, Italy's FTSE MIB: +0.4%, Spain's IBEX 35: -0.1%.
  • In economic data:
    • Germany's September ifo Business Climate Index 85.4 (expected 86.1; last 86.6). September Current Assessment 84.4 (expected 86.1; last 86.4) and Business Expectations 86.3, as expected (last 86.8)
  • In news:
    • Economists from the ifo Institute warned that the German economy could contract for the year.
    • European Central Bank policymaker Muller said that more rate cuts are on the way if the outlook holds, echoing recent comments from other ECB officials.