Stock Market Update

Equity futures are pointing to a higher open as investors await the afternoon FOMC decision. The CME FedWatch Tool currently assigns a 92.7% probability to a 25-basis-point rate hike this afternoon, with many analysts arguing that the Fed deciding to hold rates could damage its credibility given the current inflation backdrop. As always, Fed Chair Kevin Warsh's press conference portion of the meeting will be closely watched for any signals on the expected policy path going forward, especially since Warsh himself is an advocate of a "quieter Fed," and today's implied hike could be the beginning of a broader tightening cycle rather than an isolated policy adjustment.

Oil prices are moving lower this morning, providing some support for equity futures, with WTI crude trading around $103 per barrel after settling above $105 yesterday.

Stocks finished broadly lower on Tuesday as another surge in crude oil and elevated Treasury yields weighed on the market. The S&P 500 (-0.5%), Nasdaq Composite (-0.8%), and DJIA (-0.6%) logged their second consecutive declines to start the week, with the energy sector standing out as one of the few areas of strength.

On the U.S. data front:

• 09/12 MBA Mortgage Applications Index -4.1%; prior -2.7%

Today's remaining economic calendar:

• 8:30 AM ET: August Retail Sales; Briefing.com consensus 0.9%; prior -0.6%
• 8:30 AM ET: August Retail Sales, ex-auto; Briefing.com consensus 0.5%; prior -0.3%
• 8:30 AM ET: August Import Prices; prior -0.4%
• 8:30 AM ET: August Import Prices ex-oil; prior 0.4%
• 8:30 AM ET: August Export Prices; prior -1.3%
• 8:30 AM ET: August Export Prices ex-ag.; prior -1.5%
• 10:00 AM ET: July Business Inventories; Briefing.com consensus 0.2%; prior 0.0%
• 10:00 AM ET: September NAHB Housing Market Index; Briefing.com consensus 34; prior 35
• 10:30 AM ET: 09/12 EIA Crude Oil Inventories; prior -0.39M
• 2:00 PM ET: September FOMC Decision; Briefing.com consensus 3.75-4.00%; prior 3.50-3.75%
• 4:00 PM ET: July Net Long-Term TIC Flows; prior -$172.7B

In corporate news:

• OpenAI is considering a new funding round, according to The Information.
• CEOs from Meta Platforms (META 674.80, +4.56, +0.7%) and NVIDIA (NVDA 213.58, +1.41, +0.7%) have rejected calls to slow down the pace of AI development, according to Financial Times.
• SK Hynix (SKHY 181.14, +6.31, +3.5%) said no plans have been made yet in regard to an earlier report that said the company is in talks with Intel (INTC 100.37, +3.23, +3.3%) to make memory chips in the U.S. for the first time

Reviewing overnight developments:

Equity markets ended the session broadly higher amid speculation that Presidents Trump and Xi could discuss reducing tariffs on agricultural and energy products when they meet next week. Japan's Nikkei: +0.7%, Hong Kong's Hang Seng: +0.2%, China's Shanghai Composite: +0.7%, India's Sensex: +0.5%, South Korea's Kospi: +1.4%, Australia's ASX All Ordinaries: +0.3%.

In news:

• Japan's Prime Minister Takaichi confirmed that she will make cabinet changes tomorrow, though key officials are expected to retain their posts.
• Hong Kong released its first five-year plan, which anticipates both opportunities and challenges.

In economic data:

• Japan's August trade deficit JPY840 bln (expected deficit of JPY1.00 trln; last deficit of JPY680 bln). August Imports 28.0% yr/yr (expected 26.3%; last 27.9%) and Exports 19.3% yr/yr (expected 18.2%; last 23.2%). July Core Machinery Orders -3.7% m/m (expected -1.2%; last 9.7%); 11.2% yr/yr (expected 15.3%; last 16.9%)
• Australia's August MI Leading Index 0.0% (last 0.0%)
• New Zealand's Q3 Westpac Consumer Sentiment 89.5 (last 80.4) and Q2 Current Account deficit 3.2% of GDP (last 3.6% of GDP)

Major European markets trade broadly higher, with British homebuilders outperforming after upbeat results from Barratt Redrow. STOXX Europe 600: +0.6%, Germany's DAX: +0.3%, U.K.'s FTSE 100: +0.6%, France's CAC 40: +0.5%, Italy's FTSE MIB: +0.8%, Spain's IBEX 35: +0.4%.

In news:

• The Bank of England is not expected to raise rates tomorrow, though the market is looking for an end to active sales of 20- and 30-year Gilts.
• European Commission President von der Leyen called on member states to admit Canada as an associate member.

In economic data:

• Eurozone's July Industrial Production -0.1% m/m (expected -0.2%; last -0.1%); 0.0% yr/yr (expected -0.3%; last -0.3%). Q2 Wages 3.0% yr/yr (last 3.4%) and Q2 Labor Cost Index 3.1% yr/yr (expected 3.0%; last 3.2%)
• U.K.'s August CPI 0.5% m/m, as expected (last 0.3%); 3.1% yr/yr, as expected (last 2.9%). August Core CPI 0.3% m/m, as expected (last 0.2%); 2.6% yr/yr, as expected (last 2.6%). August Input PPI 0.3% m/m (expected 0.6%; last -0.8%) and Output PPI 0.3% m/m (last 0.5%). August House Price Index 1.4% yr/yr (expected 2.1%; last 2.0%)
• Italy's August CPI 0.5% m/m, as expected (last 0.3%); 3.3% yr/yr, as expected (last 2.9%)