The September slump will likely continue as the index futures are sharply lower early Wednesday. Traders will likely wait and watch to see how the labor market data, due for the week, pan out and their implications for the Fed funds rate. Wharton Professor and WisdomTree Chief Economist Jeremy Siegel said the report will decide whether the cut is going to be 25 basis points or double as much.
Tech stocks were lower in premarket trading, with Nvidia Corp. NVDA down over 1%. The CBOE Volatility Index, or VIX, spiked nearly 10% to $22.76. The Labor Department’s job opening data and the Beige Book and a few earnings reports are also on traders’ radar. If these rule out a recession, traders may go bargain hunting to take advantage of Tuesday’s pullback.
| Futures | Performance (+/-) |
| Nasdaq 100 | -0.50% |
| S&P 500 | -0.31% |
| Dow | -0.19% |
| R2K | -0.29% |
In premarket trading on Wednesday, the SPDR S&P 500 ETF Trust SPY fell 0.36% to $550.90, and the Invesco QQQ ETF QQQ slid 0.60% to $459.05, according to Benzinga Pro data.
Cues From Last Session:
A tech tumble that morphed into a broader market weakness dragged stocks sharply lower on Tuesday, with a trio of weak data serving as a trigger. The Institute for Supply Management’s manufacturing purchasing managers’ index and S&P Global’s final manufacturing PMI came in worse than expected and the Commerce Department said construction spending fell more than expected in July. The string of negative data reignited recession talks, pushing traders on the defensive.
The averages opened lower and fell sharply in early trading. The sell-off continued despite a slower momentum for the remainder of the session. The tech-heavy Nasdaq Composite settled at the lowest level since Aug. 12 and the S&P 500 at a two-week low. All three indices fell by the most since the Aug. 5 global sell-off.
IT, communication services, energy, industrial and material stocks came under intense selling pressure, while defensive real estate and consumer staple stocks bucked the downtrend.
| Index | Performance (+/) | Value |
| Nasdaq Composite | -3.26% | 17,136.30 |
| S&P 500 Index | -2.12% | 5,528.93 |
| Dow Industrials | -1.51% | 40,936.93 |
| Russell 2000 | -3.09% | 2,149.21 |
Insights From Analysts:
Morgan Stanley’s U.S. equity strategy team recommends focusing on defensive businesses that prioritize operational efficiency or have durable pricing power, or both. The team led by the firm’s Chief Equity Strategist Mike Wilson noted that cyclical and defensive stocks have failed to rebound materially, while lower-beta stocks continued to show very “resilient performance” amid the mixed data on both the macro and micro front.
Wilson called for better-than-expected non-farm payroll gains of 185,000 for August and a dip in the jobless rate to 4.2%.
Carson Group Chief Investment Strategist Ryan Detrick shared a premonitory historical trend. Sharing data that showed the second half of September grossly outperforming, he said, “September isn’t usually a good month for stocks, but remember it is the second half when the real trouble starts.”
Fund Strat’s Tom Lee said investors should be cautious about the next eight weeks, from September until the election day. In an interview with CNBC, he said he sees the weakness as a “chance to buy,” and said investors should be ready to buy the dip.
Upcoming Economic Data:
- The Commerce Department is due to release the trade balance report for July at 8:30 a.m. EDT, with economists calling for a deficit of $79.1 billion compared to a deficit of $73.1 billion in June.
- The Bureau of Labor Statistics will release the results of the July Job Openings and Labor Turnover Survey, or JOLTS, at 10 a.m. EDT. The consensus calls for job openings to be at 8.1 million compared to 8.18 million in June.
- The Commerce Department is scheduled to release the factory goods orders report for July at 10 a.m. EDT. Economists, on average, expect a 5.5% month-over-month jump in factory goods orders for July compared to a 3.3% drop in June.
- The Fed will release the Beige Book report at 2 p.m. EDT, which gives anecdotal evidence of economic conditions in the 12 Federal Reserve districts.
See Also: How To Trade Futures
Stocks In Focus:
- GitLab Inc. GTLB jumped nearly 17% in premarket trading on the company’s quarterly results, while PagerDuty, Inc. PD and Zscaler, Inc. ZS fell over 14% each.
- Ciena Corporation CIEN, DICK’S Sporting Goods, Inc. DKS, Dollar Tree, Inc. DLTR, and Hormel Foods Corporation HRL are among the companies reporting quarterly results ahead of the market open.
- Those reporting after the close include AeroVironment, Inc. AVAV, C3.ai, Inc. AI, Casey’s General Stores, Inc. CASY, ChargePoint Holdings, Inc. CHPT and Hewlett Packard Enterprise Company HPE.
Commodities, Bonds And Global Equity Markets
Crude oil futures extended their slide and dropped below the psychological support of $70-a-barrel and gold futures also slipped. Bitcoin BTC/USD plunged to the $56.5K level. The yield on the 10-year Treasury note edged down 2.6 points to 3.818%.
The Asian markets had another down day on Wednesday, with the Japanese Nikkei 225 average sliding by over 4% on the yen’s strength. The South Korean and Taiwanese markets, heavily weighted with tech stocks, also pulled back sharply. Traders were reacting to the sell-off seen on Wall Street overnight. On the other hand, the New Zealand and Indonesian markets bucked the downtrend.
European stocks traded lower in early trading.
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