Stock Futures Spring to Life as Government Shutdown Dodged (For Now)
Stock Futures Spring to Life as Government Shutdown Dodged (For Now)
In a dramatic morning twist that had Wall Street on the edge of its seats, stock futures leaped to action at the opening bell of trading. This spirited surge was sparked by a temporary agreement amongst U.S. legislators that put the specter of a government shutdown on hold, at least for the moment.
Futures linked to the Dow Jones Industrial Average flexed their muscles, proudly rising by 122 points, a cheeky 0.4% boost. The S&P 500 futures joined the party with an equally spry 0.4% gain, while the Nasdaq 100 futures, ever the overachievers, showcased a 0.6% upswing.
The Senate managed to pass a "continuing resolution" with mere hours left on the clock before the dreaded midnight deadline on Saturday. President Joe Biden, playing the role of the government's savior, promptly signed it into law. This legislative magic trick keeps the government's lights on for an additional 45 days – a period in which lawmakers can hopefully iron out the kinks in funding legislation.
However, it wasn't all champagne and confetti in the futures market. Beneath the jubilation, a sense of foreboding lingered. Investors couldn't shake the feeling that this might just be the calm before another shutdown storm. The Saturday agreement did little to quell simmering disputes over government spending levels, border issues, and Ukraine.
The looming shutdown threat had cast a shadow over investors' hearts last week, coinciding with the conclusion of both the trading month and quarter. As the anxiety grew, so did fears that a shutdown could add even more weight to a U.S. economy already grappling with its slowest growth in 15 years, thanks in no small part to sky-high interest rates.
September became a dismal chapter in the stock market's 2023 diary, with both the S&P 500 and Nasdaq Composite delivering their worst monthly performances of the year. The S&P 500 index waved goodbye to September with a 4.9% dip, while the quarter bowed out 3.7% lower. Meanwhile, the tech-heavy Nasdaq Composite dropped a dramatic 5.8% in the month and 4.1% in the quarter. The trusty old Dow didn't escape unscathed either, ending the month 3.5% lighter and the quarter 2.6% in the red.
But don't lose hope just yet! Despite this pullback, the indexes are still sporting a winning record for the year. It's a testament to the ferocity of the rally that kicked off the year. The S&P 500 may be down about 6% from its dazzling 2023 high close in July, but it's still boasting an 11% gain for the year. So, keep your seatbelts fastened, for the stock market's rollercoaster ride shows no sign of slowing down!
U.S. futures falter after government shutdown averted - what's moving markets
Futures faltered on Monday, paring back some earlier gains, after last-minute negotiations between lawmakers on Capitol Hill over the weekend led to a surprise short-term funding deal that averted a U.S. government shutdown. Elsewhere, UAW workers and Mack Trucks forge an agreement to avoid a strike, while the World Bank cuts its growth forecast for China's economy next year.
1. Futures waver after government shutdown avoided
U.S. stock futures hovered around the flatline on Monday as investors poured over an eleventh-hour deal to prevent a U.S. government shutdown over the weekend and looked ahead to fresh economic data this week.
At 06:47 ET (10:47 GMT), the Dow futures contract had dipped 20 points or 0.1%, S&P 500 futures were mostly unchanged, and Nasdaq 100 futures rose by 26 points or 0.2%.
The main indices were mixed in the final day of September trading on Friday, although all three slipped on a monthly basis. The S&P 500 and Nasdaq Composite in particular dropped to their worst month of 2023 so far.
However, the indices are up for the year, highlighting the strength of a rally several months ago that was driven by soaring enthusiasm for generative artificial intelligence.
Traders will be keeping an eye on new economic numbers on both manufacturing activity and construction spending due out on Monday, as markets continue to track the development of the U.S. economy and gauge the potential path ahead for Federal Reserve monetary policy.
2. Biden pledges Ukraine backing after shutdown averted
U.S. President Joe Biden has vowed not to "walk away" from Ukraine after a plan to provide $6 billion in fresh aid to the country was scuppered by lawmakers to avert a government shutdown.
The broadly unexpected agreement forged on Capitol Hill over the weekend will keep the government open until November 17, but does not include additional money for Ukraine on top of the $113B that has already been approved since the outbreak of hostilities with Russia.
Yet speaking on Sunday, Biden said that a "vast majority" of members of both his Democratic party and their Republican counterparts are still in favor of sending financial backing to the country. Biden previously requested an extra $24B in August, with the White House hoping to both maintain Ukraine's battlefield capabilities and provide humanitarian assistance.
Republicans have said that any further funding would need to be tied to U.S. border security reforms, which House Speaker Kevin McCarthy -- himself the target of disgruntled hardline party members -- called his "priority."
3. UAW workers reaches labor deal with Mack Trucks
A group of about 4,000 workers represented by the United Auto Workers union have hashed out a temporary deal with Volvo (OTC:VLVLY) Group-owned Mack Trucks that avoids a potential strike.
The tentative agreement, which was made shortly before midnight Eastern Standard Time on Sunday and was announced on social media, must still be ratified by the UAW.
Almost all of the Mack Truck's staff, who are asking for improved wages and benefits, had signed off on a strike last month, the UAW said. A prior deal, which was first signed after a two-week walkout in 2019, was set to expire on Sunday night.
Many UAW members have already been staging weeks of strikes at factories run by major car manufacturers General Motors (NYSE:GM), Ford Motor (NYSE:F), and Jeep-parent Stellantis (NYSE:STLA).
In a statement, Mack President Stephen Roy lauded the temporary agreement, saying it will deliver better pay and benefits to the company's employees and families.
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4. World Bank slashes China growth forecast
The World Bank has lowered its outlook for growth next year in China, citing a series of soft data points from the world's second-largest economy.
In a semi-annual report released on Sunday, the bank flagged the impact of an ongoing property sector liquidity crisis and a sputtering post-pandemic recovery, as well as external factors like trade protectionism and elevated interest rates.
As a result, it now expects China's economic output to increase by 4.4% in 2024, down from its previous estimate of 4.8% in April. Expectations for growth this year of 5.1% were, however, left unchanged.
Green shoots may be starting to appear in the Chinese economy following months of weak economic indicators. On Saturday, an official survey showed that the country's factory activity expanded for the first time in six months. Manufacturing output and retail sales growth also accelerated in August, while a fall in exports and imports eased.
Beijing has recently moved to shore up the economy, though some analysts have argued that more support will be necessary for the government to hit its 5% growth objective for this year.
5. Oil stabilizes amid supply tightness
Oil prices rose on Monday, supported by concerns over a tight supply picture and relief that the U.S. government avoided a potentially damaging shutdown.
By 06:48 ET, the U.S. crude futures traded 1.1% higher at $91.78 a barrel, while the Brent contract climbed 1.1% to $93.25. Bolstered by a decision by Saudi Arabia and Russia to extend output reductions until the end of the year, crude prices jumped by almost 30% in the third quarter.
The Organization of the Petroleum Exporting Countries and its allies -- a group that includes both Riyadh and Moscow -- will likely not change its production policy at a closely-watched meeting of the Joint Ministerial Monitoring Committee on Wednesday, Reuters has reported.
Separately, OPEC Secretary-General Haitham Al Ghais noted on Monday that oil demand is expected to remain "resilient" over the rest of 2023, a prediction that was boosted by the latest factory activity figures out of top oil importer China.
Source: Investing.com
The recent emergence of weight-loss drugs with the power to slash the risk of heart attacks and diabetes has sent stock investors on a rollercoaster ride. They're navigating uncharted waters, trying to decipher how these game-changing medications will impact various healthcare companies.
Picture this: as patients embark on their journey to shed those pesky pounds by embracing new kids on the block like Ozempic and Wegovy (affectionately known as GLP-1s), there's a glimmer of hope that diabetes cases might dwindle. It's undeniably fantastic news for public health, but it's also thrown a curveball at device manufacturers catering to diabetes-related ailments.
This dilemma has investors taking sides, and it's causing quite the stir in the financial arena. The S&P 500 Health Care index tells a tale of its own, with the top three decliners this quarter being none other than diabetes-related companies: Insulet, ResMed Inc, and Dexcom Inc.
Insulet Corporation, renowned for its insulin pumps, is feeling the weight of this challenge most acutely. It's been through the wringer, losing approximately 45% of its market value in the past three months and experiencing its worst quarterly performance in nearly 15 years. But here's the plot twist: while traders are hastily parting ways with diabetes device stocks, sell-side analysts are playing devil's advocate. They're making a compelling case that these companies might weather the storm better than anticipated in the short term. In fact, they're daring to suggest that the financial fallout from GLP-1 drugs might not be as catastrophic as we've all been fearing.
On the flip side, Wall Street's insatiable appetite for weight-loss medications like Wegovy has been a boon for drug giants Novo Nordisk A/S and Eli Lilly & Co. However, an August study update spilled the beans, revealing that Wegovy isn't just about shedding pounds—it's also in the business of reducing heart-related risks. That bombshell sent diabetes device manufacturers into a tailspin, adding a new layer of intrigue to this unfolding drama.
CarMax Cruises Through Q2 Earnings, but Bumps in the Road Ahead
CarMax (NYSE:KMX), the heavyweight in the U.S. used car retail arena, unveiled its Q2 2024 earnings on Monday, and it was a bit of a mixed bag. The company hit the target, matching estimates at 75 cents per share, but it's worth noting that this number took a dip from last year's 79 cents per share. Seems like CarMax is following InvestingPro's breadcrumbs of warning about a slippery slope in their earnings per share.
On the bright side, the company's revenues sailed past projections, reaching a whopping $7.07 billion. However, don't pop the champagne just yet, as this still marked a 13.2% year-over-year nosedive. It's a bit like celebrating a touchdown when you're still miles behind in the game. InvestingPro's crystal ball was right on the money, predicting a sales decline this year.
In a challenging quarter, CarMax managed to rev up its used-vehicle sales to $5.59 billion. But, let's face it, even that couldn't evade a grim 11% year-over-year drop due to lower retail units and average selling prices. The company also took a nosedive in wholesale revenues, plummeting by a jaw-dropping 21.8% to $1,322 million. InvestingPro's report card, with a gloomy Revenue Growth of -17.19% for LTM2024.Q2, sure knows how to call 'em!
Now, on the financial pit stop, CarMax's administrative costs decided to go for a joyride, revving up by 8.3% to a staggering $585.7 million during the period. CarMax Auto Finance income, on the other hand, took a nosedive, plunging by 26.2% YoY to $135 million. With a Gross Profit Margin of just 11.84% for LTM2024.Q2, as reported by our buddies at InvestingPro, it's clear that CarMax is struggling with its profit margins. Looks like another win for InvestingPro's fortune tellers!
But, hold onto your seatbelts; CarMax's financial position still looks sturdy with cash reserves parked at $521.1 million, just as InvestingPro tipped that the company's liquid assets could ride out the storm. However, there's a plot twist: the company's long-term debt decided to go on a spending spree, clocking in at $1,608.7 million. It's a scene straight out of InvestingPro's script, showing that CarMax's total debt is on an escalator ride to the top for yet another year. So, while CarMax may have navigated Q2 reasonably well, it seems like there are some speed bumps looming on the horizon.
Smart investing is like picking the ripest fruit in the financial orchard—it requires patience, a keen eye, and a knack for knowing when to pluck. It's not about chasing quick wins, but rather planting the seeds of wisdom and watching them grow into a bountiful portfolio. So, whether you're a Wall Street wizard or a Main Street maestro, remember: in the grand game of investing, the only thing that should be overripe is your knowledge.