12pm: US equities build on early gains
US stocks were higher as Wall Street headed into the afternoon on the first trading day of the month following a weak showing in September which saw the broad-market S&P 500 shed close to 5%.
As of noon, the Dow Jones Industrial Average recovered 228 points, or 0.67%, to 34,072. The S&P 500 added almost 21 points, or 0.48%, to 4,328. The tech-heavy Nasdaq gained 18 points, or 0.12%, to stand at 14,466.
Apart from concerns that central banks will start tightening monetary policy, a debt-ceiling stand-off between the Democrats and the Republicans has investors worried as it could result in a credit default in the world’s biggest economy.
“There’s clearly still plenty of nerves in the markets at the moment, which is perfectly understandable under the circumstances,” OANDA senior market analyst Craig Erlam said.
“There’s an enormous amount of uncertainty as we move into the end of the year and central banks removing stimulus, even raising rates, in the midst of that doesn’t inspire confidence.
“Policymakers can dress it up however they want, but if they push ahead with tightening monetary policy at a time when growth is slowing and headwinds are growing stronger, they’ll be undermining their own message and it will start to fall on deaf ears.”
Still, the ISM manufacturing index rose to 61.1 in August from what was an already very strong July reading of 59.9. ING noted that regional indicators have been mixed, with the consensus expecting a slight dip to 59.5 while the sharp slowdown in Chinese manufacturing has also heightened fears that US manufacturing could be starting to experience softer growth.
“US manufacturers are holding their own despite huge headwinds from supply chain problems and worker shortages,” James Knightley, chief international economist at ING said.
“Construction is also holding up well and this offers more support to our view that the 3Q growth slowdown is a temporary blip.”
Among the day’s gainers, Exxon Mobil’s shares rose 2.3% after it said that it expects that the recent surge in energy prices to boost 3Q profits by as much as $1.5 billion.
10.13am Proactive North America headlines:
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9.49am: US stocks start on front foot on Friday
US shares started in the green as traders shrugged off the losses of the last quarter and hailed news of a potential coronavirus (Covid-19) pill treatment.
The Dow Jones Industrial Average added over 197 points in New York to stand at 34,041, while the broader-based S&P 500 added almost nine points at 4,316.
The Nasdaq exchange added around 16 points at 14,465.
On the corporate front, shares in drugs and pharma giant Merck surged almost 9% in early deals to $81.77 after the company, along with Ridgeback Biotherapeutics, announced that their oral antiviral treatment for Covid-19 reduced the risk of hospitalization or death by half for patients with mild or moderate cases.
Looking ahead to the fourth quarter of the year for markets, analyst Fawad Razaqzada at thinkmarkets.com , noted: “After several quarters of consecutive gains for global stocks (especially the US and definitely not China), the final month of the third quarter saw the rally come to an abrupt halt.”
He added: “Heading into the final quarter of the year, concerns over stagflation and hyperinflation will dominate the agenda.
“Investors will want to know what steps governments and central banks might take to stem price pressures, and at the same time, keep their respective economies ticking over. Will the Fed taper QE faster to avoid overcooking inflation? Will the OPEC+ release more than 400K barrels of oil per day to halt the oil price rally? Will gold finally catch a haven bid or will the dollar prove too hot for the metal once again?”
6.30am: US stocks seen opening lower
US stocks are expected to open lower as the final quarter of the year gets underway following a rough September as a debt ceiling impasse between the Democrats and the Republicans runs the risk of ending in a credit default.
Futures for the Dow Jones Industrial Average futures shed 0.48% in Friday pre-market trading, while the broader S&P 500 index fell 0.41% and those for the tech-heavy Nasdaq-100 declined 0.36%.
The eleventh-hour signing of a funding bill by President Joe Biden is expected to keep government agencies running until early December. However, Treasury Secretary Janet Yellen warned that if the debt ceiling is not raised by October 18, the US may not be able to service its debt.
“While, as signalled, Congress passed a continuing resolution to avert a government shutdown, the S&P 500 closed down 1.2% yesterday – taking its September loss to almost 5% – as investors refocussed on even more pressing fiscal matters, such as the need to raise the debt ceiling by around mid-October in order for the US to mitigate risks of defaulting on its obligations,” commented Daiwa Capital Markets analyst Emily Nicol.
“Doubtless also on investors’ mind was the lack of progress in moving forward the bipartisan $550 billion infrastructure bill – scheduled to have been voted on yesterday but pulled by House Speaker Pelosi – and a planned $3.5 trillion budget bill that Democrat moderate Senator Joe Manchin has said he would like to cut to just $1.5 trillion (doubtless emboldening his Republican counterparts).”