Busy day full of economic reports, strikes and global conflicts

Tuesday, October 1, 2024

We spent this morning pre-market looking ahead to a busy day for the stock market. And we got it – in fact, with Iran’s attack on Israel today, in addition to the port strike across much of the US, we saw more market-shaping news than we even had on the calendar.

The first trading day in October therefore shows a downward trend after a relatively unusually strong September. The Dow fell -173 points or -0.41% to lead the major indexes today. The S&P 500 lost -53 points, -0.93%, and the Nasdaq lost -278 points, -1.53%. This was a slightly steeper decline than the small-cap Russell 2000’s -1.48% decline.

Conflicts in the Middle East are increasing

Today, Iran fired nearly 200 ballistic missiles at Israel, not all of which were thwarted by the Iron Dome missile defense system. The US Navy has also shot down Iranian missiles on behalf of Israel. This came after the Israeli army spent a week attacking so-called Hezbollah strongholds in Lebanon, including the capital and largest city, Beirut.

What’s next? Experts say Israel’s next move could be to attack oil reserves and shipping ports in Iran, which would drive up global oil prices. Today, spot oil prices are up around 3%, but a serious disruption to oil supply and delivery would likely drive these prices significantly higher.

ILA strike on the first day of the fourth quarter

The International Longshoremen’s Association’s (ILA) latest contract expired at midnight last night, and now 45,000 longshoremen are on strike in 36 ports from Maine to Texas. In addition to a fairer wage structure, the union also wants guarantees that their jobs will not be replaced by automation.

This strike affects 35% of all U.S. imports and could reduce fourth-quarter GDP by $4.5 billion to $7.5 billion. Prominent ports include New York and New Jersey, the second and third largest in the country. Although 45,000 union members are currently affected, this number could rise to over 100,000 employees through knock-on effects.

JOLTS numbers for August mostly subdued

We saw a surprising increase in job openings today Job Vacancies and Labor Turnover Survey (JOLTS) Report for August. A total of 8.04 openings were recorded, more than the 7.7 million expected in the previous month’s report. The number of jobs per available worker remained at 0.9, which remains the highest level since June 2021.

The number of churns fell to its lowest level since September 2020, and the churn rate itself, at +1.9%, is the lowest we have seen since 2015. This shows workers’ dwindling belief that they could leave their job and find a better one. The recent hiring rate and total separations are both lower month-over-month, at +3.3% and +3.1%, respectively.

The story continues

Production and construction data predominantly lower

ISM manufacturing September came in lower than expected today, with a total of 47.2%, in line with the previous month and 30 basis points (bps) below expectations. In the meantime the last reading is for S&P Manufacturing PMI rose 30 basis points from the expected 47.0. Both reports remain in contraction territory, below 50.

Construction expenses Meanwhile, August was lower than expected: -0.1% versus the 0.0% expected. This follows a downwardly revised reading of -0.5% month-on-month. This is the third consecutive negative month for construction spending, but also the closest to zero since +0.2% was recorded in May this year.

Nike Reports Mixed First Quarter, Shares Fall -3%

Nike NKE shares are down -3% in the aftermarket after the company released its first-quarter earnings report after the closing bell. Earnings of 70 cents per share easily beat the 51 cents per share in the Zacks Consensus (though below the 94 cents per share in the year-ago quarter) on revenue of $11.59 billion, below analysts’ expectations of $11.65 billion US dollars.

The conference call that has just begun makes predictions for the future, but Matt Friend, Nike’s CFO, was positive and noted early successes in the new product cycle. Sales in North America were in line with expectations, while China was slightly stronger, as were overall gross margins in the quarter. NKE shares were already down about -20% year to date.

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