Shares in the S&P 500 have fallen for three consecutive days and on Wednesday futures are extending those losses ahead of fresh data and more Q3 earnings. About two hours before the open the S&P looks to open nearly 6 points down, after trimming 3.4 points yesterday.
While investors wait for the durable goods report, which is expected to advance in September, sentiment will remain skittish as investors open up the Wall Street Journal to learn that GM’s financing arm, GMAC, is seeking more taxpayer aid.
“The U.S. government is likely to inject $2.8 billion to $5.6 billion of capital into the Detroit company, on top of the $12.5 billion that GMAC has received since December 2008,” the Journal reported, citing people familiar with the matter. “The latest infusion would come in the form of preferred stock. The government's 35.4% stake in the company could increase if existing shares eventually are converted into common equity.”
Half an hour into today’s session markets will then focus on the housing market as the latest numbers for new home sales are released. It too should see a rise, so based on data it would seem that markets could rebound today. But earnings could be a different story.
Meanwhile, we’re midway through the Treasury’s record $123 billion weekly auction. Another $41 billion will be sold off today in 5-year Notes. BMO economist Jennifer Lee notes that yesterday’s 2-Year auction “was well received, suggesting that there remains an appetite for U.S. paper.”
8:30 ― Durable Goods Orders are set to advance by 1.5% in September after falling 2.4% in August. Gains are expected in orders for transportation products, machinery and electronic goods, but not all analysts are convinced as forecasts range from -0.8% to +2.5%. The report may receive less attention than the following day’s GDP report, but in terms of looking ahead this one is more important.
“Business investment is beginning to stabilize—at least for equipment,” said forecasters from IHS Global Insight, whose prediction is well above consensus at +2.5%. “We expect business equipment spending to rise about 7% in the third quarter, with the gains concentrated in high tech and vehicles.”
Jennifer Lee from BMO advises to watch the component tracking nondefence capital goods orders excluding aircraft component. “It acts as a proxy for future capital spending and if does indeed pick up ― it would be the first in three months ― it would suggest that for all of the U.S. firms that have been talking about nudging up capital spending, well, they were indeed walking their talk.
10:00 ― New Home Sales will be closely watched as September may be the last look as purchases before the tax credit for first-time homebuyers expires (the expiration date is Nov. 30, but that’s when deals must be finalized.) Economists said gains should be concentrated in lower-priced homes as the tax credit is limited to low- and middle-income buyers. The Street’s forecasts is for the annual rate to rise from 429k to 440k.
“New home sales will take a small hit once the tax credit for first-time homebuyers expires,” said analysts from IHS Global Insight. “The drop in inventory is good news because it points to rising housing starts even after the tax credit for first-time homebuyers expires.”
- Treasury Auctions:
- 1:00 ― 5-Year Notes ($41 billion)