TSX jumps amid Fed rate cut hopes, ongoing U.S. government shutdown
Investing.com - U.S. stock futures are mixed as investors gear up for the publication of fresh inflation data. Economists expect the annualized producer price index for final demand in August to equal July’s pace, further highlighting stubborn inflation pressures prior to an all-important Federal Reserve interest rate decision next week. Oracle (NYSE:ORCL) offers a blockbuster booked revenue forecast, sending shares soaring before the opening bell on Wall Street, while Wegovy-maker Novo Nordisk announces steep job cuts.
1. Futures mixed
U.S. stock futures hovered around both sides of the flatline on Wednesday, with investors pouring over earnings from software group Oracle and awaiting the first batch of key inflation data this week.
By 03:38 ET (07:38 GMT), the S&P futures contract had risen by 21 points, or 0.3%, Nasdaq 100 futures had climbed by 70 points, or 0.3%, and Dow futures were mostly unchanged.
The main averages on Wall Street notched gains in the prior session, as sentiment remained buoyed by expectations that a Federal Reserve interest rate cut is coming next week.
A sharp downward revision to U.S. employment figures for the 12 months through March suggested that a possible cooling in the labor market may have been taking place even before President Donald Trump unveiled sweeping import tariffs in April. Bets that the Fed will slash rates by at least 25 basis points at its September 16-17 gathering were little changed following the numbers, while U.S. Treasury yields, which tend to move inversely to prices, moved higher.
“The [Bureau of Labor Statistics] revision strengthened the case for Fed easing, but Powell already has plenty of labor justification to cut [...] and the actual number [...] didn’t deviate from the rough consensus range,” analysts at Vital Knowledge said in a note.
2. PPI ahead
Markets are now turning their focus to the release of the producer price index for August.
It will be this week’s opening look at how inflation is evolving heading into the final month of the third quarter, with a separate gauge of consumer price growth due out on Thursday.
Economists anticipate that last month’s producer price index from the BLS will come in at 3.3% on an annualized basis, matching the July reading.
Sticky price gains could further highlight an emerging worry that, as the jobs picture deteriorates, the Fed faces challenges to both sides of its dual mandate: maintaining price stability and ensuring maximum employment.
Still, the inflation data should be “no barrier” to a Fed rate cut, analysts at ING argued. Policymakers have already largely indicated that a rate reduction may be needed to bolster the labor market, despite risks that such a move could push up inflation.
Meanwhile, fears over a potential encroachment on the central bank’s independence by Trump were given a temporary respite after a federal judge ruled that the president cannot fire Fed Governor Lisa Cook.
3. Oracle shares spike as backlog swells
Shares in Oracle surged in extended hours trading after the software firm unveiled a blowout booked revenue estimate for its artificial intelligence-enhanced cloud unit.
The after-hours jump in the stock was mirrored in Frankfurt dealmaking, where the stock (F:ORCL) rose by over 30%.
The company said it now expects booked revenue at its Oracle Cloud Infrastructure division to surpass half-a-trillion dollars, a robust forecast which analysts said was a sign of solid demand for the group’s relatively low-cost, AI-powered offerings.
Speaking in a post-earnings call, CEO Safra Catz noted that the firm has worked to make a range of popular AI reasoning models — such as OpenAI’s ChatGPT and xAI’s Grok — available to its customers.
Remaining performance obligations, or RPO, Oracle’s most recognized measure of booked revenue, surged by 359% versus a year earlier to $455 billion in the quarter ended on August 31, and Catz predicted that “several additional multi-billion-dollar” clients will be signed in the next few months.
"RPO stole the show [...], reinforcing confidence in Oracle’s acceleration narrative," analysts at Jefferies said in a note.
Yet the group-wide fiscal first-quarter performance was more mixed. Adjusted earnings per share were $1.47 and revenue was $14.93 billion, compared with FactSet estimates of $1.48 a share and $15.04 billion.
4. Novo Nordisk to slash over 11% of workforce
Novo Nordisk (CSE:NOVOb) has said it will cut 9,000 jobs worldwide as the maker of popular weight-loss drug Wegovy and diabetes treatment Ozempic seeks to reduce costs and streamline operations.
The cuts amount to around 11.5% of the Danish drugmaker’s total workforce of 78,400, with about 5,000 positions to go in Denmark. Copenhagen-listed shares of Novo Nordisk were higher in early trading on Wednesday.
Novo said the restructuring would generate annual savings of 8 billion Danish crowns ($1.27 billion) by 2026, although it expects one-off charges of 9 billion crowns in the third quarter. About 1 billion crowns in savings are expected to be realised in the fourth quarter.
The savings will be redirected to growth opportunities in diabetes and obesity, the company said.
Chief Executive Mike Doustdar, who took over at helm of the company last month, said the changes would simplify the organization and help it focus more closely on diabetes and obesity treatments, its largest businesses.
5. Oil climbs
Oil prices rose on heightened geopolitical tensions in the Middle East as well as the prospect of more restrictions on Russian oil potentially denting global supply.
At 03:39 ET, Brent futures gained 0.7% to $66.86 a barrel, and U.S. West Texas Intermediate crude futures rose 0.8% to $63.10 a barrel.
Prices gained in the previous trading session after Israel said it had attacked Hamas leadership in Doha, which Qatar’s prime minister said threatened to derail peace talks between Hamas and Israel, lifting tensions in the oil-rich region.
Additionally, Reuters reported that Trump is calling on the European Union to steeply tariff India and China over their buying of Russian energy. Trump has already imposed 50% tariffs on India, and was seen calling for 100% tariffs on New Delhi and Beijing.
Despite being designed to pressure Moscow into ending its long-running war with Ukraine, the move could limit global supplies if top buyers India and China cave in to Western pressure. However, both countries have so far signaled few plans to stop their purchases of Russian oil.
Elsewhere, Poland said it had shot down Russian drones flying over its territory during a widespread attack in western Ukraine -- an incursion that the NATO member described as an "act of aggression."