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Investing.com – U.S. stocks are on track for a September decline ahead of the month’s final trading day, despite a positive session on Wall Street on Thursday. As we approach the end of the final quarter, the focus will be on inflation, which is closely watched by the Federal Reserve, and investors will be watching a tense budget battle in Washington ahead of a possible government shutdown this weekend.
1. Futures are bullish
U.S. stock futures rose on Friday, extending gains made in the previous session, although stocks remained negative for the month.
As of 04:51 ET (0851 GMT), the Dow contract was up 154 points, or 0.5%, while S&P 500 futures were up 21 points, or 0.5%, and jumped 98 points. , or by 0.7%.
On Thursday, Wall Street’s major indices closed in the green, rising 0.8%. Shares were supported by a decline in US Treasury yields from 16-year highs.
Heading into the last trading day of the month and quarter, the Nasdaq and S&P 500 will post their worst performances of the month, with the 30-stock index down 3%.
In economic data, investors will be keeping an eye on the latest US Personal Consumption Expenditures (PCE) price index – the Federal Reserve’s preferred measure of inflation – which will be released later on Friday. Investors’ attention has recently been focused on the future path of the Federal Reserve’s interest rate, as well as the jump in oil prices and the ongoing budget standoff in Washington, which threatens to lead to a government shutdown.
2. PCE index
Economists expect growth in the core PCE figure for August to accelerate, signaling continued upward pressure on prices in the world’s largest economy.
On a monthly basis, PCE inflation will accelerate from 0.2% in July to 0.5%. On an annual basis, it is forecast to jump from 3.3% to 3.5%.
However, the pace of growth in the so-called core PCE index, which excludes spending items such as food and energy, is forecast to remain flat month-on-month and slow from 4.2% to 3.9% for the year.
Fed officials are likely to pay close attention to this indicator when deciding whether to raise borrowing costs again this year.
Last week, the Fed kept rates in the range of 5.25%-5.50%, but noted that further tightening at its November or December meeting may be necessary to reduce inflation. They also pointed out that rates could remain at elevated levels for longer than expected, which has weighed on stocks and sent bond yields higher this week.
3. The Senate and House are taking different paths ahead of the government shutdown.
The US House of Representatives is expected to vote on a short-term funding bill on Friday as lawmakers try to avert a government shutdown that could begin as soon as this weekend.
But the bill is unlikely to win decisive support from some hardline GOP members in the lower chamber of Congress, who are feuding with Speaker Kevin McCarthy over spending levels set in a deal struck with President Joe Biden earlier this year.
The House did manage to pass three bills Thursday that would provide funding for parts of the government, although those partisan measures are unlikely to win support in the Democratic-controlled Senate. On their own, they also will not be enough to avoid the fourth federal government shutdown in a decade.
Meanwhile, senators agreed to begin debate on a separate stopgap bill that would extend spending until Nov. 17 and include provisions for Ukraine aid and domestic disaster relief, but it has already been rejected by House Republicans.
Wall Street is keeping a wary eye on the budget battle, which comes just months after another bitter fight in Washington over the US debt ceiling. Moody’s (NYSE: ), the latest rating agency to give the country its top AAA rating, warned that a government shutdown could jeopardize that rating.
4. UAW Strike Extension Deadline Approaches
The United Auto Workers union may reportedly expand its strike Friday at factories owned by three major U.S. automakers if significant progress is not made in negotiations with them.
Earlier this week, multiple media outlets reported that the UAW plans to expand the scope of the strikes if significant progress is not made in negotiations with General Motors (NYSE: ), Ford Motor (NYSE: ) and Jeep maker Stellantis by 10:00 a.m. ET today (NYSE: ).
Additional strikes will target factories that make the companies’ large pickup trucks and SUVs, which could cost the businesses billions of dollars in revenue and profits, according to Reuters.
The UAW, which first began strikes on Sept. 15, has been feuding with automakers over wage increases and benefits. About 18,300 UAW members are currently on strike, representing approximately 12% of the union’s total workforce in the so-called Detroit Three.
5. Oil prices tend to rise weekly amid supply shortages
Oil prices eased in choppy trading on Friday but remained on course for a 2% gain this week on tight U.S. supplies and hopes for increased demand in China during the Golden Week holiday.
Prices rose 30% in the last quarter to reach their highest level in 2023, thanks in part to moves by Saudi Arabia and Russia to extend production cuts until the end of the year. The oil market was further supported by the United States, where oil inventories at one of its main supply points are at their lowest level since July 2022.
At the same time, strong tourism activity during China’s week-long Golden Week holiday is also expected to boost oil demand in the world’s largest fuel importer.
Analysts are also looking ahead to a ministerial meeting of the Organization of the Petroleum Exporting Countries and their allies – OPEC+ – next week, when reports suggest Saudi Arabia, the group’s de facto leader, could introduce potential voluntary supply cuts.
By 5:17 a.m. ET, crude oil futures were trading 0.1% lower at $91.64 a barrel, while the contract was down 0.2% at $92.91.
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2023-09-29 09:26:00
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