September 24, 2022

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Wall Street drops as the Fed, Ford predicted, scares investors

Wall Street drops as the Fed, Ford predicted, scares investors

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  • All eyes on Wednesday’s Fed policy decision
  • Ford sees an additional $1 billion in inflationary costs, and stocks fall
  • Nike downgrades after Barclays downgrades its credit rating due to China shutdown fears

(Reuters) – Wall Street closed lower on Tuesday as traders, already wary of placing new bets on the eve of a US Federal Reserve meeting expected to lead to another big interest rate hike, digested further evidence of slowing inflation in US business.

Standard S&P 500 Index (.SPX) It has fallen this year as investors fear that aggressive policy tightening measures by the Federal Reserve may push the US economy into recession.

It closed for the third consecutive session below 3,900 points – a level that technical analysts consider a strong support for the index – as last week’s dire forecast from delivery company FedEx Corp. (FDX.N) Repeat, this time by automaker Ford Motor Co (FN).

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Ford shares fell after it reported a bigger-than-expected $1 billion hit from inflation and pushed delivery of some vehicles into the fourth quarter due to a shortage of parts. Read more

Competitor General Motors (GM.N) It also sank.

“We’ve seen some speakers talking about the pressures they’re facing, so we can see some margin pressure and some drop in the raw numbers in third-quarter earnings,” said Greg Bootel, head of US equity and derivatives strategy at BNP Paribas. .

The US central bank is widely expected to raise interest rates by 75 basis points for the third time in a row at the end of its policy meeting on Wednesday, with markets also pricing in a 17% chance of a 100 basis point increase and projecting the final interest rate at 4.49% by March 2023.

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Emphasis will also be placed on updated economic forecasts and bitmap estimates of signals related to policy makers’ perception of the end point of rates and expectations for unemployment, inflation and economic growth. Read more

Adding to a mixed batch of economic data, the Commerce Department report showed residential building permits (USBPE = ECI) – Among the most forward-looking housing indicators – it fell 10% to 1.517 million units, the lowest level since June 2020. Read more

The US 10-year Treasury yield reached 3.56%, its highest level since April 2011, while the closely watched yield curve between 2-year and 10-year Treasuries has inverted.

A reversal in this part of the yield curve is seen as a reliable indicator that a recession will follow within one to two years.

“There are a lot of headwinds to prevent ongoing rallies. It’s hard to have (price-to-earnings) expansion while the Fed is tightening,” BNP’s Boutle said.

According to preliminary data, the S&P 500 . index (.SPX) It lost 43.61 points, or 1.12%, to close at 3,856.28 points, while the Nasdaq Composite lost. (nineteenth) It lost 107.87 points, or 0.94%, to 11,427.15. Dow Jones Industrial Average (.DJI) It fell 306.89 points, or 0.99%, to 30,712.79 points.

All 11 major S&P sectors fell, with real estate sensitive to the economy (.SPLRCR) and materials (.SPLRCM) The sectors are among the largest of the waterfalls.

Meanwhile, in another sign of nervousness about future corporate earnings, Nike Inc (NKE.N) It fell after Barclays analysts downgraded the rating to “equal weight” from “overweight,” citing volatility in the Chinese market due to the pressure of COVID-related shutdowns in early September.

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Additional reporting by Devik Jain and Ankika Biswas in Bengaluru and David French in New York; Editing by Shunak Dasgupta, Magu Samuel and Lisa Shumaker

Our criteria: Thomson Reuters Trust Principles.