Interest rates

Concerns about the economy, interest rates could continue to weigh on Wall Street

Major U.S. index futures are currently pointing to a lower open on Monday, with equities likely to extend the sharp pullback seen last week.

Ongoing concerns about the outlook for the world economy should continue to weigh on the markets after the FedEx (FDX) warning last week.

A rise in Treasury yields could also contribute to continued weakness on Wall Street, with the yield on the benchmark ten-year note hitting an eleven-year high.

The advance in Treasury yields comes ahead of the highly anticipated Federal Reserve monetary policy announcement on Wednesday.

The Fed is widely expected to raise interest rates another 75 basis points, although some see an outside chance for a 100 basis point rate hike.

CME Group’s FedWatch tool currently indicates an 80.0% probability of a 75 basis point rate hike and a 20.0% probability of a 100 basis point rate hike,

A number of other major central banks around the world are also expected to announce their latest monetary policy decisions this week, including the Bank of England and the Bank of Japan.

After coming under pressure during Thursday’s session, stocks saw further declines in Friday’s session. The major averages all moved lower on the day, ending the session at their lowest closing levels in two months.

Major averages climbed well past their pre-close session lows, but remained in negative territory. The Dow Jones fell 139.40 points or 0.5% to 30,822.42, the Nasdaq fell 103.95 points or 0.9% to 11,448.40 and the S&P 500 slipped 28.02 points or 0.7% at 3,873.33.

With the downward move extended, the major averages all posted heavy losses for the week. The Dow Jones fell 4.1%, while the S&P 500 plunged 4.8% and the Nasdaq fell 5.5%.

A sharp drop in FedEx (FDX) shares contributed to weakness on Wall Street, with the delivery giant plunging 21.4% to a two-year closing low.

The sale by FedEx came after the company reported weaker-than-expected preliminary fiscal first-quarter results and withdrew its full-year guidance.

FedEx cited weak global volumes and expectations of a continued volatile operating environment and warned that it expects Company conditions to weaken further in the second quarter.

FedEx’s warning added to concerns about the outlook for the global economy amid tighter monetary policy by central banks around the world.

Concerns about the interest rate outlook also continued to weigh on the markets ahead of the Federal Reserve’s monetary policy decision.

“Wall Street was already worried that the Fed’s inflation-fighting mission could trigger a recession, but now it looks like corporate America is already showing signs of a slowing economy,” market analyst Edward Moya said. senior at OANDA.

Meanwhile, traders largely ignored a report from the University of Michigan showing modest improvement in consumer sentiment and lower inflation expectations.

The University of Michigan said its consumer confidence index fell from 58.2 in August to 59.5 in September. With this rise, the consumer sentiment index reached its highest level since hitting 65.2 in April.

The report also showed that the recent drop in energy prices has contributed to lower inflation expectations.

One-year inflation expectations fell to 4.6% in September from 4.8% in August, while five-year inflation expectations fell slightly to 2.8% from 2.9%.

The Fed has indicated that its aggressive tightening of monetary policy partly reflects its desire to prevent high inflation expectations from continuing.

With FedEx leading the decline, transportation stocks showed substantial downward movement, dragging the Dow Jones Transportation Average down 5.1%. The average fell to its lowest closing level in over a year.

Significant weakness was also visible among oil services stocks, as evidenced by the 3.7% drop in the Philadelphia Oil Services Index. The sell-off in oil services stocks came even though the price of crude oil ended the day nearly flat.

Natural gas stocks also saw considerable weakness amid a prolonged natural gas price decline, with the NYSE Arca Natural Gas Index falling 2.8%.

Brokerage, chemical and biotech stocks also posted notable moves lower, while gold stocks saw some strength amid a modest rise in the price of the precious metal.

Commodities, Forex Markets

Crude oil futures plunge $2.35 to $82.76 a barrel after rising $0.01 to $85.11 a barrel last Friday. Meanwhile, after rising $6.20 to $1,683.50 an ounce in the previous session, gold futures are moving higher, sliding $10.40 to $1,673.10 l ‘ounce.

On the currency front, the US dollar is trading at 143.51 yen from 142.92 yen at the close of trading in New York on Friday. Against the euro, the dollar is trading at $0.9989 from $1.0016 last Friday.

Asia

Asian stocks ended broadly lower on Monday as investors braced for a series of central bank decisions this week.

The Federal Reserve meets on Wednesday, while the Bank of England and the Swiss National Bank will announce their monetary policy decisions on Thursday.

The Bank of Japan also meets on Thursday, with no interest rate change expected.

The dollar hovered near a two-decade high against major peers and Treasury yields rose amid bets that the Fed will raise its benchmark interest rate by at least 75 basis points at the start. end of a two-day political meeting on Wednesday.

Gold and oil fell around 1% in Asian trading amid dollar strength.

Japanese markets were closed for Old Age Day. Chinese stocks ended slightly lower despite the megacity of Chengdu emerging from a two-week lockdown and the People’s Bank of China cutting its 14-day reverse repo rates to revive credit demand and support the booming economy.

China’s Shanghai Composite Index fell 0.4% to 3,115.60, while Hong Kong’s Hang Seng Index fell 1.0% to 18,565.97.

Shares in Seoul fell for a fourth consecutive session to hit more than two months as investors braced for the Fed to hike rates 75 basis points for the third straight time.

The Kospi ended down 1.1% at 2,355.66, marking the lowest level since July 12. Battery maker LG Energy Solution cut losses by 5.6%, while utility Korea Electric Power Corp. rose 3.2% amid speculation that the government could raise electricity rates by a large margin next month.

Australian markets gave up initial gains to end lower as oil prices reversed course, weighing on energy stocks. The benchmark S&P ASX 200 slid 0.3% to 6,719.90, while the broader All Ordinaries index closed down 0.4% to 6,948.60.

Europe

European stocks fell in cautious trade on Monday ahead of a busy week of central bank meetings. Thirteen central bank meetings are scheduled for this week, which are expected to see borrowing costs rise across the globe.

As inflation worries mount, it remains to be seen whether the Federal Reserve will be forced to raise rates by 100 basis points at the end of a two-day policy meeting on Wednesday.

The Bank of England meets on Thursday, with markets split on whether the central bank will hike rates by 50 or 75 basis points ahead of a mini-budget to be unveiled on Friday by new Chancellor of the Exchequer Kwasi Kwarteng. The BoE meeting was delayed for a week after the death of Queen Elizabeth II.

While France’s CAC 40 index fell 1.0%, Britain’s FTSE 100 index and Germany’s DAX index were down 0.6% and 0.5%, respectively.

Swiss pharmaceutical major Roche fell despite European Commission approval of its Vabysmo to treat vision loss.

Shares of City of London Investment Trust also fell. The British company said its net return for the financial year 2022 before tax fell to 100.47 million pounds, from 267.16 million pounds last year.

Volkswagen is also falling, reversing initial gains. The German automaker is seeking to raise nearly 9.4 billion euros ($9.41 billion) from the IPO of its iconic sports car maker Porsche AG.

US Economic Reports

The National Home Builders Association is due to release its homebuilder confidence report in September at 10 a.m. ET. The housing market index is expected to decline slightly to 48 in September from 49 in August.

Actions in brief

Shares of Take-Two (TTWO) may come under pressure after a Bloomberg report said a hacker released authentic, preliminary footage from the development of the video game company’s highly anticipated Grand Theft Auto VI.

Software company Adobe (ADBE) could also see another drop after Wells Fargo downgraded its rating on the company’s stock to Equal Weight from Overweight.

On the other hand, shares of bluebird bio (BLUE) are seeing significant premarket strength after the FDA granted accelerated approval for the biotech company’s Skysona gene therapy for early-onset active cerebral adrenoleukodystrophy.

Auto parts retailer AutoZone (AZO) could also move higher after reporting fiscal fourth-quarter results that beat analysts’ estimates both top and bottom.

For comments and feedback, contact: [email protected]