July 17, 2024

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US stocks fall ahead of the Federal Reserve meeting

US stocks fell ahead of a later Federal Reserve meeting this week, where the central bank is expected to provide some clues about its path forward.

Wall Street’s benchmark S&P 500 fell 0.4 percent on Tuesday, reversing earlier gains, while the heavyweight Nasdaq Composite fell 0.9 percent. The S&P 500 fell during the previous session but gained nearly 8 percent for the month of October.

The central bank’s Federal Open Market Committee is expected to implement its fourth consecutive rate increase of 0.75 percentage point on Wednesday in a bid to cool inflation still at a decades-high. Investors will be watching closely for any indication that the Federal Reserve is ready to slow the pace of increases in December.

Traders were mixed on the results of the December meeting: futures markets show a 49 percent chance of a 0.75 percentage point increase, and a 44 percent chance of a 0.5 percentage point lower increase. The strong jobs data released on Tuesday shows that the labor market remains healthy, which, if it continues, could reduce the odds of a lower rally in December. But interest rate expectations in the futures market on Tuesday didn’t move much.

The Labor Department said demand for American workers rebounded in September, as employers added 437,000 jobs, bringing the total number of job vacancies to 10.7 million. Analysts at Citigroup said the figures represented “another example of data” uncooperative “with the Fed wanting to slow the pace of rate hikes”.

Meanwhile, the Institute for Supply Management said factory activity, which tracks its index, fell to 50.2 in October, indicating a slight expansion in manufacturing output. Markets expected a reading of 50.

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The Federal Reserve raised its key policy rate this year from nearly zero to its current 3 per cent range to 3.25 per cent in a strong monetary tightening that pulled the S&P 500 index back from a record high in January. .

big technology It has been hit hard by a slowing economy and rising interest rate environment, with many companies reporting weak earnings last week. However, Uber’s third-quarter revenue and profit came in higher than analysts’ expectations on Tuesday, sending its shares up 13 percent.

In the government bond markets, the yield on US 10-year Treasuries fell less than 0.01 percentage point to 4.04 per cent. The yield on British government bond equivalents fell 0.04 percentage point to 3.4 per cent.

Elsewhere in stock markets, the European Stoxx 600 Index is up 0.6 percent, and the London FTSE 100 Index is up 1.3 percent.

The gains followed sharp gains in stocks in mainland China and in Hong Kong. The CSI 300 stock index in Shanghai and Shenzhen jumped 3.6 percent, while the Hang Seng Index in Hong Kong rose 5.2 percent.

Analysts said the rally, which has helped offset some of the losses it has incurred since the end of the 20th CPC Congress a week ago, was driven by unverified rumors online that the Chinese government had set up a task force to consider reopening plans.

Most of the day’s gains came after social media posts shortly before the conclusion of Hong Kong’s morning session, without naming sources, indicated that China had set up a “re-opening committee” to assess various reopening scenarios early next year.

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Analysts said the purchase appeared to be motivated by rumors, but questioned their veracity.

“There are quite a few institutions buying shares today,” said Louis Tse, managing director at Hong Kong-based broker Wealthy Securities.

“The numbers are there, there is a lot of turnover, but if China opens up, they will do it gradually, not all at once. They can’t afford these many cases all of a sudden.”