October 6, 2022

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US stocks fluctuate ahead of the Fed meeting

US stocks fluctuate ahead of the Fed meeting

The S&P 500 index recently gained 0.2%, a day after stocks rose late on Monday. The technology-focused Nasdaq Composite Index lost 0.2% while the Dow Jones Industrial Average shed 0.1%. Eight of the 11 S&P industry sub-sectors were in the green.

The moves reflect a jittery mood among investors who expect the US central bank to accelerate monetary policy tightening this week, the latest step in an anti-inflation effort that has already been implemented. Raising borrowing costs across the economy this year, Stock and bond markets streaming.

Recent economic data has shown rising costs on everything from groceries to gasoline, with war in ukraine And Severe measures to combat COVID-19 In China the increasing complexity of world trade. US companies also face rising wages Labor markets are still tight. These factors have put inflation at the top of the Fed’s agenda, leading to moves that could lead to further turmoil in the stock market, said Andrew Hollenhurst, chief US economist at Citigroup.

“Even if we get exactly what the Fed policy is expected to announce… will the risk assets still go along with that?” Mr. Hollenhurst said.

Meanwhile, traders are interacting with a plethora of the latest major companies’ reports and financial forecasts. investment company

KKR

It rose 4.2% after its distributable profit after tax came in above analysts’ estimates. Estee Lauder It lost 5.5% after the company cut its revenue and earnings forecast. Rockwell Automation Quarterly earnings slumped, he said, sending shares down 12%.

In other corporate titles, Elliott Investment Management Disclosure of approximately 6% stake in Western DigitalThis sent the data storage company’s shares up 15%.

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Health care real estate trust

Shares rose 8.3% after the Wall Street Journal reported that Welltower remained an interested viewer After a previous takeover bid, though, Healthcare Realty agreed to merge with

American Healthcare Trust.

Overall positive corporate reports have failed to stabilize the market in recent weeks. Earnings growth is in line with historical norms at around 11% annually, according to Deutsche Bank analysts, while margins have remained near record levels despite higher input prices. However, the S&P has lost about 12% year-to-date.

“These blows were stronger than they have been in the last quarter. It has been a good earnings season,” said Jonathan Golub, chief US equity strategist at Credit Suisse. However, he added, investor concerns about inflation and the Fed’s response left potential buyers feeling Sadly.

“The market is seeing that the Fed is going to have to do a lot to get this under control,” Golub said.

Earning season continues, with

AirbnbAnd

StarbucksAnd

Lift

And

American International Group

In the block after the markets close.

All eyes are on the Fed’s next steps.


picture:

Brendan McDermid/Reuters

One factor influencing the markets is the higher yields of treasury, which with higher yields offers investors low-risk returns that are more competitive compared to equities. Earlier on Tuesday, yielding over 10 years Treasuries topped 3% For the second day in a row, it fell to 2.954%, compared to 2.995% on Monday. Yields, which move inversely to bond prices and are a reference to borrowing costs across the economy, have risen to their highest since 2018 in anticipation of higher interest rates.

Rate-setting officials will meet on Tuesday for the two-day policy meeting. Concluding on Wednesday, the Fed is expected to raise interest rates by half a percentage point, the first such increase in 22 years and after A quarter point increase in March.

Investors will seek details from Chairman Jerome Powell on the central bank’s plans to reduce its bond holdings. Officials recently indicated that they would allow $95 billion in securities to mature each month, Decode another form of stimulation flooded the markets during the pandemic.

Gregory Berdon, chief investment officer at

Arbuthnot Latham.

Mr. Burdon added that financial conditions had already tightened significantly, noting a stronger dollar, higher Treasury yields and higher mortgage rates.

In commodities, Brent crude futures fell 1.7% to $105.72 a barrel. Traders are waiting for a meeting of ministers of OPEC members and their allies, including Russia, on Thursday, and are watching the shutdown in China, which curbs demand for fuel.

European Union Proposal to ban Russian crude oil By the end of the year it is due to be distributed to member states on Tuesday.

The Stoxx Europe 600 Index rose 0.5%, led by shares of banks and oil and gas companies on a busy day in the region.

BP shares rose 5.8%. After the oil producer reported base earnings of $6.2 billion, upon scrapping a pre-tax accounting fee related to his decision to exit his Russian holdings.

BNP Paribas

It posted a jump in earnings, sending shares of the French lender up 5.2%.

Mainland China markets are closed for a public holiday. Hong Kong’s Hang Seng added 0.1%.

Federal Reserve Chairman Jerome Powell indicated that the central bank is likely to raise interest rates by half a percentage point at its meeting. Photo: Samuel Corum / Getty Images

Write to Joe Wallace at [email protected] and Matt Grossman at [email protected]

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