Tuesday September 20th

20-09-2022

Stock futures dip with Fed set to kick off September meeting on Tuesday

U.S. stock markets index futures slipped Tuesday as Wall Street looked to build on a modest rebound ahead of another rate hike from the Federal Reserve. Futures tied to the Dow Jones Industrial Average fell 204 points, or 0.66%. S&P 500 futures shed 0.73%, and those for the Nasdaq 100 traded 0.82% lower. The Federal Open Markets Committee kicks off its September meeting on Tuesday, where central bankers are expected to announce a 0.75 percentage point rate hike on Wednesday. Stocks have tumbled in recent weeks as comments from Fed Chair Jerome Powell and an unexpectedly hot August consumer price index report caused traders to prepare for even higher rates until inflation cools. “Heightened fear of recession risk has helped to keep US policy rate pricing inverted from early 2023 to early 2026 and may help to explain why equity volatility is higher than the macro landscape would generally predict,” wrote Goldman Sachs’ Dominic Wilson in a note to clients Tuesday. “Even so, markets will need to adjust signi´Čücantly further if the more hawkish view of the labour market is right.” Wilson said the S&P 500 needs to trade within the 2900 to 3375 range and 5-year yields between 4.5-5.4% if the Fed needs to see higher unemployment to gain confidence that inflation will fall. During a choppy trading session on Monday, stocks rose in the afternoon to snap a two-day losing streak and claw back some of their recent losses. The Dow rose 197 points, or about 0.6%. The S&P 500 and Nasdaq Composite gained roughly 0.7% and 0.8%, respectively. However, after the market closed on Monday, Ford announced that supply chain issues would cost the automaker an extra $1 billion in the third quarter. Shares fell nearly 5% in premarket trading. August read on housing starts comes in stronger than expected. U.S. homebuilding increased in August, a surprise to the upside as rising rents boosted construction of multi-family housing units. Housing starts rebounded 12.2% to a seasonally adjusted annual rate of 1.575 million units last month, the Commerce Department said on Tuesday. Economists polled by Reuters had forecast a starts rate of 1.445 million units. Shares in the Asia-Pacific rose Tuesday as Japan’s inflation accelerated and China kept its loan prime rate on hold. Investors are also looking ahead to the Federal Reserve meeting in the U.S. Hong Kong’s Hang Seng index gained 1.36% in the final hour of trade and the Hang Seng tech index was up 2.22%. The Shanghai Composite in mainland China rose 0.22% to 3,122.41 and the Shenzhen Component advanced 0.686% to 11,283.92. Japan’s Nikkei 225 rose 0.44% to close at 27,699.42 on its return to trade after a holiday and the Topix gained 0.45% to 1,947.27. The Kospi in South Korea added 0.52% to 2,367.85, while the Kosdaq was 1.12% higher at 760.35. Oil prices ticked up on Tuesday as OPEC and its allies keep producing less than their quotas, but were headed for a fourth monthly decline ahead of an expected further U.S. interest rate hike which may curb economic growth and fuel demand. Brent crude futures for November settlement were up 54 cents, or 0.59%, to $92.52 a barrel at 9:00 a.m. ET. U.S. West Texas Intermediate crude for October delivery was at $86.05 a barrel, up 32 cents. The October contract will expire on Tuesday and the more active November contract was at $85.69, up 33 cents, or 0.39%. Gold prices fell on Tuesday, weighed down by a firmer dollar and elevated U.S. bond yields, as the Federal Reserve gears up for a hefty rate hike to tame inflation pressures. Spot gold was down 0.51% at $1,669.80 per ounce, as of 9:00 a.m. ET. U.S. gold futures were down 0.15% at $1,675.50.