Monday September 19th

U.S. stock markets index futures pointed to more losses Monday — following the major averages’ worst week since June — as interest rates surged ahead of the Federal Reserve’s two-day meeting this week. Futures tied to Dow Jones Industrial Average fell 260 points, or 0.85%. S&P 500 and Nasdaq 100 futures slid 0.84% and 0.77%, respectively. The 10-year Treasury yield topped 3.5% on Monday, its highest level in 11 years, and rates across the board continued to rise ahead of the Fed’s likely decision this week to raise its benchmark rate by another three-quarters of a point to snuff out inflation. After some brief hope over the summer that the Fed may be done its aggressive tightening campaign soon, investors have begun dumping stocks again on fears the central bank will go too far and tip the economy into a recession. Investors are coming into the new week focused on the Fed’s latest policy meeting, which will begin Tuesday. The central bank is expected to raise interest rates by another three-quarters of a point, though investors are also watching for guidance about corporate earnings before the next reporting season begins in October. “As we peer into the end of 2022, we continue to anticipate choppy conditions in US equities, which we view as caught in a tug of war between deeply bearish sentiment (a contrarian / bullish signal) and ongoing concerns about further Fed tightening and its longer-term economic ramifications and downward earnings revisions,” wrote RBC Capital Markets’ Lori Calvasina in a note to clients Monday. Stocks slid last week as investors reacted to a hotter-than-expected inflation report and a dismal warning from FedEx about a “significantly worsened” global economy. The major averages posted their fourth weekly loss in five weeks. Beyond the Fed meeting, there are just a few economic data releases this week, including August housing starts on Tuesday and initial jobless claims on Thursday. There are also a handful of corporate earnings on deck, including Costco, Darden Restaurants, General Mills and Lennar. Shares in the Asia-Pacific fell on Monday ahead of major central bank meetings this week. The Hang Seng index in Hong Kong was 0.89% lower in the final hour of trade, with the Hang Seng Tech index down 1.93%. South Korea’s Kospi shed 1.14% to 2,355.66 and the Kosdaq was 2.35% lower at 751.91. In mainland China, the Shanghai Composite dipped 0.35% to 3,115.60 and the Shenzhen Component also declined 0.48% to 11,207.04. The People’s Bank of China cut its 14-day reverse repo rates. Japan’s market was closed for a holiday Monday. Oil fell Monday, pressured by expectations of weaker global demand and by U.S. dollar strength ahead of a possible large interest rate increase, though supply worries limited the decline. Central banks around the world are certain to increase borrowing costs this week, and there is some risk of a blowout 1 percentage point rise by the U.S. Federal Reserve. “The upcoming Fed meeting and the strong dollar are keeping a lid on prices,” said Tamas Varga of oil broker PVM. Brent crude for November delivery fell $1.76, or 1.9%, to $89.59. U.S. West Texas Intermediate (WTI) for October dropped $1.83, or 2.2%, to $83.28. Gold prices slipped on Monday, pressured by a firmer dollar as investors braced for aggressive interest rate hikes by the U.S. Federal Reserve and other central banks this week in an effort to tame high inflation. Spot gold was last down 0.68% at $1,663.58 an ounce. U.S. U.S. gold futures fell 0.69% to $1,663.79.