Wall Street Falls as Fed, Ford Forecasts Scare Investors

Wall Street Falls as Fed, Ford Forecasts Scare Investors

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  • All eyes on the Fed’s policy decision on Wednesday
  • Ford sees an extra $1 billion in inflationary costs, shares plunge
  • Nike falls after Barclays downgrade over China lockdown concerns

Sept 20 (Reuters) – Wall Street closed lower on Tuesday as traders, already wary of placing new bets on the eve of a U.S. Federal Reserve meeting that is expected to bring another big hike in interest rates, interest, they soaked up more evidence that inflation is slowing down American business.

The benchmark S&P 500 (.SPX) index has fallen this year as investors fear aggressive policy tightening by the Fed could push the US economy into recession.

It closed for the third consecutive session below 3,900 points, a level seen by technical analysts as strong support for the index, as last week’s dire outlook for delivery company FedEx Corp (FDX.N) was repeated. , this time from the automaker Ford Motor Co. (FN).

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Ford shares tumbled after it signaled a bigger-than-expected $1bn hit from inflation and delayed delivery of some vehicles to the fourth quarter due to parts shortages. read more

Its rival General Motors Co (GM.N) also went under.

“We’ve seen some players talk about the pressures they’re facing, so we could see some margin compression and some weakening in the headline third-quarter earnings numbers,” said Greg Boutle, chief equity and financial strategist. US derivatives at BNP Paribas. .

The US central bank is widely expected to raise rates by 75 basis points for the third consecutive time at the end of its policy meeting on Wednesday, with markets also pricing in a 17% chance of a 100bp hike. and predict the terminal rate at 4.49. % as of March 2023.

Attention will also turn to updated economic projections and dot plot estimates for clues as to the direction of the endpoint of unemployment, inflation and economic growth rates and prospects for policymakers. read more

Adding to a mixed set of economic data, a Commerce Department report showed residential building permits (USBPE=ECI), among the most forward-looking housing indicators, fell 10% to 1.517 million units, the lowest level from June 2020. read more

The benchmark 10-year US Treasury yield hit 3.56%, its highest level since April 2011, while the closely watched yield curve between 2-year and 10-year bonds inverted further.

An inversion in this part of the yield curve is considered a reliable indicator that a recession will follow in a year or two.

“There are a lot of headwinds preventing sustained rallies. It’s hard to have an expansion (price-to-earnings) while the Fed tightens,” BNP’s Boutle said.

According to preliminary data, the S&P 500 (.SPX) lost 43.61 points, or 1.12%, to close at 3,856.28 points, while the Nasdaq Composite (.IXIC) lost 107.87 points, or 0.94 %, to stay at 11,427.15. The Dow Jones Industrial Average (.DJI) fell 306.89 points, or 0.99%, to 30,712.79.

All 11 major S&P sectors fell, with the economically sensitive real estate (.SPLRCR) and materials (.SPLRCM) sectors among the biggest decliners.

Meanwhile, in another sign of nervousness around future corporate earnings, Nike Inc (NKE.N) fell after analysts at Barclays downgraded it to “equal weight” from “overweight”, citing volatility in the Chinese market. due to pressures related to COVID-19. lockdowns in early September.

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Reporting from Devik Jain and Ankika Biswas in Bengaluru and David French in New York; Edited by Shounak Dasgupta, Maju Samuel, and Lisa Shumaker

Our standards: the Thomson Reuters Trust Principles.

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