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Stock market today: Stocks fall, bond yields rise, while the Fed looms

Stock market today: Stocks fall, bond yields rise, while the Fed looms

Updated at 12:22 PM EST

US stocks fell on Monday, after their biggest weekly drop in three months, as investors braced for a key Federal Reserve decision on interest rates likely to be reverberated by major central banks in Europe and Asia.

While investors have long been anticipating another massive rate hike from the Federal Reserve this week, especially after a hotter-than-expected inflation report in August, growing concern about the impact of central bank tightening on the broader global economy has added a new dimension to this. List of the week for price decisions.

The Bank of England, which postponed last week’s policy meeting amid the nation’s mourning for Queen Elizabeth II, will meet on Thursday, as will the Bank of Japan and the Swiss National Bank.

The World Bank urged policymakers last week to “switch their focus from cutting consumption to boosting production” amid concerns that faster rate hikes could push the global economy into recession, while Goldman Sachs cut its US growth forecast for 2023 – to 1.1 % of 1.5%. Citing more hawkish Fed policy and a surge in key unemployment rates.

In Germany, where Europe’s largest economy is already shrinking, the Bundesbank warned on Monday that “economic activity may slow somewhat this quarter and contract significantly in the autumn and winter months,” amid the region’s ongoing energy crisis.

Currently, CME Group FedWatch suggests there is an 80% chance of a 75 basis point rate hike on Wednesday, the third in a row, with a near 50/50 chance of the Fed raising its target rate to between 4.5% and 4.75 % by the end of February.

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Bond markets continue to raise fears of a recession, with the spread between two-year bond yields – which have been trading at the highest levels since 2007 – now about 46 basis points higher than the yield on 10-year notes.

In fact, the benchmark 10-year note topped 3.5% for the first time since 2011, while the dollar index rose 0.22% against a basket of other global currencies in the overnight session to trade at 110.006.

With investor prices now rising — with a US recession likely, and more and more companies warning of the impact of waning demand and rising input costs — traders and investors will focus heavily on any suggestion that Powell might shift the Fed’s inflation battle in order to avoid prolonged damage. run for the world’s largest economy.

Beyond the Fed, investors will also focus on a key set of numbers from the rapidly weakening housing market, with data on housing starts and building permits for August at 8:30 a.m. ET on Tuesday, and existing home sales data following on Wednesday.

July Quarter Earnings From Home Builders Lennar (flexible) The main KB (KBH) On Wednesday, an important earnings announcement is expected from wholesale retail giant Costco (cost) Thursday.

In Europe, the Stoxx 600 Index is down 0.09% at close of trading in Frankfurt to start the week, with markets closed in London to celebrate the Queen’s funeral. In Asia, the region-wide MSCI ex-Japan fell 0.65% while Japan’s Nikkei 225 closed due to the Elderly’s Day holiday.

On Wall Street, the S&P 500 was down 10 points by midday trading while the Dow Jones Industrial Average was down 60 points. The technology-focused Nasdaq, which fell more than 5% last week, was 45 points in the red.

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In terms of individual stocks, Take-Two Interactive (TTWO) Stocks were an interesting pre-market driver, dropping nearly 2% after a weekend report that parts of the new Grand Theft Auto VI game had been leaked online.

Bitcoin prices were also in focus after dropping to a three-month low in overnight trading as global markets retreated from risky assets ahead of an active week of central bank rate decisions and further movement of the US dollar.

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