New York
CNN Business
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Plenty for Wall Street to sit back and take it easy while waiting for the Federal Reserve’s latest interest rate decision on Wednesday. Stocks fell on Tuesday as investors worried about the impact of another big interest rate hike.
The Dow fell more than 450 points, or 1.5%, in midday trading. The S&P 500 also decreased by about 1.5% while high-tech Nasdaq fell 1.3%.
No earnings reports were noted on Tuesday…despite warnings from Ford
(F) About inflation and supply chain woes add to investor concerns.
Nor is there much economic data for investors to focus on new housing report, has been mixed. Housing prices starting for August are up more than 12% from July, but building permits have fallen by 10%.
The housing numbers are unlikely to change the minds of Fed policymakers who will publish another rate hike on Wednesday. The market is pricing in an almost 85% chance of a 3/4 percentage point rally for the third time in a row.
But there are some who believe the Fed will be even more aggressive and raise rates by an unprecedented full percentage point, or 100 basis points, mainly because Inflationary pressure continues.
“The consumer price index report has presented a degree of uncertainty about how the Fed will behave,” said Garrett DeSimone, head of quantitative research at OptionMetrics. DeSimone said he thinks the Fed should raise rates by 100 basis points, a move that could be “breaking the Band-Aid rally.”
Expectations of higher interest rates have also pushed up long-term bond yields. 10-year U.S. Treasuries hit 3.6% at one point on Tuesday before rebounding. That was the highest level since February 2011.
The market sold off on Tuesday after a humble protest to start the week. Shares rallied late in Monday’s trading session after hovering near breakeven for most of the day.
But the market has had a rough few days, falling over the past week after Shocking earnings warning from FedEx
(FDX)this raises more worries about health of the global economy and Corporate America.
“We are seeing a lot of the FedEx hangover still easing in the market,” said Anthony Denier, CEO of Webull, an online brokerage. “Transport stocks are a canary in the coal mine when it comes to the economy.”
Investors are increasingly worried. The CNN Business Fear & Greed Indexlooks at seven market sentiment indicators, which have slipped deeper into Fear territory.
