Market focused on Fed meeting, main index was under pressure, Dow fell more than 350 points | Anue Juheng

Markets believe the US Federal Reserve will dramatically hike interest rates this week to curb decades of torrid inflation, welcoming the latest economic forecasts and 10-Year Treasury YieldRising to a new high since the 2008 financial crisis, major US equity indices opened lower on Tuesday (20th), includingIndustrial average of the Dow Jonesit fell by over 350 points.

Before the deadline,Industrial average of the Dow Jonesfell by more than 350 points or 1.22%,Nasdaq Composite Indexfell by more than 100 points or 0.92%,S&P 500 Indexfell by more than 1%,Semiconductor of PhiladelphiaThe index fell by nearly 1%.

US stock index futures evened out earlier gains before the US market opened and fell as traders braced for another large US interest rate hike. Markets are increasingly concerned that the Federal Reserve (Fed) may tighten monetary policy excessively, raising the prospect of a hard landing for the economy. Meanwhile, the dollar gained ground on safe-haven demand, trading at 109.865 at press time.

Focused on technology, sensitive to interest ratesNasdaq 100 futures fell 0.5%, underperformingS&P 500 Indexfuture. In other stocks, in pre-market trading, Ford Motor shares plummeted after announcing its profit forecast for the third quarter, with market analysts worried about the impact of rising costs.

The US central bank begins its monetary policy meeting today and will announce its interest rate decision and economic forecast summary Thursday (22) at 2:00 am Taiwan time of 4%, then it will suspend rate hikes .

The Fed’s long-term strategy is believed to avoid the disastrous “stop-and-go” policy of the 1970s that sent inflation out of control. Investors have lowered expectations for a larger rate hike from the Fed, with only two of 96 economists surveyed by Bloomberg now predicting a 4-yard (100 basis point) rate hike.

In bonds, the 10-year US Treasury yield climbed above 3.5%, while the most sensitive two-year yield reached its highest level since 2007 and was on track to reach 4% above, reflecting the investor fears of a hard landing.

Meanwhile, in another worrying trend for US equities, real interest rates (inflation-adjusted Treasury yields) have risen to their highest levels since 2007. It was a key factor driving risk assets. higher when real interest rates were set in negative territory during a decade of accommodative monetary policy.

U.S. profits have been cut more than they have increased in the past 15 weeks, according to an indicator from Citigroup, and strategists at Morgan Stanley and Goldman Sachs have warned that the risks to earnings and equity valuations are growing.

Starting at 9:00 PM on Tuesday (20) Taipei time:

The main economic data today:

• The US monthly operating license rate for August was brought back to – 10%, expected – 4.5%, previous value – 0.6%
• The initial value of the annualized total number of building permits in the United States in August reported 1.517 million units, the expected 1.61 million units and the previous value of 1.685 million units
• The annualized monthly rate of new housing starts in the US in August was 12.2%, expected 0.3%, the previous value – 10.9%
• The annualized total of new homes starts in the US in August recorded 1,575 million units, 1,445 million units expected and the previous value of 1,404 million units

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Ford (F-USA) fell 9.11% to $ 13.57 per share at the start of the trade

Ford Motor has warned investors that costs could rise by an additional $ 1 billion in the third quarter due to inflation and supply chain problems. The company said the supply problem has resulted in a shortage of components affecting 40,000 to 45,000 vehicles, mostly trucks and SUVs with higher margins, which cannot be delivered to dealerships due to the shortage. Additionally, Ford cited inflation as one of the reasons for the $ 1 billion higher cost than originally estimated.

Nike (UNITED STATES) fell 4.19% to $ 102.72 per share at the start of the trade

Nike US shares fell 2.2% in pre-market trading after Barclays downgraded Nike shares from “overweight” to “equal weight”, noting that Nike’s market in China will continue to fluctuate as demand for the North America and other regions has weakened.

Witton Electronics (WDC-USA) fell 3.71% to $ 35.26 per share at the start of the trade

Witton Electronics fell 1.7% in pre-market trading after Deutsche Bank downgraded its shares to “Hold” from “Buy”, saying its profits and revenues were hurt by deteriorating demand, possibly in the bottom of financial forecasts.

Wall Street Analysis:

Danielle DiMartino Booth, chief strategist and chief strategist at Quill Intelligence, said the Fed could tighten policy on the brink of recession. “The stock market’s reliance on Fed easing during the recession may be exactly what President Powell wants to eliminate by aggressively raising interest rates, in addition to inflation,” she said.

Global tightening of monetary policy will increase headwinds for risk assets as central banks deliberately try to slow aggregate demand, ING Group said. Additionally, group analysts believe that there appears to be no reason for the Fed to soften the hawkish stance shown recently at the central bank’s annual meeting in Jackson Hole by predicting the dollar will remain flat ahead of the Federal Open Market Committee meeting. (FOMC).

Luca Paolini, chief strategist at Pictet Asset Management, said the Fed is likely to slow the pace of rate hikes next year and said rates could peak next year, before market attention turns. focus on how rate hikes will affect the economy and corporate earnings. He believes he has not yet seen a significant reduction in corporate revenues, but it will happen in the near future. He also noted that bonds have limited falls and an inverted yield curve has historically been a red flag for stock buying.