Furthermore, the U.S. 10-Year Treasury yield increased to 4.48% while the Two-Year Treasury yield slipped, as it hovers around 5.14%.
Compared to yesterday, the market is pricing in a higher chance of a higher Fed Funds rate for December 2023. In fact, the market’s expectations for a rate in the range of 5.5% to 5.75% increased to 39.1% compared to yesterday’s expectations of 37.2%.
This can be attributed to the Federal Reserve’s economic projections, which suggest that the central bank will hike rates one more time in 2023.
Interestingly, though, the market still thinks the central bank won’t actually increase rates, assigning a 54.5% probability that rates will remain the same.
Last updated: 11:50AM EST
Stocks are down so far in today’s trading session. On Thursday, the National Association of Realtors released its U.S. Existing Home Sales report, which measures the change in sales of existing residential buildings during the previous month on an annualized basis. Existing home sales came in at 4.04 million for the month of August, below the expected 4.1 million.
As a result, existing home sales decreased month-over-month by -0.7% after a -2.2% decrease in July. Indeed, existing home sales have increased only twice in the past 19 months as higher interest rates continue to make homeownership difficult. On a year-over-year basis, sales fell 15.5%.
Last updated: 9:30AM EST
Stock markets opened lower on Thursday, with the Nasdaq 100 (NDX), S&P 500 (SPX), and the Dow Jones Industrial Average (DJIA) down by 0.88%, 0.46%, and 0.5%, respectively, at 9:31 a.m., EST, September 21.
Meanwhile, the Philadelphia Fed manufacturing gauge fell back into contraction territory in September to a negative 13.5 in September after being in positive territory in August. Economists were expecting a flat reading for the month of September. The Philadelphia Fed manufacturing index is a regional manufacturing index that gives an indication of the state of the manufacturing sector.
The new orders index indicated that new orders declined in September, and this index was a negative 10.2 from a positive 16 in August.
U.S. jobless claims fell to an eight-month-low of 201,000 in the week ending September 16 from the prior revised jobless claims of 221,000 in the previous week. This was below the economists’ estimates of claims of 225,000. There is also the possibility that the Labor Day holiday may have accounted for part of the decline in claims due to the delayed filing of applications.
Actual jobless claims (before seasonal adjustments) totaled to about 175,000 for the second week in a row. This was the lowest level since October of last year.
In another round of economic data, the U.S. current account deficit surprisingly narrowed by $2.4 billion in the second quarter to $212.1 billion as compared to consensus estimates of a deficit of $220.6 billion. Exports of goods and services and income received from foreign residents declined by $7.8 billion to $1.15 trillion in Q2. Imports of goods and services and income paid to foreign residents fell by $10.2 billion to $1.36 trillion.
First published:4:32AM EST
U.S. stock futures are trending lower on early Thursday as traders digest the Fed’s monetary policy stance. Futures on the Nasdaq 100 (NDX), S&P 500 (SPX), and the Dow Jones Industrial Average (DJIA) were down by 0.46%, 0.33%, and 0.20%, respectively, at 4:31 a.m., EST, September 21.
Yesterday, the three major indices closed lower, with the Fed holding interest rates steady but indicating one more rate hike before the end of the year.
Further, the Fed anticipates two rate cuts in 2024, which is fewer than its previous forecast and implies that high-interest rates would last longer than expected. Interestingly, when asked about calling a soft landing for the economy a baseline expectation, Fed Chair Jerome Powell said, “No, I would not do that.” He explained that while he always thought that a soft landing was a possible outcome, it is dependent on factors that are “outside our control.”
Meanwhile, key economic releases lined up for Thursday include weekly jobless claims data and existing home sales report. Traders continue to keep track of the developments in the labor market and other key macro data points to gauge the state of the U.S. economy.
Coming to stock-specific news, logistics giant FedEx (NYSE:FDX) is likely to be in focus today, thanks to an upbeat fiscal first-quarter earnings report driven by solid performance of the company’s Ground segment and cost reduction initiatives.
Elsewhere, European markets opened lower ahead of a series of interest rate decisions from central banks in England, Norway, Sweden, Switzerland, and Turkey.
Asia-Pacific Markets End Lower on Thursday
Asia-Pacific indices fell on Thursday in reaction to the Fed’s interest rate projections.
Japan’s Nikkei and Topix indices fell by 1.37% and 0.94%, respectively.
Similarly, Hong Kong’s Hang Seng index and China’s Shanghai Composite and Shenzhen Component indices closed lower by 1.29%, 0.77%, and 0.90%, respectively. Interestingly, shares of Chinese electric vehicle (EV) maker Nio (NYSE:NIO) rose after the company announced the launch of its first mobile phone.
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