Market News

Stock Markets Today: Stocks Close in the Red as Fed Kickstarts September Meeting

First updated: 4:16AM EST

Stock indices finished today’s trading session in the red. The Dow Jones Industrial Average (DJIA), the S&P 500 (SPX), and the Nasdaq 100 (NDX) decreased by 1.01%, 1.12%, and 0.85%, respectively. This comes as Wall Street prices in a possible 75 basis-point interest rate hike by the Federal Reserve and warnings from multiple companies about increasing macroeconomic headwinds.

The real estate sector was the session’s laggard, as it fell by 2.56%. Conversely, the consumer staples sector was the session’s leader, with a loss of 0.53%. In addition, WTI crude oil lost 0.87%, reaching $84.26 per barrel.

Furthermore, the U.S. 10-Year Treasury yield increased to 3.563%, an increase of 7.1 basis points. Similarly, the Two-Year Treasury yield also increased, as it hovers around 3.952%. This brings the spread between them to -38.9 basis points. The negative spread indicates that investors still have fears of a recession.

The Atlanta Federal Reserve updated its GDPNow reading, which allows it to estimate GDP growth in real-time. Currently, it estimates that the economy will see an annualized expansion of 0.31% in the third quarter after experiencing two consecutive quarters of decline.

This is down from the previous reading of 0.5%. The “nowcast” becomes more accurate as more economic data is released throughout the quarter. Therefore, it will be interesting to see how the estimate changes, going forward. In the previous quarter, the estimate started off positive and eventually ended up correctly estimating a GDP decline by the end of Q2.

However, Housing Starts data released today indicated that housing starts in the month of August rose 12.2% month-over-month to an annualized rate of 1.575 million units, beating market forecasts of 1.445 million. Despite this recovery, the housing sector is under pressure as prices of building materials continue to soar and mortgage rates increase.

Also, Ford Motor’s (NYSE:F) announcement that supply-chain woes would accrue an additional $1 billion in supplier costs in the third quarter sent the stock tumbling. Moreover, 40,000-45,000 vehicles will remain unfinished during the quarter due to the shortage of parts. Shares of the company dropped almost 5% in Tuesday’s premarket trading session.

The Fed’s Meeting Starts Today

The Fed will commence its two-day FOMC September meeting later today. Further, market participants expect the federal agency to announce a 75 basis-point interest rate hike on Wednesday.

Earlier, several experts were anticipating a full-point raise, given the hotter-than-expected inflation data for August. However, until the announcement is actually made by the Federal Reserve, markets are expected to remain choppy.

Currently, the futures market is assigning an 84% probability of a 75 basis-point hike versus a 16% probability of a 100 basis-point hike.

What Happened on Monday?

Monday saw a volatile trading session as stocks climbed in the afternoon. At the end of the regular trading session, the major averages closed modestly higher, snapping out of two days in the red. The S&P500, the Dow, and the Nasdaq 100 climbed 0.69%, 0.64%, and 0.77%, respectively. Although the indexes ended in the green, the gains were not very significant.

One thing that stood out in Monday’s rally was that all sectors were up, excluding the healthcare sector, which fell 0.54% on U.S. President Joe Biden’s comment that the pandemic is over.

At a time when the U.S. is still reporting an average of 62,000 daily COVID-19 cases and more than 400 daily COVID deaths, critics jumped at Biden’s comment, calling it immature. They also called the comment a hindrance to the efforts of raising more funding (about $22.4 billion more for vaccines) for COVID-19 programs.

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