Wall Street falls as Fed focus, Ford forecasts, frighten investors

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  • All eyes on the Fed’s policy decision on Wednesday
  • Ford sees additional $1 billion in inflationary costs, stocks fall
  • Nike slips after Barclays demotion over China lockdown issues
  • Indices down: Dow 1.73%, S&P 1.8%, Nasdaq 1.58%

Sep 20 (Reuters) – Wall Street tumbled on Tuesday as traders, who were already positioning themselves for another big interest rate hike this week by the U.S. Federal Reserve, dragged markets lower after a Detroit titan provided further evidence of slowing inflation in the United States.

The benchmark S&P 500 index (.SPX) has lost more than 19% so far this year as investors fear aggressive Fed policy tightening could tip the U.S. economy into a recession, with delivery company FedEx’s recent dire outlook Body (FDX.N) and automaker Ford Motor Co (FN) adding to the misfortunes.

Ford shares fell 11.9% after posting a bigger-than-expected $1 billion decline due to inflation and pushing delivery of some vehicles into the fourth quarter due to parts shortages. Read more

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Rival General Motors Co. (GM.N) was also down 5.7%.

Adding to a mixed set of economic data, a Commerce Department report showed residential building permits (USBPE=ECI) – among the most forward-looking housing indicators – fell 10% to 1.517 million units, the lowest level since June 2020. read more

“Markets have been under some pressure as it’s clear the economy and the rate of earnings growth are slowing and will slow further,” said Hugh Johnson, chief economist at Hugh Johnson Economics in Albany, New York. York.

“The concern is that even if it slows down, the Federal Reserve will tell us in a very hawkish way that they are very focused on the 2% inflation rate and will continue to lean towards restraint or be very hard until they get to that 2% level.”

The US central bank is expected to raise rates by 75 basis points for the third consecutive time at the end of its policy meeting on Wednesday, with markets also pricing a 17% chance of a 100 basis point hike and forecasting the rate terminal at 4.49. % by March 2023.

Emphasis will also be on updated economic projections and dot plot estimates for clues about policymakers’ direction of the end point for unemployment, inflation, and economic growth rates and prospects. Read more

“We’re going to be in an environment where monthly economic data is going to be scrutinized with greater breadth than it has been before,” said Doug Fincher, portfolio manager at Ionic Capital Management.

“The market thinks the Fed will manage to control inflation at the expense of the economy. The question is whether it will achieve this through a soft landing or a hard landing.”

The benchmark 10-year US Treasury yield rose to 3.56%, its highest level since April 2011, as the closely watched yield curve between two-year and 10-year bonds inverted further.

An inversion in this part of the yield curve is considered a reliable indicator that a recession will follow in one to two years.

At 1:57 p.m. ET, the Dow Jones Industrial Average (.DJI) fell 536.96 points, or 1.73%, to 30,482.72, the S&P 500 (.SPX) lost 70.09 points, or 1.80%, to 3,829.8 and the Nasdaq Composite (.IXIC) fell 182.62 points, or 1.58%, to 11,352.40.

The S&P 500 (.SPX) is trading below 3,900 points, a level seen by technical analysts as strong support for the index, but which has now been breached twice in the past three sessions.

All 11 major S&P sectors fell, real estate sensitive to economy (.SPLRCR) and materials (.SPLRCM) sectors down 3% and 2.5%, respectively.

Meanwhile, in another sign of jitters over future corporate earnings, Nike Inc. (NKE.N) was downgraded by Barclays analysts from “equal weight” to “overweight”, citing volatility in the Chinese market due to pressures from COVID-related lockdowns in early September. The sportswear giant’s stock fell 4.9%.

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Reporting by Devik Jain and Ankika Biswas in Bengaluru and David French in New York; Editing by Shounak Dasgupta, Maju Samuel and Lisa Shumaker

Our standards: The Thomson Reuters Trust Principles.

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