ford: Wall Street falls as Fed, Ford forecasts, give fright

Wall Street ended Tuesday lower as the eve of a Federal Reserve meeting expected to bring another big rate hike brought further evidence of the impact of inflation on American businesses, which the Federal Reserve is trying to tame.

The benchmark S&P 500 index is down 19.1% so far this year as investors fear aggressive Fed monetary tightening could plunge the US economy into recession.

It closed below 3,900 points for the third consecutive day – a level seen by technical analysts as strong support for the index – as last week’s bleak outlook for delivery firm FedEx Corp was repeated, this time by automaker Ford Motor Co.

Ford’s shares tumbled 12.3%, its biggest one-day loss since 2011, after the company posted a bigger-than-expected inflation loss of $1 billion and delayed deliveries of some vehicles until the fourth quarter due to parts shortages.

Rival General Motors Co was also down 5.6%.

“We’ve seen some leaders talk about the pressure they’re facing, so we could see some margin compression in third-quarter earnings and some softening in top-line numbers,” said Greg Boutle, head of US equities and derivatives strategy

.

The US Federal Reserve is widely expected to hike interest rates by 75 basis points for a third straight session at the end of Wednesday’s monetary policy meeting, with markets also pricing in a 17 percent chance of a 100 basis point hike, leaving the final interest rate at 4.49 % forecast by March 2023.

The focus will also be on the updated economic forecasts and dot-plot estimates to provide clues as to how policymakers view the end point for interest rates and the prospects for unemployment, inflation and economic growth.

In addition, a Commerce Department report showed that housing permits — among the more forward-looking housing indicators — fell 10% to 1.517 million units, the lowest since June 2020.

The benchmark yield for 10-year US Treasuries hit 3.56%, the highest since April 2011, while the closely watched yield curve between 2-year and 10-year bonds continued to invert.

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

“There is a lot of headwind to prevent sustained rallies. It’s hard to have (price-earnings) expansion while the Fed is tightening,” said BNP’s Boutle.

The Dow Jones Industrial Average fell 313.45 points, or 1.01%, to 30,706.23, the S&P 500 lost 43.96 points, or 1.13%, to 3,855.93, and the Nasdaq Composite fell 109.97 points, or 0 .95% to 11,425.05.

All 11 major S&P sectors fell, with the economically sensitive real estate and materials sectors being the biggest losers, down 2.6% and 1.9%, respectively.

Meanwhile, Nike Inc, another sign of jitters about future corporate earnings, fell 4.5% after the sportswear giant was downgraded from overweight to breakeven by Barclays analysts, fueling volatility in the Chinese market due to pressure from COVID-related lockdowns in early September.

Another apparel maker, Gap Inc, closed 3.3% lower. It said on Tuesday it will cut about 500 jobs at companies after withdrawing its full-year guidance late last month amid inventory glut and weak sales.

Volume on US exchanges was 9.90 billion shares compared to the average of 10.71 billion for the entire session over the last 20 trading days.

The S&P 500 posted two new 52-week highs and 66 new lows; the Nasdaq Composite posted 31 new highs and 408 new lows.

https://economictimes.indiatimes.com/markets/stocks/news/wall-street-falls-as-fed-ford-forecasts-give-fright/articleshow/94337893.cms ford: Wall Street falls as Fed, Ford forecasts, give fright

Russell Falcon

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