Markets Fall As Investors Await Tomorrow’s Fed Decision…..
U.S. equities finished lower as the markets awaited tomorrow’s highly anticipated monetary policy decision from the Federal Reserve. The Central Bank is expected to deliver another 75-basis point rate hike, while the markets also grappled with the notion of the possibility of a 100-basis point hike in the wake of last week’s hotter-than-expected consumer price inflation report. Economic news for today was focused on housing, with housing starts rising much more than expected, but building permits dropping more than anticipated. In equity news, Ford announced that inflation and parts shortages will raise supply costs by $1 billion above initial expectations, but still reaffirmed its full year guidance. United Health Group was given permission from a federal judge to proceed with its acquisition of Change Healthcare, which the U.S. Department of Justice tried to block. Treasury yields were higher, particularly on the longer end of the curve, and the U.S. dollar increased, while crude oil prices declined, and gold also lost ground. European stocks declined amid a larger rate hike than anticipated from Sweden’s central bank, and as Germany’s Producer Price Index unexpectedly soared. Markets in Asia finished broadly higher, while China’s central bank kept its benchmark lending rates unchanged, and as Hong Kong is set to ease hotel quarantine rules.
The Dow Jones Industrial Average declined 313 points (1.0%) to 30,706, the S&P 500 Index decreased 44 points (1.1%) to 3,856, and the Nasdaq Composite was 110 points (1.0%) lower at 11,425. In moderate volume, 4.0 billion shares of NYSE-listed stocks were traded, and 4.0 billion shares changed hands on the Nasdaq. WTI crude oil lost $1.42 to $83.94 per barrel. Elsewhere, the gold spot price fell $4.20 to $1,674.00 per ounce, and the Dollar Index increased 0.4% to 110.12.
Housing starts for August soared 12.2% month-over-month (m/m) to an annual pace of 1,575,000 units, well above the Bloomberg consensus estimate of a 0.3% rise to a 1,450,000-unit pace, and compared to July’s downwardly revised 10.9% decline to 1,404,000 units. Building permits, one of the leading indicators tracked by the Conference Board as it is a gauge of future construction, dropped by 10.0% m/m to an annual rate of 1,517,000, well below expectations calling for a 4.8% decline to 1,604,000 units, and compared to the unrevised 1,674,000-unit pace posted in July.
Treasury yields were higher, with the yield on the 2-year note increasing 3 basis points (bps) to 3.96%, the yield on the 10-year note up 9 bps to 3.56%, and the 30-year bond rate climbing 7 bp to 3.57%.
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