U.S. stocks are taking a leg lower Tuesday morning, as oil prices and bond yields rise ahead of the Federal Reserve’s interest rate decision Wednesday.
How stocks are trading
- The S&P 500 dropped 21 points, or 0.4%, to 4,432
- The Dow Jones Industrial Average fell 185 points, or 0.5%, to 34,438
- The Nasdaq Composite declined 88 points, or 0.6%, to 13,622
On Monday, the Dow Jones Industrial Average
DJIA
rose 6 points, or 0.02%, to 34624, the S&P 500
SPX
increased 3 points, or 0.07%, to 4454, and the Nasdaq Composite
COMP
gained 2 points, or 0.01%, to 13710.
What’s driving markets
The central bank is fully expected by the market to leave its policy interest rates at a range of 5.25% to 5.50% after its meeting on Wednesday, but traders are wary about accompanying guidance on any future rate rises amid stubborn inflationary pressures, a concern that sees 10-year benchmark Treasury yields
BX:TMUBMUSD10Y
holding near their highest level since 2007.
Recent stronger-than-forecast economic data alongside a 10-month high in oil prices may encourage the Fed to deliver a “hawkish pause”, according to Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
As for oil’s inflationary push, it’s possible that oil gets back to $100 a barrel, Chevron CEO Mike Wirth predicted Monday. West Texas Intermediate crude for October delivery rose to more than $92 a barrel on Tuesday.
In another look at economic conditions Tuesday morning, U.S. housing starts fell 11.3% in August after a revised 2% gain in July. Starts dropped to their lowest level since June 2020, with demand crimped by mortgage rates over 7%.
“[A] palatable air of uncertainty engulfs global markets. While U.S. stocks and bonds have been treading water, oil prices are on the rise, which complicates the policy decisions of major central banks, including the Federal Reserve, ECB, and Bank of England,” said Stephen Innes, managing partner at SPI Asset Management.
The European Central Bank raised rates by 25 basis points last week and the Bank of England is expected to do the same this Thursday.
At Vanguard, Chief Global Economist Joe Davis said a “soft landing is still possible, but not probable in our view, as it would require an unlikely ‘painless disinflation process,’ toward target without a slowing of demand in the economy.”
Read also: 4 things to watch for at this week’s Fed monetary-policy meeting
Investors will be keen to see later Tuesday whether Instacart can follow Arm Holdings’
ARM,
-4.84%
example and get a positive reception after pricing its IPO towards the top of the mooted range. Shares for the grocery-delivery app are being priced at $30.
So far, the company seems poised to fetch a price above that that point. It may still be hours before the first trade, but one indication says the opening trade could be around $39.
Companies in focus
-
Nio Inc.
NIO,
-11.64%
shares are down more than 11% after the Chinese electric vehicle maker announced a convertible bond offering. Half of the $1 billion debt offering will come due in 2029 and the other half in 2030. Money from the bonds is intended buy back a portion other debt securities, while also strengthening the balance sheet. -
Block Inc.
SQ,
-2.75%
shares are off more than 2% after an announcement reshuffling leadership. Alyssa Henry, who lead’s Block’s Square merchant business is stepping down, according to a company filing. Jack Dorsey, Block’s co-founder and CEO — as well as Twitter’s co-founder and onetime CEO — is adding the position to his duties. -
Carnival Corp.
CCL,
+0.17%
shares are up 1.7% after an stock upgrade from analyst who has been bearish on the cruise operator. Strong booking trends and signs of strength in the cruise market were reason for Truist analyst Patrick Scholes’ upgrade.
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