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Wall Street falls as Fed, Ford forecasts, give fright

Stock Markets Sep 20, 2022 06:17PM ET
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© Reuters. FILE PHOTO: Traders work on the trading floor at the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S., September 13, 2022. REUTERS/Andrew Kelly
 
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By David French

(Reuters) - Wall Street ended Tuesday lower as the eve of a U.S. Federal Reserve meeting expected to bring another large interest rate hike brought further evidence of the impact on corporate America from the inflation that the U.S. central bank wants to tame.

The benchmark S&P 500 index has dropped 19.1% so far this year as investors fear aggressive policy tightening measures by the Fed could tip the U.S. economy into a recession.

It closed for the third straight session below 3,900 points - a level considered by technical analysts as a strong support for the index - as last week's dire outlook from delivery firm FedEx Corp (NYSE:FDX) was repeated, this time by automaker Ford Motor (NYSE:F) Co.

Shares of Ford slumped 12.3%, the biggest one-day drop since 2011, after it flagged a bigger-than-expected $1 billion hit from inflation and pushed delivery of some vehicles to the fourth quarter due to parts shortages.

Rival General Motors Co (NYSE:GM) also sank 5.6%.

"We have seen some bellwethers talk about the pressures they are facing, so we could see some margin compression and some softening in the topline numbers in the third-quarter earnings," said Greg Boutle, head of U.S. equity & derivative strategy at BNP Paribas (OTC:BNPQY).

The U.S. central bank is widely expected to hike rates by 75 basis points for the third straight time at the end of its policy meeting on Wednesday, with markets also pricing in a 17% chance of a 100 bps increase and predicting the terminal rate at 4.49% by March 2023.

Focus will also be on the updated economic projections and dot plot estimates for cues on policymakers' sense of the endpoint for rates and the outlooks for unemployment, inflation and economic growth.

Adding to the mix, a Commerce Department report showed residential building permits - among the more forward-looking housing indicators - slid by 10% to 1.517 million units, the lowest level since June 2020.

The benchmark U.S. 10-year Treasury yield hit 3.56%, its highest level since April 2011, while the closely watched yield curve between two-year and 10-year notes inverted further. [US/]

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

"There are a lot of headwinds to prevent sustained rallies. It's hard to have (price-to-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 dropped 109.97 points, or 0.95%, to 11,425.05.

All of the 11 major S&P sectors declined, with economy-sensitive real estate and materials sectors the biggest fallers, dropping 2.6% and 1.9% respectively.

Meanwhile, in another sign of nerves around future corporate earnings, Nike Inc (NYSE:NKE) fell 4.5% after the sportswear giant was downgraded by Barclays (LON:BARC) analysts to "equal weight" from "overweight", citing volatility in the Chinese market due to pressures from COVID-related lockdowns in early September.

Another apparel maker, Gap Inc (NYSE:GPS), closed 3.3% lower. It announced on Tuesday it was eliminating about 500 corporate jobs, having withdrawn its annual forecasts late last month due to an inventory glut and weak sales.

Volume on U.S. exchanges was 9.90 billion shares, compared with the 10.71 billion average for the full session over the last 20 trading days.

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

Wall Street falls as Fed, Ford forecasts, give fright
 

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Comments (33)
Kaushal Shah
Kaushal Shah Sep 21, 2022 6:29AM ET
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minimum 300 point hike can come ?
Mike Sim
Mike Sim Sep 20, 2022 6:36PM ET
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Once again “savvy” investors come out in droves for criminal “late trade” rally as they rush to by the most overpriced equites in the history of the world. All while paying over ask to fraudently whisk losses out the system until they repeat the process tomorrow. BIGGEST INVESTMENT JOKE IN THE WORLD. Criminally manipulated fraudulent JOKE. Assume the proper postion America!
EL LA
EL LA Sep 20, 2022 4:18PM ET
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Wait, so, $3 gas and $75,000 per electric car isn't going to work best for everyone?
hiiah Huuah
hiiah Huuah Sep 20, 2022 4:14PM ET
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Just bring down the dollar an all will be ok
Ricky Singh
Ricky Singh Sep 20, 2022 3:22PM ET
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They manipulated and crushed the market in last 7 days and tomororw they will pump it !
Ricky Singh
Ricky Singh Sep 20, 2022 3:21PM ET
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Thanks to Feds and Biden for looting the public !
Jay Garrelts
Jay Garrelts Sep 20, 2022 3:21PM ET
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Don’t forget about Trump him and Biden looted equally
Alan Rice
Alan Rice Sep 20, 2022 3:04PM ET
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Terminal FF rate of 4.5% to beat 9% inflation is "wishful thinking" . Dow should proceed to $20,000. Invest at YOUR OWN risk.
Mitchel Pioneer
Mitchel Pioneer Sep 20, 2022 2:58PM ET
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2PM sharp, and the criminal "late trade" FRAUD commences right on schedule.  Criminally manipulated, predictable JOKE.  How much more flagrant can it get?
Prabhat Negi
Prabhat Negi Sep 20, 2022 2:58PM ET
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as irritating your comments are but i agree with you
Robert Lepine
Robert Lepine Sep 20, 2022 2:02PM ET
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No panic, the rate was 11.5% july 9 1984
Robert Lepine
Robert Lepine Sep 20, 2022 2:02PM ET
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No panic, the rate was 11.5% july 9 1984
 
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