4:15 p.m.: US markets start the week with losses
US markets started the week on a downward path as investors continued to fear that the Federal Reserve’s aggressive anti-inflation campaign could send the US economy into a sharp downturn.
At the close, the Dow Jones Industrial Average was down 330 points, or 1.11%, to 29,261, the S&P 500 was down 38 points, or 1.03%, to 3,655, while the Nasdaq Composite was also down 65 points, or 0.6%, to 10,803 .
“Investors are throwing in the towel right now,” Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma, told Reuters.
“It’s the uncertainty about the high water mark for the Fed’s interest rate. Is it 4.6%, is it 5%? Is it sometime in 2023?”
Volatile currency markets added to the uncertain mood as the dollar strengthened again against the pound and sterling hit all-time lows on worries that the new UK government’s fiscal plan released on Friday would weigh on the country’s finances.
12:05 p.m .: Nasdaq bucks downtrend
Major US indices remained mixed at midday as commodities such as oil and natural gas fell in price but US yields rose.
At midday, the Dow Jones Industrial Average fell 0.6% to 29,417, the S&P 500 fell 0.5% to 3,675, while the Nasdaq Composite rose 0.06% to 10,874.
Josh Mahony, senior market analyst at online trading platform IG, said markets were regaining ground but optimism was in short supply.
“Interestingly, we’ve seen the tech-focused Nasdaq lead U.S. gains as investors rush into growth stocks despite fears of rising Fed rates,” Mahony wrote in a note.
He also noted that the US dollar-UK pound experienced the highest single-day volatility since the peak of the Covid crisis in March 2020. The pound fell as much as 4.8%, trading below $1.04 this morning and rising to $1.07 at midday.
“Pound’s strength may be in response to the Bank of England’s expected emergency interest rate hike, but there is a risk that markets will realize that the UK’s reserves are making the pound increasingly difficult to defend,” Mahony wrote.
Among the biggest gainers were Wynn Resorts (NASDAQ:WYNN) and Las Vegas Sands, both up more than 13% on news that Macau authorities said China would resume an e-visa program for mainland travelers and allow group travel to the gambling resort town. The US 2-year Treasury bond hit a fresh 15-year high, while the 10-year benchmark also rose.
On the other hand, Prologis lost 4.5%, as did Duke Realty. Oil prices also fell, with West Texas intermediate trading below $79 a barrel, and natural gas fell 1.5% to $6.75.
9.35am: Economic outlook ‘gloomy’ ahead of next month’s gains, says analyst
US stocks opened mixed on Monday as the Fed’s aggressive rate-hike plan to curb four decades of high inflation continued to weigh on investor sentiment.
Shortly after the market opened, the Dow Jones Industrial Average fell 66 points, or 0.2%, to 29,525 points, the S&P 500 was stable at 3,692 points, and the Nasdaq Composite was up 40 points, or 0.4%, to 10,905 points.
Ride-sharing company Lyft Inc (NASDAQ:LYFT) fell 2.9% after research analysts at UBS Group downgraded the stock from a “buy” rating to “neutral,” noting that a recent poll showed that the stock had lost ground both drivers and consumers prefer competitor Uber Technologies Inc (NYSE: UBER).
Meme-stock Bed Bath and Beyond Inc was up 2.3% at the open ahead of the embattled company’s quarterly results due Thursday.
In a note, Forex.com market analyst Joshua Warner wrote that the market expects the Fed to continue hiking interest rates aggressively into 2024 amid slower growth, higher unemployment and higher than previously expected inflation.
“The gloomy economic outlook is likely to continue to weigh on equities this week and paints a bleak picture as we approach next month’s earnings season,” he wrote.
6.30 am More waterfalls
US stocks are expected to open lower as concerns of a prolonged recession grip markets.
Sharp swings in the currency markets are also adding to the market fears as the US dollar strengthens sharply against the pound and the euro.
Futures for the Dow Jones Industrial Average are down 0.8% in premarket trading, while those for the S&P 500 are down 0.8% and contracts for the Nasdaq 100 are down 0.6%.
The dust has yet to settle over the Federal Reserve’s third 75 basis point rate hike in the past week and markets grapple with the prospect of a deep recession. Investors are unsettled and show little willingness to take risks.
The result has been lower stock prices, as the Federal Reserve last week underscored its commitment to continue raising interest rates to tame inflation, which remains close to 40-year highs.
On Friday, the S&P 500 was down 1.7%, the Nasdaq was down 1.8% and the Dow was down 1.6% to 29,590 points — a new low for 2022.
Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, noted that the “extremely chaotic note” in FX markets was not helping.
“Both the pound and the euro will be severely punished for the policy decisions that are made in the UK and Italy respectively,” she said.
“EUR/USD was shaken this morning. The pair fell to 0.9550 and will certainly remain under pressure as Italian yields are likely to break away from the rest of the Eurozone and head north. The larger yield differential between Italian and German bonds is likely to push the euro further lower,” she said.
In Italy, far-right leader Giorgia Meloni claimed victory in the country’s elections over the weekend.
“Investors’ biggest concern about Meloni is whether the new Italian far-right government would deviate from the reforms Draghi has introduced,” Ozkardeskaya noted.
The pound, meanwhile, slumped to historic lows against the dollar after last week’s government mini-budget pledged big tax cuts.
“Investors really hated the ‘mini budget’ announced in the UK last Friday. Investors were expecting to hear about a huge spending package from the Liz Truss government, but the package was even ‘bigger’ than market expectations,” Ozkardeskaya added.
On the data front, focus is on US personal spending due Friday.
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