Wall Street falls as Fed focus, Ford forecasts, spooks investors

Sept 20 (Reuters) – Wall Street fell on Tuesday as traders bracing for another big rate hike this week by the U.S. Federal Reserve sent markets lower after the Detroit titan offered further evidence that inflation is slowing American business.

Benchmark S&P 500 index (.SPX) It has lost more than 19% so far this year on fears that the Fed’s aggressive policy tightening measures will push the US economy into recession, as delivery firm FedEx Corp’s latest dire forecast. (FDX.N) and car manufacturer Ford Motor Co (FN) adds to the woes.

Ford shares fell 11.9% after taking a bigger-than-expected $1 billion hit from inflation and some vehicles being delivered in the fourth quarter due to parts shortages. read more

Rival General Motors Co (GM.N) also decreased by 5.7%.

Adding to the mixed economic data, the Commerce Department report showed housing permits (USBPE=ECI) – among more promising housing indicators – fell 10% to 1.517 million units, the lowest level since June 2020. read more

“The markets are under some pressure because it’s clear that the economy and the rate of income growth is in the process of slowing and will continue to slow,” said Hugh Johnson, chief economist at Hugh Johnson Economics in Albany.

“The concern is that even if it slows down, the Federal Reserve will tell us very clearly that they are very focused on the 2% inflation rate and that they will continue to be accommodative or they will be very tight. Be cautious until it reaches the 2% level.

The US central bank is widely expected to raise interest rates for a third time by 75 basis points at the end of Wednesday’s policy meeting, with markets pricing in a 17% chance of a 100 bps hike and forecasting a terminal rate of 4.49. % by March 2023.

Attention will also be focused on updated economic forecasts and dot plot estimates of policymakers’ feelings about the end point for rates and the outlook for unemployment, inflation and economic growth. read more

“We’re going to be in an environment where month-to-month economic data is going to be scrutinized to a greater degree than ever before,” said Doug Fincher, portfolio manager at Ionic Capital Management.

“The market believes that the Fed will bring inflation under control at the expense of the economy. The question is whether they will do it with a soft landing or a hard landing.”

The yield on the 10-year US Treasury hit 3.56%, its highest level since April 2011, while the yield curve between the two-year and 10-year notes inverted further.

An inversion in this part of the yield curve is considered a reliable indicator that a recession will occur in a year or two.

Dow Jones Industrial Average at 1:57 PM ET (.DJI) The S&P 500 index fell 536.96 points, or 1.73%, to 30,482.72 (.SPX) The Nasdaq Composite lost 70.09 points, or 1.80%, to 3,829.8 (.IXIC) It fell 182.62 points or 1.58% to 11,352.40.

S&P 500 (.SPX) is trading below 3,900, a level seen by technical analysts as strong support for the index but has now been breached twice in the past three sessions.

All 11 major S&P sectors declined, along with economy-sensitive real estate (.SPLRCR) and materials (.SPLRCM) sectors decreased by 3% and 2.5%, respectively.

Meanwhile, in another sign of jitters about future corporate earnings, Nike Inc (NKE.N) It was downgraded from “overweight” to “equal weight” by analysts at Barclays in early September, citing volatility in the Chinese market due to pressures from the COVID-related lockdowns. Shares of the sportswear giant fell 4.9%.

Reporting by Devik Jain and Ankika Biswas in Bengaluru and David French in New York; Edited by Shawnak Dasgupta, Maju Samuel, and Lisa Shumaker

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