Wall Street falls as Fed and Ford forecasts scare

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  • All eyes are on the Fed’s policy decision on Wednesday
  • Ford sees additional $1 billion in inflationary costs, stocks fall
  • Nike slips after Barclays demotion over China lockdown issues
  • Indices down: Dow 1.01%, S&P 1.13%, Nasdaq 0.95%

Sept 20 (Reuters) – Wall Street ended lower on Tuesday as the day before a U.S. Federal Reserve meeting that is expected to lead to another big interest rate hike provided further evidence of the impact on businesses inflation that the US central bank wants to tame.

The benchmark S&P 500 index (.SPX) has fallen 19.1% so far this year as investors fear aggressive Fed policy tightening could tip the US economy into a recession .

It closed for the third consecutive session below 3,900 points – a level seen by technical analysts as strong support for the index – as the gloomy outlook for delivery company FedEx Corp (FDX.N) of the last week have been repeated, this time by automaker Ford Motor Co. (FN).

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Ford shares fell 12.3%, the biggest one-day drop since 2011, after taking a bigger-than-expected hit of $1 billion due to inflation and pushing delivery of some vehicles to the fourth quarter due to parts shortages. Read more

Rival General Motors Co (GM.N) also fell 5.6%.

“We’ve seen some indicators talking about the pressures they’re facing, so we could see some margin compression and some easing in third-quarter revenue numbers,” said Greg Boutle, head of equity strategy and American derivatives at BNP Paribas. .

The US central bank is expected to raise rates by 75 basis points for the third consecutive time at the end of its policy meeting on Wednesday, with markets also pricing a 17% chance of a 100 basis point hike and forecasting the rate terminal at 4.49. % by March 2023.

Emphasis will also be on updated economic projections and dot plot estimates for clues about policymakers’ direction of the end point for unemployment, inflation, and economic growth rates and prospects. Read more

On top of that, a report from the Commerce Department showed that residential building permits (USBPE=ECI) – among the most forward-looking housing indicators – fell 10% to 1.517 million units, the lowest level. lowest since June 2020. Read more

The benchmark 10-year US Treasury yield rose to 3.56%, its highest level since April 2011, as the closely watched yield curve between two-year and 10-year bonds inverted further.

An inversion in this part of the yield curve is considered 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 an expansion (price-earnings) as the Fed tightens,” BNP’s Boutle said.

The Dow Jones Industrial Average (.DJI) fell 313.45 points, or 1.01%, to 30,706.23, the S&P 500 (.SPX) fell 43.96 points, or 1.13%, to 3,855.93 and the Nasdaq Composite (.IXIC) fell 109.97 points, or 0.95%, to 11,425.05.

All 11 major S&P sectors fell, with the economically sensitive real estate (.SPLRCR) and materials (.SPLRCM) sectors the biggest losers, falling 2.6% and 1.9% respectively.

Meanwhile, in another sign of jitters over future corporate earnings, Nike Inc (NKE.N) tumbled 4.5% after the sportswear giant was downgraded by Barclays analysts to “weight equal” of “overweight”, citing the volatility of the Chinese market due to the pressures. COVID-related lockdowns in early September.

Another clothing maker, Gap Inc (GPS.N), closed down 3.3%. It announced on Tuesday that it was cutting about 500 corporate jobs, after withdrawing its annual forecast late last month due to a glut of inventory and weak sales. Read more

Volume on U.S. exchanges was 9.90 billion shares, compared to an average of 10.71 billion for the full session over the past 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.

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

Our standards: The Thomson Reuters Trust Principles.

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