As investors anticipate this week’s Federal Reserve interest rate increase, Wall Street opened with a decline.
As of 9:49 a.m. Eastern time, the S&P 500 slid 28 points, or 0.7%, to 3,862, while the Dow Jones industrials fell 231 points, or 0.9%, to 30,091. The technology-heavy Nasdaq fell 85 points.
Due to persistently rising inflation and the rises in interest rates intended to combat it, the markets have been tense. The fear is that the Federal Reserve and other central banks may exceed their policy objectives, causing a recession.
The majority of economists anticipate that the Fed will increase its prime lending rate by an additional three-quarters of a percentage point when its officials meet this week.
An examination of how the Fed’s interest rate hike may affect consumers 08:06 “Hot under the hood” inflation
“Fact is, hawkish expectations based on the ‘hot under the hood’ U.S. inflation data indicate that markets have good reason to prepare for headwinds amid prospects of higher (for longer) rates; and arguably ‘higher for longer’ USD (dollar) as well,” Vishnu Varathan of Mizuho Bank wrote in a commentary.
Friday’s harsh warning from FedEx about rapidly deteriorating economic trends increased market fear. The S&P 500 decreased by 0.7%, while the Nasdaq sank by over 1%. The Dow fell over a half percent.
The S&P 500 fell 4.8% for the week, with most of the decline stemming from a 4.3% drop on Tuesday following an unexpectedly high inflation data.
Four out of the last five weeks, all of the major indexes have recorded losses.
FedEx threat spooks market
FedEx fell 21.4% on Friday, its largest single-day decline on record, after notifying investors that its fiscal first-quarter profit is expected to fall short of projections due to a decline in business. In addition to closing stores and corporate headquarters, the package delivery firm anticipates that business circumstances will continue to deteriorate.
A day of mourning was observed in the United Kingdom for Queen Elizabeth II. The marketplaces of Japan were closed due to a holiday.
Higher interest rates have a negative effect on stocks, particularly the more expensive technology sector. The home market also suffers as a result of rising interest rates. The average U.S. long-term mortgage rate surpassed 6% for the first time since the 2008 housing meltdown. Higher interest rates could make an already pricey property market for American buyers even more expensive.
Bank of America provides no-money-down mortgages to bridge the racial homeownership gap. 05:03
However, the rate hikes have yet to significantly cool the economy.
The U.S. announced last week that consumer prices grew 8.3% year-over-year through August, the labor market is red-hot, and consumers continue to spend, all of which lend credence to Fed policymakers’ claims that the economy can withstand additional rate hikes.
In other trade on Monday, the price of U.S. benchmark oil fell $2.01 to $83.10 per barrel on the New York Mercantile Exchange. On Friday, it rose 1 cent to $85.11 per barrel.
Brent crude oil gave dropped $1.93 to $89.42 a barrel.