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Shares rise amid expectations of another major rate hike

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Shares rose on Wall Street after bouncing back and forth between small gains and losses for much of the day as investors braced for another major rate hike this week by the Federal Reserve.

The S&P 500 gained 27 points, or 0.7%, to close at 3,899. The Dow Jones index rose 197 points, or 0.6%, to 31,020. The tech-heavy Nasdaq rose 87 points.

Shares of smaller companies also rose as the market gained momentum in the last hour of trading. The Russell 2000 rose 0.7%.

Wall Street remains focused on stubbornly high inflation and the Federal Reserve’s attempt to lower prices aggressively raising interest rates. Most economists predict that the Fed will raise its primary lending rate — which affects interest rates across the economy — by another three-quarters when central bank leaders meet on Wednesday.


A look at how the Fed’s rate hike could affect consumers

08:06

Last week, the US reported that: consumer prices increased by 8.3% through August compared to last year, the labor market is still piping hot and consumers continue to spend, all of which ammunition for Fed officials who say the economy can tolerate more rate hikes.

The fear is that the Fed and other central banks would exceed their policy targets, triggering a recession.

“Hot under the hood” inflation

The fact is that aggressive expectations based on ‘hot under the hood’ US inflationary pressures mean markets have good reason to brace for headwinds amid prospects of higher (for longer) yields; and arguably ‘higher for longer’ USD (dollar) too,” Mizuho Bank’s Vishnu Varathan said in a comment.

On Friday a grim warning Friday from FedEx about rapidly deteriorating economic trends heightened fears in the markets. The S&P 500 fell 0.7%, while the Nasdaq lost nearly 1%. The Dow lost nearly half a percent.

The S&P 500 fell 4.8% for the week, with much of the loss coming from a 4.3% defeat on Tuesday following a surprisingly warm report on inflation.

All major indices have now lost four of the past five weeks.

FedEx warning shocks market

The broader market is coming off its worst week in three months after the surprisingly hot CPI report on inflation and major companies, including FedEx, warning of deteriorating trends in the economy.

FedEx fell 21.4% for its biggest one-day sale on record friday after warning investors that fiscal first quarter earnings are likely to fall short of forecasts due to a downturn in business. The parcel delivery service is also closing storefronts and corporate offices and expects business conditions to weaken further.

Higher interest rates tend to weigh on stocks, especially the more expensive tech sector. The housing sector is also suffering from rising interest rates. Average long term US mortgage rate climbed above 6% last week for the first time since the 2008 housing crash. The higher rates could make an already tight housing market even more expensive for US home buyers.


Bank of America offers zero mortgages to address racial home ownership gap

05:03

Investors will receive another update on the housing sector on Wednesday when the National Association of Realtors releases August figures for previously occupied home sales.

Average long-term mortgage rates in the US rose above 6% last week for the first time since the 2008 housing crash. Higher interest rates could make an already tight housing market even more expensive for US home buyers.

But the rate hikes does the economy need to cool down? substantial.


iPhone 14 to be unveiled at Wednesday Apple event

06:36

The gains in technology stocks, retailers and banks helped pull the market up. Apple was up 2.3%, Home Depot was up 1.6% and Bank of America was up 1.5%. Healthcare stocks fell, dampening gains elsewhere in the market. Pfizer fell 1.3%.

The yield on the 2-year Treasury, which usually follows expectations for Fed action, rose to 3.94% from 3.87% at the end of Friday. The 10-year interest rate, which influences the mortgage rate, rose from 3.45% to 3.48%.

On another trading Monday, the US benchmark crude lost $2.01 to $83.10 a barrel in electronic trading on the New York Mercantile Exchange. It rose 1 cent to $85.11 a barrel on Friday.

Brent oil lost $1.93 to $89.42 a barrel.

Britain celebrated a day of mourning Queen Elizabeth II. The Japanese markets were closed for a holiday.

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