US equities: Wall Street poised to tumble on fears of aggressive rate hike
Wall Street’s major indexes were set for a lower open on Monday, extending declines for a third straight day as investors feared another massive interest rate hike by the Federal Reserve could tip the economy America in a recession.
The S&P 500 and Nasdaq posted their worst weekly percentage decline since June on Friday as markets fully priced in at least a 75 basis point rise in rates during the week, federal funds futures showing a 21% chance of reaching 100 basis points. increase.
Surprisingly warm August inflation data last week also sparked bets on more rate hikes going forward, with the US federal funds terminal rate now at 4.47%.
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“Markets will be looking for direction until the Fed meeting, there won’t be much trade action until then,” said Christopher Grisanti, chief equity strategist at MAI Capital Management in Cleveland.
The S&P 500 has lost nearly 19% so far this year on fears of a central bank-induced recession amid recent warnings of slowing demand from delivery company FedEx and a curve of US Treasury Inverse Yield.
“I think a recession is very likely. The Fed sees a recession as unfortunate, but necessary to fight inflation,” Grisanti said.
The CBOE Volatility Index, also known as the Wall Street Fear Gauge, hit 27.72 points, closing in on a more than two-month high.
The focus will also be on the new economic projections, which are due to be released alongside the policy statement at 2 p.m. ET (1800 GMT) on Wednesday.
Goldman Sachs lowered its forecast for 2023 U.S. GDP on Friday night as it forecasts a more aggressive Fed and sees that pushing the unemployment rate higher than it had previously forecast.
“We believe a 100 basis point hike would piss off Wall Street … and increase the likelihood that the FOMC will end up over-tightening and reduce the possibility of achieving a soft landing,” wrote Chief Investment Strategist Sam Stovall. to CFRA, in a note.
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As of 8:20 a.m. ET, Dow e-minis were down 269 points, or 0.87%, S&P 500 e-minis were down 35 points, or 0.9%, and Nasdaq 100 e-minis were down 112.5 points, or 0.94%.
Heavyweights Microsoft Corp, Amazon.com, Meta Platforms, Alphabet Inc, Apple Inc, Tesla Inc and Nvidia Corp fell between 0.9% and 1.5% in premarket trading.
Bank of America slipped 1.1% to lead declines among major US banks.
Take-Two Interactive Software Inc fell 4.2% following a report that a hacker leaked the first images of Grand Theft Auto VI, the next installment of the best-selling video game.