Stocks fell on Tuesday as Wall Street increasingly faced up to the likelihood that the Federal Reserve won’t cut interest rates any time soon.
The S&P 500 (^GSPC) pulled back 1.0%, while the Dow Jones Industrial Average (^DJI) dropped about 260 points, or 0.8%. The tech-heavy Nasdaq Composite (^IXIC) was also down 1.0%. While the three major stock gauges started the week with wins, they are on track for a losing month.
Fed policymaker Neel Kashkari said Monday that given the surprising resilience of the US economy, the central bank will probably need to hike rates again and keep them high to cool inflation — echoing recent comments from other officials.
The prospect of “higher for longer” interest rates put pressure on markets. The 10-year Treasury yield (^TNX) was hovering near its highest levels since 2007, which helped push the dollar to a new 10-month peak.
Fresh data out Tuesday showed a drop in consumer confidence in September and a rise in US home prices to a record in July.
With recession worries still in play, JPMorgan CEO Jamie Dimon warned markets may not be prepared for a worst-case scenario where the Fed lifts rates to 7% alongside stagflation.
Adding to the gloom was a warning from Moody’s that a government shutdown would harm the US credit rating. With just days to go before the Sept. 30 deadline for reaching a budget deal, history shows the standoff could rattle stocks.
Some respite could come from this week’s highlights in economic data: Thursday’s update on US second-quarter GDP and Friday’s fresh reading on PCE inflation, the Fed’s preferred measure.
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JConsumer confidence declines for second-straight month
Consumer confidence declined again in September, hitting its lowest levels since May, according to new data from the Conference Board released on Tuesday.
The Consumer Confidence Index fell to 103 in September, down from 108.7 in August and below the 105.5 economists surveyed by Bloomberg had expected. Consumers views on the present economic situation remained relatively unchanged, according to Dana Peterson, the chief economist at The Conference Board. But consumers are feeling worse about what’s ahead for the economy.
The Expectations Index, which is based on consumers’ short-term outlook for income, business, and labor market conditions, sank to a reading of 73.7 in September, down from 83.3 in August and 88 in July.
Historically, any number below 80 signals a recession within the next year.
“Consumers may be hearing more bad news about corporate earnings, while job openings are narrowing, and interest rates continue to rise—making big-ticket items more expensive,” Peterson said in the release.
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J
Consumer confidence declines for second-straight month
Consumer confidence declined again in September, hitting its lowest levels since May, according to new data from the Conference Board released on Tuesday.
The Consumer Confidence Index fell to 103 in September, down from 108.7 in August and below the 105.5 economists surveyed by Bloomberg had expected. Consumers views on the present economic situation remained relatively unchanged, according to Dana Peterson, the chief economist at The Conference Board. But consumers are feeling worse about what’s ahead for the economy.
The Expectations Index, which is based on consumers’ short-term outlook for income, business, and labor market conditions, sank to a reading of 73.7 in September, down from 83.3 in August and 88 in July.
Historically, any number below 80 signals a recession within the next year.
“Consumers may be hearing more bad news about corporate earnings, while job openings are narrowing, and interest rates continue to rise—making big-ticket items more expensive,” Peterson said in the release.
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Stocks open in the red
Stocks opened lower as fears of higher interest rates for longer than expected, rising treasury yields and a looming government shutdown weighed on investors.
At the opening bell, the S&P 500 (^GSPC) was down 0.7%, while the Dow Jones Industrial Average (^DJI) slipped 0.5%. The Nasdaq Composite (^IXIC) slumped more than 0.7%. The 10-year Treasury yield (^TNX) hovered near its highest levels since 2007, sitting at 4.52% when the market opened on Tuesday.
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Here are some of the stocks leading Yahoo Finance’s trending tickers page in premarket trading on Tuesday:
Coty (COTY): Shares fell by 3% after the cosmetics maker launched a global offering of 33 million shares and said it had submitted an application for dual listing of its shares on the Paris Stock Exchange.
Tesla (TSLA): Shares fell 1% in premarket trading. The FT reported Tuesday that Tesla and European carmakers that export from China to the EU will be part of the bloc’s probe into whether the country’s electric vehicles industry is receiving unfair subsidies.
Fisker (FSR): Fisker’s shares rose by 4%. The group announced on Tuesday that it expects to ramp deliveries of its EVs in the US and Europe to 300 per day.
ASML (ASML): Shares in the chipmaker fell almost 2% premarket amid broader weakness in shares of big technology companies, according to the Wall Street Journal.
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KStock futures slide as rates reality sinks in
Stocks were poised to slide at Tuesday’s open on Wall Street as investors stayed focused on how the Fed’s tightening campaign could weigh through the last months of 2023.
Futures on the S&P 500 (^GSPC) dropped 0.39%, while those on the Dow Jones Industrial Average (^DJI) fell 0.33%, or about 114 points. Contracts on the tech-heavy Nasdaq 100 were down 0.45%.
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