Today, Wall Street is gearing up for a quiet start, with continued concerns that interest rates will remain higher than usual, keeping the 10-year Treasury yield strong. Investors are also keeping an eye on economic data and listening closely to statements from Federal Reserve officials due out this week.
Last Friday, the S&P 500 and Nasdaq experienced their most significant weekly percentage decline since March. This coincided with benchmark Treasury yields hitting multi-year highs and investors absorbing the Federal Reserve’s new, more cautious outlook.
As we approach the end of the September quarter, the Dow, along with the other two benchmarks, is headed for its first quarterly decline this year.
After the Federal Reserve recently decided to keep its key rate unchanged and hinted at a longer tightening policy, some policymakers are warning of possible further rate hikes, expressing doubts about whether the battle against inflation is over.
Concerns about the direction of interest rates, including the possibility of a hike by the end of the year and projections of smaller cuts next year, have led the 10-year Treasury yield to hit a 16-year high, negatively impacting growth stocks.
Ahead of the market open on Monday, Alphabet, Nvidia, Tesla and Meta Platforms all felt some downward pressure, with losses ranging from 0.6% to 1.6%.
Throughout the week, investors will closely monitor data on durable goods, the Fed’s favorite measure of inflation: the August Personal Consumption Expenditures (PCE) price index, second-quarter GDP, and remarks from Fed officials, including Chairman Jerome Powell.
Thomas Martin, senior portfolio manager at GLOBALT Investments, commented: “We are now in a phase where the impact of the Federal Reserve’s policy tightening is starting to take effect. This is when we really need to pay attention to those indicators.”
According to CME’s FedWatch tool, traders currently expect the benchmark rate to remain unchanged in November (74% confidence) and December (59% confidence), respectively.
Investors are also considering other factors, including high oil prices, the resumption of student loan payments in October and a possible government shutdown if lawmakers fail to pass a budget by Sept. 30.
Martin added: “Given the various uncertainties and the fact that this month is traditionally considered one of the most challenging of the year, people are likely to proceed with caution.”
As of 8:19 a.m. ET, Dow e-minis were down 72 points, or 0.21%, S&P 500 e-minis were down 12 points, or 0.28%, and Nasdaq 100 e-minis were down 48 points, or 0.32%.
Following a preliminary labor agreement between the Hollywood Writers Guild and major studios on Sunday, media companies including Warner Bros Discovery, Paramount Global, Netflix and Walt Disney posted profits ranging from 0.4% to 2%. This agreement is expected to resolve one of two strikes that have paralyzed most film and television production.
HP Inc saw a 2.6% drop after Warren Buffett’s Berkshire Hathaway sold nearly 4.8 million shares of the PC maker.
Shoe maker Nike and sportswear retailer Foot Locker fell 1.6% and 2.6%, respectively, after Jefferies downgraded both stocks from “buy” to “hold.”
Shares of Chinese companies listed in the United States fell ahead of a week-long holiday in the world’s second-largest economy. Shares of Alibaba, PDD Holdings, Baidu and JD.com fell between 1.6% and 3.2%.
Also read: Stock Market Update: Markets Show Signs of Recovery After Fed Signal