Reuters Interview 9/20/22

• Companies

• All eyes on Fed policy decision on Wednesday
• Ford sees additional $1 bln in inflationary costs, shares fall
• Futures down: Dow 0.49%, S&P 0.57%, Nasdaq 0.65%

Sept 20 (Reuters) – Wall Street’s main indexes were set to open lower on Tuesday as investors positioned themselves for new economic projections and another large interest rate hike by the Federal Reserve this week to quell decades-high inflation.

All the three major indexes ended a choppier session higher on Monday led by gains in beaten down industrial shares and some mega-cap technology and growth stocks, though trading volumes were light suggesting caution ahead of the start of the Fed’s two-day policy meeting later on Tuesday.

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“Traders are being extremely cautious ahead of the Fed announcement tomorrow and it’s the indigestion of yields rising that’s causing the market to be unsettled,” said Peter Cardillo, chief market economist at Spartan Capital Securities LLC.

“We expect a 75-basis-point hike from the Fed and the market has already discounted that and so we are likely to see a mixed trading session as the day progresses.”

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The U.S. central bank is widely expected to hike rates by a third-straight 75 basis points on Wednesday, with markets also pricing in a 19% chance of a 100 bps increase and expect terminal rate at 4.48% by March 2023.

Focus will also be on the updated economic projections and dot plot estimates for cues on policymakers’ sense of the endpoint for rates and the outlooks for unemployment, inflation and economic growth. read more

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“The key to tomorrow is going to be indications by the Fed chief as to what’s the next possible move. The question is will 75 basis points be the norm for the next few meetings and that’s what the market is basically worried about,” Cardillo added.

The benchmark U.S. 10-year Treasury yield hit 3.54%, its highest level since April 2011, in anticipation of the rate hike, while the closely watched yield curve between two-year and 10-year notes inverted further.

An inversion in this part of the yield curve is viewed as a reliable indicator that a recession will follow in one to two years.

Shares of big U.S. banks slipped in premarket trading, while those of rate-sensitive growth companies such as Apple Inc (AAPL.O), Tesla Inc (TSLA.O), Microsoft Corp (MSFT.O), Alphabet Inc (GOOGL.O), Nvidia Corp (NVDA.O) and Meta Platforms Inc (META.O) dipped between 0.4% and 0.9%.

The benchmark S&P 500 index (.SPX) has lost 18.2% so far this year as investors fear aggressive policy tightening measures could tip the U.S. economy into a recession, with a recent dire outlook from delivery firm FedEx Corp (FDX.N) and an inverted U.S. Treasury yield curve adding to woes.

At 8:13 a.m. ET, Dow e-minis were down 153 points, or 0.49%, S&P 500 e-minis were down 22.25 points, or 0.57%, and Nasdaq 100 e-minis were down 78.75 points, or 0.65%.

Ford Motor Co (F.N) slid 4.4% after the automaker said inflation-related supplier costs will run about $1 billion higher than expected in the current quarter and sees 40,000 to 45,000 vehicles in inventory due to lack of parts, delaying sales. read more

PayPal Holdings Inc (PYPL.O) fell 2.6% after Susquehanna Financial Group downgraded the fintech company’s stock to “neutral” from “buy”.

Reporting by Devik Jain and Ankika Biswas in Bengaluru; Editing by Shounak Dasgupta

Our Standards: The Thomson Reuters Trust Principles.

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