US stocks fell on Wednesday as investors await the latest decision on Federal Reserve monetary policy amid rising inflation and a still tight US labor market.
The S&P 500, Dow and Nasdaq accelerated down in intraday trading. Government bond yields rose through the curve, and the 10-year reference yield was just under 3%, or close to its highest level since the end of 2018.
Investors are expecting a statement on Federal Reserve monetary policy and a press conference from President Jerome Powell later Wednesday afternoon. The central bank is expected to raise interest rates by 50 basis points for the first time since 2000. Such an increase would be twice the 25-point increase the Fed undertook in mid-March, which was itself the first interest rate hike. after 2018. This will lead to the target range for interest rates on federal funds between 0.75% and 1.00%, compared to the current range between 0.25% and 0.50%.
Expectations of this excessive increase in interest rates have been building for weeks among market participants, especially given the comments of key Federal Reserve officials who seem to support such a move. Powell said in a public address to the International Monetary Fund earlier this month that he thought it would be “appropriate … to move a little faster” on raising interest rates and that 50 basis points were “on the table”. for May. The Fed is also expected to use the meeting in May to announce the start of a quantitative tightening or withdrawal of assets from the central bank’s balance sheet for $ 9 trillion.
The prospect of higher interest rates has caused volatility in stock markets, which have become accustomed over the past two years to extremely low interest rates and easy money policy in general. At the same time, however, many experts suggest that the Fed has allowed its pandemic support policies to continue for too long, allowing inflation to jump to the fastest pace since the 1980s. And as US GDP growth has turned negative in the first three months of the year, the question remains whether the Fed will now be able to tighten policies without driving the economy into a deep downturn.
The story continues
“As the market has estimated a 50 basis point increase in interest rates at the Federal Reserve meeting in May, the focus will immediately shift to how many half-point increases the Fed expects to start in 2022,” said Daniel DiMartino Booth. CEO and chief strategist of Quill Intelligence, wrote in an email on Tuesday. “The Fed will shock markets if it fails to pursue a more aggressive policy by raising interest rates by 50 basis points on Wednesday.”
“Confidence in the Federal Reserve is at stake, given the jump in inflation, which turned out to be anything but transient,” Booth added. “Interest rates are too low and markets are too accustomed to almost unlimited liquidity from Fed bond purchases. Powell’s greatest folly would be to insist that the economy is very strong in the face of the vast evidence that it is slowing down and slowing down quickly. “
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11:28 a.m. ET: US services growth slows slightly in April: ISM
The US services sector saw a slight slowdown in April compared to March, with rising prices and continued supply constraints weighing on expansion.
The Institute of Supply Management’s index of services fell to 57.1 in April from 58.3 in March, according to a new report Wednesday. According to Bloomberg, consensus economists have sought a slight increase to 58.5. Indications above the neutral level of 50.0 show an expansion in the sector.
Below the base index, the ISM price sub-index rose to its all-time high of 84.6, indicating continuing inflationary pressures. Meanwhile, sentiment for tracking the subindex’s inventory rose to 46.7, but remained in a shrinking territory for the second month in a row. The ISM employment sub-index also fell in a shrinking territory, falling to 49.5 from 54.0 in March.
“Growth continues for the services sector, which is growing for all but two of the last 147 months. There was a decline in the composite index, mainly due to the limited workforce (impact on the employment index) and the slowdown in the growth of new orders, “Anthony. Nives, chairman of the Institute for Supply Management, said in a statement to the press. “Business activity remains strong, but high inflation, capacity constraints and logistical challenges are obstacles, and the war between Russia and Ukraine continues to affect material costs, especially fuel and chemicals.
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9:35 a.m. ET: Shares open slightly changed
Here are the main market movements at 9:33 AM ET:
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S&P 500 (^ GSPC): +1.28 (+ 0.03%) to 4176.76
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Dow (^ DJI): +4.50 (+ 0.01%) to 33,133.29
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Nasdaq (^ IXIC): -20.90 (-0.15%) to 12,544.49
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Crude oil (CL = F): + $ 4.65 (+ 4.54%) to $ 107.06 per barrel
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Gold (GC = F): unchanged at $ 1,870.60 per ounce
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10-year treasury (^ TNX): +1.9 bps for 2.9790% yield
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8:30 a.m. ET: US private wages missed expectations in April, rising 247,000 from expected 383,000
Wages rose less than expected in the US private sector last month as employers worked to fill permanent vacancies to help meet demand.
Private sector wages rose 247,000 in April, ADP said in its closely monitored monthly report on Wednesday. This came after an increase of 479,000 private salaries in March, according to the ADP’s revised monthly press release. According to Bloomberg, consensus economists have sought to increase private wages by 383,000.
The US services sector saw the biggest gains in private wages last month, with almost every industry group adding new jobs. However, job growth slowed compared to March, which contributed to the main slowdown in total private wage gains. Leisure and hospitality employers added 77,000 jobs in April, which, while still the largest of any industry group, is less than half of March’s wage increases. This was followed by professional and business services, with wages rising by 50,000 in April and education and health services with a profit of 48,000. In the goods sector, wages rose net in each of the manufacturing, construction and mining industries.
In addition, according to the size of the company, small businesses saw a significant drop in employment last month. Small businesses or those with 49 employees or less lost a total of 120,000 salaries last month, while medium and large businesses earned 46,000 and 321,000, respectively.
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7:39 a.m. ET: Uber publishes better-than-expected quarterly results guidelines
Uber (UBER) published forecasts for the highest results for the first quarter and guidelines for the current quarter on Wednesday morning, as the transport company signaled that it is working in a shortage of drivers, while maintaining solid profitability.
Revenue more than doubled in the first quarter to $ 6.9 billion, beating estimates of $ 6.1 billion, according to data collected by Bloomberg. Adjusted EBITDA increased to $ 168 million, which is also above the expected $ 135 million. Travel in the first quarter increased by 18% compared to last year, reaching 17.1 billion, highlighting the continuing recovery in demand for riders.
For the current quarter, Uber said it saw gross provisions of between $ 28.5 million and $ 29.5 billion and adjusted EBITDA of between $ 240 million and $ 270 million.
Uber shares reduced early trading losses after the results. Earlier in the night, Uber shares plummeted in sympathy for Lyft shares, which fell after the travel company offered a forecast for earnings and profit for the current quarter, which did not meet analysts’ expectations.
Earlier, Uber was supposed to report its quarterly results after closing the market on Wednesday, but after Lyft’s report, “rescheduled to provide a more timely update on the company’s performance and guidelines before the market opens,” according to a statement.
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7:29 a.m. ET Wednesday: Rising stock futures
This is where the markets traded before the opening bell
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S&P 500 futures (ES = F): +16.75 points (+ 0.4%) to 4186.00
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Dow futures (YM = F): +122 points (+ 0.37%) to 33,155.00
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Nasdaq futures (NQ = F): +44.75 points (+ 0.34%) to 13,132.25
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Crude oil (CL = F): $ +3.88 (+ 3.79%) to $ 106.29 per barrel
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Gold (GC = F): – $ 4.30 (-0.23%) to $ 1866.30 per ounce
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10-year treasury (^ TNX): + 0.4 bps for 2.962% yield
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18:01 ET Tuesday: stock futures open mixed
Here is where the markets traded on Tuesday night:
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S&P 500 futures (ES = F): +1.5 points (+ 0.04%) to 4170.75
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Dow futures (YM = F): -2 points (-0.01%) to 33,031.00
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Nasdaq futures (NQ = F): +22.75 points (+ 0.17%) to 13,110.25
NEW YORK, NEW YORK CITY – APRIL 28: Traders work on the floor of the New York Stock Exchange (NYSE) on April 28, 2022 in New York. The Dow Jones Industrial Average rose in morning trading as markets continued to go through a period of instability due to fears of inflation and the war in Ukraine. (Photo by Spencer Platt / Getty Images)
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter.
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