Wall Street stocks slide as traders await Fed meeting

Wall Street stocks slide as traders await Fed meeting

US stocks fell on Monday as investors braced for this week’s much-anticipated Federal Reserve meeting and a fresh round of corporate earnings.

Wall Street’s benchmark S&P 500 fell 0.8 percent in afternoon trade in New York, while the tech-heavy Nasdaq Composite slipped 1.1 percent.

Both indexes closed higher on Friday, posting straight weekly gains for the first time since August, although companies including Amazon, Facebook-owner Meta and Google parent Alphabet disappointed investors with their third-quarter results and guidance.

Concerns about US companies come as market participants are also keeping a close eye on policy meetings at the Bank of England and the US Federal Reserve this week.

The Fed is expected to deliver its fourth straight 0.75 percentage point hike on Wednesday, signaling more hikes to curb rapid price growth even as fears mount that the US could enter a recession next year.

The Chicago Business Barometer, which measures business activity in the US Midwest, fell to 45.2 in October, from 45.7 in September and below the 47 level expected by economists polled by Reuters. A number below 50 indicates a contraction.

A national manufacturing gauge compiled by the Institute for Supply Management, which is being closely watched as an indicator of the strength of the world’s largest economy, is due to be released on Tuesday.

Column chart of annual change in earnings per share (%) showing US corporate earnings growth slowing

The Fed’s favorite inflation measure, the core index of personal consumption spending, rose 0.5 percent month-on-month in September, in line with economists’ expectations, and retreated from 0.6 percent in August.

Mark Haefele, chief investment officer at UBS Global Wealth Management, said the latest inflation numbers mean it’s “too early” for the Fed to follow suit Bank of Canada or the European Central Bank when issuing “less aggressive signals”.

Investors have also been watching the recent corporate earnings season for signs of drag from high inflation and rising borrowing costs.

Companies listed in the S&P 500 have so far reported third-quarter earnings growth of 2.2 percent year over year, according to data from FactSet, the groups that reported and estimates for those that didn’t , have taken into account. That would be the lowest earnings growth rate since the third quarter of 2020.

The energy sector, on the other hand, reports earnings growth of 134 percent. Companies like Pfizer, Airbnb and Uber report on Tuesday.

In Treasury markets, the yield on the 10-year Treasury rose 0.03 percentage point to 4.04 percent as its price fell. The yield on 10-year Bunds was stable at 2.1 percent.

Consumer price inflation in the euro zone rose to a record 10.7 percent in October, higher than the 10.2 percent forecast by economists polled by Reuters and higher than the 9.9 percent in September. Gross domestic product in the euro zone rose by 0.2 percent in the third quarter compared to the previous three-month period, figures from Eurostat show.

Agnès Belaisch, managing director and chief strategist for Europe at Barings Investment Institute, said a period of stagflation – low growth coupled with relatively high inflation – remains her base case for Europe, despite the better-than-expected GDP numbers.

On the stock markets, the regional Stoxx Europe 600 rose by 0.4 percent. London’s FTSE 100 gained 0.7 percent, reversing an earlier loss.

In Asia, Japan’s Topix gained 1.6 percent and South Korea’s Kospi 1.1 percent. Hong Kong’s Hang Seng Index fell 1.2 percent, while China’s CSI 300 lost 0.9 percent.

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