Stocks fall as Wall Street braces for Fed meeting

Stocks fall as Wall Street braces for Fed meeting

US stocks were firmly lower early Monday after the three major indexes logged their worst week in three months.

The S&P 500, Dow Jones Industrial Average, and the tech-heavy Nasdaq were down about 0.6% at the start of the trading session.

Meanwhile in the bond market, the benchmark US 10-year Treasury note rose to 3.49%, its highest level since 2011, while the 2-year Treasury note topped a 15-year high of 3.9%.

Investors are gearing up for the Federal Reserve’s two-day policy meeting on September 20-21. The US central bank is expected to deliver a third straight 75-basis hike at the end of Wednesday’s discussion at 2:00 pm

Higher-than-expected inflation data last week prompted a sell-off in US equity markets after renewed fears that the Fed will step up its monetary efforts and push the economy into recession. The benchmark S&P 500 lost 4.7% for the week, the Dow Jones Industrial average fell 4.1%, and the technology-heavy Nasdaq Composite fell 5.5%.

An advance earnings warning from shipping giant FedEx ( FDX ) also exacerbated growth concerns on Friday after the company said a global recession may be underway, withdrawing its full-year guidance on macroeconomic trends that are “significantly deteriorating.” “

NEW YORK, NEW YORK - SEPTEMBER 16: Traders work on the floor of the New York Stock Exchange (NYSE) on September 16, 2022 in New York City.  The Dow Jones Industrial Average fell again on Friday as economic concerns about inflation and global corporate profits of transportation companies eased.  (Photo by Spencer Platt/Getty Images)

NEW YORK, NEW YORK – SEPTEMBER 16: Traders work on the floor of the New York Stock Exchange (NYSE) on September 16, 2022 in New York City. The Dow Jones Industrial Average fell again on Friday as economic concerns about inflation and global corporate profits of transportation companies eased. (Photo by Spencer Platt/Getty Images)

Of S&P 500 companies that had earnings calls from June 15 to September 8, 240 mentioned the term “recession” – the highest number mentioning the term since at least 2010, and well above the 5-year average of 52, according to data from FactSet Research.

As investors head into earnings season, Wall Street strategists are calling down earnings expectations, while macroeconomic headlines including inflation and rate pressures are showing signs of weighing on corporate margins.

Bank of America’s Michael Hartnett warned in a recent note that earnings cuts will be a catalyst for deeper selling and sees the S&P 500 heading towards 3,600 – and even 3,000 in the bear case. At the close of Friday, the index was at 3873.33.

As Fed worries kept investors in a risk-off mood, the mood was also felt across the cryptocurrency markets. Bitcoin (BTC-USD) fell below $19,000 and Ethereum (ETH-USD) extended a slide to maneuver near the $1,300 level after a highly anticipated “merger” last week.

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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