Wall Street falls as Fed focuses, Ford forecasts, spooks investors

Sept 20 (Reuters) – Wall Street fell on Tuesday as traders, already bracing for another big rate hike this week by the U.S. Federal Reserve, drove markets lower after a Detroit titan gave further evidence that inflation was slowing U.S. business.

The benchmark S&P 500 (.SPX) has lost more than 19% so far this year as investors fear aggressive Fed tightening measures could tip the U.S. economy into a recession, with recent dire outlooks from delivery firm FedEx Corp (FDX. N) and automaker Ford Motor Co (FN) helps compound problems.

Shares in Ford fell 11.9% after it reported a bigger-than-expected $1 billion hit from inflation and pushed deliveries of some vehicles to the fourth quarter due to parts shortages. read more

Rival General Motors Co ( GM.N ) was also down 5.7%.

Adding to a mixed set of economic data, a report from the Commerce Department showed that residential building permits (USBPE=ECI) – among the more forward-looking housing indicators – fell 10% to 1.517 million units, the lowest level since June 2020. read more

“The markets have been under some pressure because it’s clear that the economy and the rate of earnings growth is slowing and is going to slow further,” said Hugh Johnson, chief economist at Hugh Johnson Economics in Albany, New York.

“The concern is that even if it slows down, the Federal Reserve will tell us in a very hawkish way that they are very focused on the 2% inflation rate and they are going to continue to lean toward restraint or be very tough until they get there The 2% level.”

The US Federal Reserve is widely expected to raise interest rates by 75 basis points for a third straight time at the end of its policy meeting on Wednesday, with markets also pricing in a 17% chance of a 100bps hike and projecting the terminal rate at 4.49% by March 2023.

Focus will also be on the updated economic projections and dot plot estimates for signals about politicians’ perceptions of the endpoint for rates and the outlook for unemployment, inflation and economic growth. read more

“We’re going to be in an environment where month-to-month financial data is going to be scrutinized more than it has been in the past,” said Doug Fincher, portfolio manager at Ionic Capital Management.

“The market believes that the Fed will get inflation under control at the expense of the economy. The question is whether they achieve this through a soft landing or a hard landing.”

The benchmark US 10-year Treasury yield hit 3.56%, the highest level since April 2011, while the closely watched yield curve between two- and 10-year notes inverted further.

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

At 1:57 p.m. ET, the Dow Jones Industrial Average (.DJI) fell 536.96 points, or 1.73%, to 30,482.72, the S&P 500 (.SPX) lost 70.09 points, or 1.80%, to 3,829.8 Composite (Nasdaq). IXIC) fell 182.62 points, or 1.58%, to 11,352.40.

The S&P 500 (.SPX) is trading below 3,900 points, a level considered by technical analysts as strong support for the index, but has now been breached twice in the past three sessions.

All 11 major S&P sectors were down, with economy-sensitive real estate (.SPLRCR) and materials (.SPLRCM) down 3% and 2.5%, respectively.

Meanwhile, Nike Inc ( NKE.N ) was downgraded by Barclays analysts to “equal weight” from “overweight”, citing volatility in the Chinese market due to pressure from COVID-related shutdowns in September. The sportswear giant’s stock fell 4.9%.

Reporting by Devik Jain and Ankika Biswas in Bengaluru and David French in New York; Editing by Shounak Dasgupta, Maju Samuel and Lisa Shumaker

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