US stocks fell on Monday, with investors chasing down expectations the Federal Reserve will raise interest rates to the highest level since the 2008 financial crisis when it concludes its policy meeting on Wednesday.
Wall Street’s benchmark S&P 500 was down 1 percent in afternoon trade, while the tech-heavy Nasdaq Composite was down 1.7 percent.
The Fed is expected to raise interest rates by a quarter of a percentage point, continuing to reduce the size of its hikes. Early data showed that the US central bank’s aggressive efforts to fight inflation are bearing fruit, but chair Jay Powell may still defy expectations that the Fed will stop raising rates and cut rates by the end of the year.
Thomas Costerg, senior US economist at Pictet Wealth Management, wrote in a note: “The main uncertainty in the meeting is how Powell will judge the evolution of the financial situation. The main hawkish risk in this meeting is that Powell expressed his unease with the recent financial situation, and stock prices which is increasing until now.
Investors are also looking ahead to Apple and Alphabet’s fourth-quarter earnings in a busy week for corporate results.
The dollar index, which tracks the currency against a basket of six peers, gained 0.4 percent, while the 10-year Treasury yield rose 0.03 percent to 3.55 percent. Bond yields move inversely to prices.
The region-wide Stoxx Europe 600 traded 0.2 percent lower after new data showed a 0.2 percent drop in Germany’s fourth-quarter gross domestic product, just as Spain’s inflation rate rose to 5.8 percent in the year to January, from 5.5 percent. cents in December. Britain’s FTSE 100 ended the session up 0.3 percent.
Equity markets have rallied this year on optimism that global growth will be less anemic than feared, helped by falling energy prices in Europe and the reversal of zero-Covid measures in China from early 2020. spending – exactly what central banks, which determined to drag down inflation, try to prevent it.
Financial conditions have loosened due to a weaker dollar, lower Treasury yields and tighter credit spreads, according to analysts at ING, “and it may feel that further loosening, supported by talk of potential policy easing in the second half of the year, could damage [the Fed’s] act now to fight inflation”.
The main question for the Bank of England, is whether to admit its work is almost done. “We suspect we are more likely to be open to options,” the analyst said, adding that market expectations of a European Central Bank rate cut in 2024 were “premature”.
Prices for Brent crude, the international oil benchmark, fell 2 percent to $84.90 a barrel, after falling 1.1 percent last week. The U.S. benchmark West Texas Intermediate fell 2.2 percent after shedding 2 percent in the previous week.
In Asia, Hong Kong’s Hang Seng index fell 2.7 percent, dragged down by a 6 percent decline for Alibaba. China’s CSI 300 gained about 0.5 percent.