Bets on another jumbo Fed rate hike, as well as weak China export data, has stocks on the back foot Wednesday.
Wall Street futures edged modestly lower Wednesday, while the dollar continued to push through multi-decade highs against its global peers, as weakening growth prospects in Europe and China push global investors deeper into U.S. assets.
Stocks were pushed lower in pre-market, as well, following a Wall Street Journal piece that suggested Fed Chair Jerome Powell is likely to deliver a 75 basis point rate hike later this month in Washington.
Trade data overnight from China, the world’s biggest exporter, showed a marked slowdown from August as Beijing’s Covid lockdowns hammered manufacturing and services activity up and down the country.
Exports were only 9.4% higher than last year, official data indicated, narrowing China’s trade surplus to a much smaller-than-expected $79.4 billion.
The data, which included slump in crude imports, extended declines for global crude prices in overnight trading and added further momentum to the surging U.S. dollar.
The dollar index, which tracks the greenback against a basket of six global currencies, was marked 0..38% higher on the session at 110.621 and within a whisker of the 20-year high it reached in early New York dealing.
WTI crude prices, meanwhile, fell to a seven-month low and were last seen trading at $86.22 per barrel ahead of Energy Department data on domestic stockpiles later in the session. The downside moves continue to add much-needed pressure for U.S. gas prices, which the AAA motor club pegged at a national average of $3.764 per gallon.
Elevated rate bets heading into the Federal Reserve’s September 21 policy meeting are holding stocks back, however, as rising bond yields pushed the Nasdaq into its seventh consecutive daily decline last night, the longest losing streak since 2016.
The CME Group’s FedWatch pegs the chances of a 75 basis point rate hike, the third in a row, at around 80%, a move that has lifted benchmark 2-year Treasury note yields well past 3.5% as last week’s solid jobs report, and a better-than-expected reading for service sector activity over the month of August, suggest a meaningful recovery is underway for the world’s biggest economy.
The moves in the dollar, as well as the ongoing slide in tech stocks, pushed bitcoin well south of the $19,000 mark, and back to the lowest levels since June, as investors dumped risk assets heading into the Fed rate decision later this month.
Bitcoin prices were last seen 0.52% lower on the session at $18,747.20 each, while the global market value of all digital coins slumped to around $984 billion – some 24.3% south of the all-time high of $1.3 billion it reached in November.
On Wall Street, futures contracts tied to the S&P 500 are indicating a modest 8 point opening bell decline while those linked to the Dow Jones Industrial Average are priced for a 55 point dip. Futures linked to the tech-focused Nasdaq are indicating a 10 point slide.
In overseas markets, Europe’s Stoxx 600 benchmark fell 1.1% by mid-day trading in Frankfurt, while China trade data pulled the region-wide MSCI ex-Japan index 1.18% lower on the session, pegging the regional benchmark at the lowest levels in seven months.
Apple’s (AAPL) – Get Apple Inc. Report shares were an active pre-market mover, rising 0.1% ahead of the tech giant’s hotly-anticipated product launch event later today at its corporate headquarters in California.
GameStop (GME) – Get GameStop Corporation Report shares fell 1.9% ahead of the video game retailer’s, and meme-stock favorite’s, second quarter earnings after the closing bell.
Analysts expect GameStop to post its sixth consecutive quarterly loss for the three months ending in July, with a bottom line loss of 38 cents per share. Group revenues, however, are expected to rise 7.3% from last year to $1.266 billion.
United Airlines Holdings (UAL) – Get United Airlines Holdings Inc. Report shares, however, failed to hold gains even as it lifted its third quarter revenue growth forecast amid a big decline in jet fuel costs and improving travel demand.
Peloton Interactive (PTON) – Get Peloton Interactive Inc. Report shares fell 1.4% after the connected fitness group said it found “material weaknesses” in its financial reporting and cautioned that it may face fines linked to last year’s recall of its Tread+ treadmill.
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This story was originally published September 7, 2022 8:55 AM.
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