© Reuters. FILE PHOTO: People walk past a screen displaying the Hang Seng stock index outside the Hong Kong stock exchanges, in Hong Kong, China July 19, 2022. REUTERS/Lam Yik/File Photo
By Sinéad Carew
NEW YORK (Reuters) – Wall Street’s main indexes closed lower on Friday as U.S. Treasury prices climbed as investor fears over the outlook for a global recession intensified as they also braced to a massive hike in US interest rates by the Federal Reserve.
Economic fears were amplified by a revelation from FedEx Corp (NYSE:) on Thursday evening that a slowdown in global demand had accelerated in late August and was set to worsen in the November quarter, prompting the delivery company to withdraw its financial forecasts.
The warning came at a time when investors were already nervous ahead of a Fed meeting, after which the central bank is expected to raise rates by 75 basis points. Some traders are betting on a 100 basis point increase, according to CME Group’s FedWatch tool (NASDAQ:). The Bank of Japan and the Bank of England are also due to meet next week.
“Today is a continuation of what we’ve seen this week, volatility around expectations of what the Federal Reserve might do, with 75 basis points priced in and 100 basis points a possibility,” said Megan Horneman, Chief Investment Officer at Verdence. Capital advisers. “Then you have the dismal report from FedEx, which some people see as an indicator not only of consumer spending, but of the economy in general.”
The stock market is down on “growing concern that is really starting to get worse that the Fed is going to make a mistake and tighten too much,” said Jim Paulsen, chief investment strategist at The Leuthold Group in Minneapolis.
Paulsen said FedEx’s warning had investors wondering “what if the Fed is going to tighten in the middle of a recession.”
But Treasury yields retreated after the FedEx warning reignited speculation that slowing growth will help the Federal Reserve bring inflation under control.
After rising to 3.924%, its highest level since 2007, earlier in the day the two-year US Treasury yield, an indicator of interest rate expectations, fell.
The yield curve inversion between two-year and 10-year bonds – seen as a harbinger of recession – widened further before returning to Thursday’s closing level.
The two-year yield last fell 0.4 basis points to 3.869% and the 10-year yield slipped 0.6 basis points to 3.453%.
“The Fed will take the FedEx report as an indication that it is on the right track, rather than a warning that the Fed may be acting too aggressively,” said Rick Meckler, partner at Cherry Lane Investments in New Vernon. , New Jersey. [.N]
In equities, the decline of 139.4 points, or 0.45%, to 30,822.42; the 28.02 points lost, or 0.72%, to 3,873.33; and the fell 103.95 points, or 0.9%, to 11,448.40.
The pan-European index was down 1.58% and the MSCI gauge of stocks across the world lost 0.96%.
Earlier today, the Vice President of the European Central Bank said an economic slowdown in the eurozone would not be enough to control inflation and the bank would have to keep raising rates.
The dollar fell 0.1% as the euro rose 0.09% to $1.0008.
The Japanese yen strengthened 0.40% against the greenback at 142.94 to the dollar, while the pound last traded at $1.142, down 0.38% on the daytime.
Analysts and fund managers have said the yen could hit a three-decade low before the end of the year.
Oil prices rose slightly on Friday as a spill at Iraq’s Basra terminal looked likely to limit crude supply, but the commodity remained lower during the week on fears that rate hikes could dampen growth. global economic growth and fuel demand.[O/R]
settled up 1 cent at $85.11 a barrel while settled up 51 cents at $91.35.
Gold prices rose on Friday as the dollar stagnated, but the greenback’s gains over the week and expectations of a big US rate hike kept bullion well below the 1,700 mark. dollars and heading for its weakest week in four.
added 0.6% to $1,674.17 an ounce. The US gained 0.34% to $1,671.70 an ounce.