US stocks plunge ahead of Fed meeting

U.S. stocks plunged ahead of a back-to-back Federal Reserve meeting this week, at which the central bank is expected to offer some clues on its path forward.

Wall Street’s benchmark S&P 500 fell 0.4% on Tuesday, erasing earlier gains, while the tech-heavy Nasdaq Composite fell 0.9%. The S&P 500 fell in the previous session but posted a nearly 8% gain for October.

The central bank’s Federal Open Market Committee is expected to implement its fourth consecutive rate hike of 0.75 percentage points on Wednesday in a bid to quell inflation that remains at its highest level in decades. Investors will also be watching closely for any indication that the Fed is ready to slow its rate of increase in December.

Traders are mixed on the results of the December meeting: futures are showing a 49% chance of a 0.75 percentage point increase and a 44% chance of a smaller 0.5 percentage point increase. percentage. Robust jobs data released on Tuesday showed a still-healthy job market, which, if it persists, could reduce the chances of a weaker rise in December. But interest rate expectations in the futures market on Tuesday were little changed.

Demand for American workers rebounded in September, with employers adding 437,000 job openings, bringing the total number of job vacancies to 10.7 million, the Labor Department said. The numbers represented “another example of data ‘not cooperating’ with the Fed’s desire to slow the pace of rate hikes,” Citigroup analysts said.

Meanwhile, the Institute for Supply Management said its factory activity tracking index fell to 50.2 in October, indicating a slight expansion in manufacturing output. Markets were expecting a reading of 50.

The Fed this year raised its key rate from near zero to its current range of 3% to 3.25% in aggressive monetary policy tightening that dragged the blue-chip S&P 500 down from a record low. reached in January. .

Big Tech has been particularly hard hit by the slowing economy and rising interest rates, with several companies posting weak profits last week. Still, Uber’s third-quarter revenue and profit beat analysts’ expectations on Tuesday, pushing its shares up 13%.

Line chart of the CSI 300 index showing Chinese stocks rebounding from October retreat

In government bond markets, the yield on 10-year US Treasuries fell less than 0.01 percentage point to 4.04%. The yield on the equivalent UK government bond fell 0.04 percentage point to 3.4%.

Elsewhere in the stock markets, Europe’s Stoxx 600 gained 0.6% and London’s FTSE 100 gained 1.3%.

The gains followed a strong rise in shares in mainland China and Hong Kong. The CSI 300 index of Shanghai and Shenzhen stocks jumped 3.6%, while Hong Kong’s Hang Seng climbed 5.2%.

Analysts said the rise, which helped offset some of the losses suffered since the end of the 20th Chinese Communist Party Congress a week ago, was fueled by unverified rumors circulating online that the Chinese government had established a task force to consider reopening plans.

Most of the day’s gains came after social media posts shortly before the close of the morning session in Hong Kong suggested, without naming sources, that China had set up a “reopening committee”. to assess different reopening scenarios for early next year.

Analysts said the purchase appeared to be driven by rumours, but were skeptical of their veracity.

“There are quite a few institutions buying stocks today,” said Louis Tse, managing director of Hong Kong-based brokerage Wealthy Securities.

“The numbers are there, and there’s a lot of turnover, but if China opens up, it will do it gradually, rather than all at once. They can’t afford to have that many cases right now. a blow.

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