Stock futures slipped on Tuesday as Wall Street looked to build a modest rebound before the Federal Reserve raises interest rates again.
Futures linked to the Dow Jones Industrial Average fell 232 points, or 0.73%. S&P 500 futures fell 0.81% and Nasdaq 100 futures fell 0.83%.
The Federal Open Market Committee begins its September meeting on Tuesday, and the central bank governor is expected to announce a 0.75 percentage point rate hike on Wednesday. Stocks have fallen in recent weeks as comments from Federal Reserve Chairman Jerome Powell and a surprise consumer price index report for August prompted traders to brace for higher interest rates until inflation cools.
Goldman’s Dominic Wilson wrote in a note: “Increased fears of recession risk contribute to an inversion of U.S. policy rate pricing in early 2023 to early 2026, which may help explain why equity volatility is higher than macro general forecast of the environment.” Client Tuesday. “Even so, if the more hawkish view of the labor market is correct, the market will need to adjust significantly further.”
If the Fed needs to see higher unemployment to gain confidence that inflation will fall, the S&P 500 needs to trade in a range of 2,900 to 3,375, with five-year yields in the 4.5-5.4% range, Wilson said.
Stocks rose in the afternoon during Monday’s choppy trading session, snapping a two-day losing streak and recouping some of their recent losses. The Dow rose 197 points, or about 0.6%. The S&P 500 and Nasdaq Composite rose about 0.7% and 0.8%, respectively.
However, after the market closed on Monday, Ford announced that supply chain issues will cost the automaker an additional $1 billion in the third quarter. Shares were down nearly 5% in premarket trading.
On the economic front, investors will take a fresh look at the housing market Tuesday morning with reports on housing starts and building permits for August.