Coffee With Greta: What Will the Fed Do?


DJIA Futures: -231 (-0.7%)

SPX Futures: -27 (-0.7%)

NASDAQ Futures: -79 (-0.7%)

Good morning friends!

Futures are falling further today as a new week of trade begins focused on the Fed.

Let’s get right to it!

Fed Week Kicks Off

Stocks are set to open lower as the market turns its focus to this week’s Fed meeting. 

The Central Bank begins its two-day policy meeting on Tuesday and will release the rate hike decision Wednesday at 2:00 p.m. ET. 

CME Group’s FedWatch Tool shows the market sees an 80% chance of another 75bps hike and a 20% chance of a 100bps hike.

The increased expectations come after inflation unexpectedly picked up in August. 

The Fed Chair has said Americans will have to experience some “economic pain” in order to get inflation under control. 

Treasury Yields Surge Ahead of Fed Rate Hike

Treasury yields are rallying today in anticipation of another large rate hike from the Fed this week. 

The 2-year yield is up 6 basis points at 3.93% while the 10-year yield is up 4 basis points at 3.5%. 

The 10-year hit a high of 3.508% earlier this morning, its highest level since 2011, and the 2-year jumped to its highest since 2007 at 3.94%.

Yields move inversely to prices, surging higher as traders sell off bonds. 

Oil Prices Fall as Demand Fears Jump

Oil prices are falling today as demand fears take over. 

West Texas Intermediate crude futures are down 3.4% to $82 bbl while Brent crude futures are down 3% to under $89 bbl.

Prices have been under pressure ahead of the Fed’s meeting this week as continued rate hikes are expected to put more pressure on the economy. 

But the market still has supply concerns hanging over its head with the EU’s sanctions on Russian oil approaching in early December.

Housing Market In Focus

This will be a big week of data for the U.S. housing market which has slowed dramatically as mortgage rates rise. 

The National Association of Homebuilders releases its September sentiment index at 10:00 a.m. ET today. 

Economists expect the index to fall 2 points to 47 after confidence slipped into negative territory for the first time since May 2020 in August. 

Builders already squeezed by high material costs and supply shortages are now struggling with slower buyer demand due to higher rates.

The Census Bureau reports August housing starts and building permits Tuesday morning and the National Association of Realtors existing home sales report will be out on Wednesday.

In Case You Missed It

  • The University of Michigan consumer sentiment index rose to 59.5 in September from 58.2 in August. That was lower than economists’ expectations for 60 and down sharply from 72.8 a year ago. The survey showed Americans expect inflation to still be at 4.6% one year from now and 2.8% five years from now.
  • FedEx (FDX) suffered its largest one-day decline on record Friday, plunging 21.4%. The drop came after the shipping giant missed expectations in the latest quarter and withdrew its full-year guidance. FedEx cited weaker global shipping demand for the move with the CEO predicting a “worldwide recession”.

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