US stocks weaken as Fed begins two-day meeting

NEW YORK: Wall Street equities ended with losses on Tuesday (Sept 20) as US central bankers opened their two-day policy meeting which is widely expected to end with a three-quarter-point interest rate increase.

Fed officials have vowed to raise rates to bring down soaring inflation, with some observers speculating about a possible one-percentage-point move.

Markets have been roiled in recent days by the central bankers' decidedly hawkish statements, despite a brief bounce on Monday.

However, analysts have already begun setting their sights on the prospect of future increases, awaiting information on what the Fed's next steps will be and how high rates could go.

The Dow Jones Industrial Average fell 313.45 points, or 1.01%, to 30,706.23, the S&P 500 lost 43.96 points, or 1.13%, to 3,855.93 and the Nasdaq Composite dropped 109.97 points, or 0.95%, to 11,425.05.

The S&P 500 index has dropped 19.1% so far this year as investors fear aggressive policy tightening measures by the Fed could tip the US economy into a recession. It closed for the third straight session below 3,900 points – a level considered by technical analysts as a strong support for the index

Among individual companies, Ford fell 12.3% in the wake of its announcement that supply chain issues would cost the company an extra US$1 billion this quarter.

Rival General Motors Co sank 5.6%.

“We have seen some bellwethers talk about the pressures they are facing, so we could see some margin compression and some softening in the topline numbers in the third-quarter earnings,” said Greg Boutle, head of US equity & derivative strategy at BNP Paribas.

Meanwhile, in another sign of nerves around future corporate earnings, Nike Inc fell 4.5% after the sportswear giant was downgraded by Barclays analysts to “equal weight” from “overweight”, citing volatility in the Chinese market due to pressures from COVID-related lockdowns in early September.

Another apparel maker, Gap Inc, closed 3.3% lower. It announced on Tuesday it was eliminating about 500 corporate jobs, having withdrawn its annual forecasts late last month due to an inventory glut and weak sales. – AFP, Reuters

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