Shares fall as investors wait for Fed rate hike

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The Dow fell more than 450 points, or 1.5%, in afternoon trading. The S&P 500 also fell about 1.5%, while the tech-heavy Nasdaq fell 1.3%.
There wasn’t much economic data for investors to focus on, either, other than a new housing report, which was mixed. The number of homes for August increased by more than 12% compared to July, but the number of building permits decreased by 10%.
Housing numbers are unlikely to change the minds of Fed policymakers, who will announce another rate hike on Wednesday. The market is counting on a nearly 85% chance of a third consecutive three-quarter percentage point increase.
But there are some who believe the Fed will be even more aggressive, raising interest rates by an unprecedented full percentage point or 100 basis points, mainly due to ongoing inflationary pressures.

“The Consumer Price Index report has introduced a degree of uncertainty about how the Fed will behave,” said Garrett DeSimone, head of quantitative research at OptionMetrics. DeSimone said he thinks the Fed should raise interest rates by 100 basis points, a move that “would detract from the patch hike”.

Expectations for higher yields also pushed long-term bond yields higher. The 10-year US Treasury hit 3.6% at one point on Tuesday before falling back. That is the highest level since February 2011.

The sell-off in the Tuesday market follows a modest rally to start the week. Shares rose towards the end of Monday’s trading session after hovering near break-even levels for most of the day.
But the market has had a rough few days and fell last week after a shocking profit warning of FedEx (FDX)leading to increased concerns about the health of the global economy and US business.

“We are still seeing a lot of the FedEx hangover trickling into the markets,” said Anthony Denier, CEO of Webull, an online brokerage firm. “Transport stocks are a canary in the coal mine when it comes to the economy.”

Investors are getting more and more nervous. The CNN Business Fear & Greed Index, which looks at seven indicators of market sentiment, slipped further into Fear territory.



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