Here are five things you need to know for Tuesday September 20th:
1. — Stock futures fall when bond yields surge
US stock futures fell again on Tuesday, while Treasury yields jumped to multi-year highs as investors eyed the start of the two-day Federal Reserve meeting in Washington.
The odds of a 75 basis point rate hike tomorrow, the third in a row, have been largely cemented by interest rate traders, according to CME Group’s FedWatch. However, the Fed’s next steps, and the level from which it will begin to consider a “pause” in rate hikes early next year, continue to rise after last week’s faster-than-expected August inflation report and concerns that pricing pressures are growing the largest economy in the world has nested in it.
This concern is being expressed in the bond market, where the 2-year Notes yield is trading at 3.973%, the highest since November 2007, in anticipation of a benchmark interest rate that could reach as high as 4.5% early next year.
That move has brought the additional yield, or spread, over benchmark 10-year bonds to about 46 basis points, even as that security trades at a 2011 high of 3.514%, raising the prospect of a near-term recession as a result of the Fed’s inflationary war .
Elevated bond yields also act as a circuit breaker for stocks as yields challenge the S&P 500’s falling dividend yields and provide an investment alternative for risk-averse fund managers.
The prospect of hawkish interest rate signals later this week, with expected rate decisions from the Bank of England and Bank of Japan, was further fueled on Tuesday by a surprise 100 basis point rate hike from Sweden’s National Bank, which set its policy rate at 1.75% this morning Stockholm.
A faster-than-expected rate of inflation in Japan, where core prices hit an 8-year high of 2.8% last month, also raised the prospect of currency intervention by the BoJ, with the yen now at a 24-year low against the dollar. Trading low and fueling import price pressure.
The moves have had little impact on the greenback so far, as the US dollar index trades near a 20-year high at 109.773 against its global peers, but is pushing stocks lower in both Europe and the United States , which is entering the Fed policy debate.
In Europe, the Stoxx 600 was down 0.3% in early Frankfurt trade after the MSCI ex-Japan index rose 0.97% in Asia.
On Wall Street, futures contracts linked to the S&P 500 are showing a 13-point drop from the opening bell, while they are linked to the Dow Jones Industrial Average and are priced for a 55-point drop. Futures tied to the tech-heavy Nasdaq are pointing to a 65-point move lower.
2nd – Ford slips on supply chain results to Q3 earnings
Ford engine (f) Shares tumbled lower in premarket trading on Tuesday after the automaker warned that supply chain ties would trim its third-quarter profit.
Ford reiterated its full-year profit guidance, which includes operating profits of between $11.5 billion and $12.5 billion, even amid what it describes as “restrictions on the availability of certain parts and increased payments to suppliers to account for the impact.” Inflation.”
However, Ford said it would likely have as many as 45,000 vehicles missing certain components, ultimately delaying their sales until the last three months of the year.
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That will impact both third-quarter revenue and adjusted earnings, which are in the range of $1.4 billion to $1.7 billion.
Ford shares were marked down 4.76% in premarket trading, showing an opening bell price of $14.22 each.
3. — United Health wins as court authorizes purchase of healthcare products
United Health Group (UNH) Shares edged higher in premarket trading after a federal judge denied a Justice Department request to block the proposed merger with health-tech group Change (CHNG) .
The DoJ had argued that the $8 billion deal, first unveiled in January, would give UnitedHealth access to health plans offered by competitors like Humana (BUZZ) and Anthem, while enabling the combined group to serve approximately 95% of the country’s leading health insurance companies.
However, Judge Carl Nichols of the U.S. District Court for the District of Columbia permitted the transaction provided UnitedHealth approved the sale of ClaimsXten, Change’s subsidiary.
UnitedHealth Group shares were marked 0.45% higher in premarket trading, showing an opening bell price of $525.93 each. Change Healthcare shares rose 7.3% to $27.33 a share.
4. — Apple announces price increases in the App Store in Europe and Asia
Apple (AAPL) Shares fell in premarket trading after the group announced plans to raise App Store prices in Europe and Asia.
Just weeks after launching its news suite for iPhone 14s, which were at the same level as the iPhone 13 for US customers, Apple announced that it would increase App Store prices by around 20% in Europe, with a starting level from €1.19. which migrations are planned for markets in Japan, East and Central Asia and South America.
Apple said earlier this year that it paid app developers about $60 billion over the course of 2021, up from $45 billion last year, suggesting it had about $75 billion in total revenue from the App Store and kept about $15 billion for the company itself.
Apple shares were down 0.41% in premarket trading, showing an opening price of $153.85 each.
5. – Housing starts data in focus as mortgage rates rise
Housing data will come back into focus Tuesday after figures from the National Association of Home Builders showed the weakest sector sentiment since 1985.
August housing starts and building permits data is released at 8:30 am Eastern time, with investors anticipating a slowdown in the annual rate of construction, which tends to lag trends in mortgage demand.
Data from the Mortgage Bankers Association last week showed that new claims fell 1.2%, down 30% from their peak in December, in part due to firm selling prices and the first rise in 30-year mortgage rates more than 6% since the real estate crisis of 2008.
The NAHB homebuilder sentiment index, meanwhile, fell to 46 points this month, well below the 50 mark that generally signals growth, extending a nine-consecutive month decline for the benchmark survey, the longest losing streak since 1985.