Wall St set for lower open on lingering concerns over elevated rates

  • Markets
  • Monday, 25 Sep 2023

WALL Street's main indexes eyed a weak open on Monday as worries over interest rates staying higher for longer kept the 10-year Treasury yield buoyant, while investors awaited economic data and Federal Reserve policymakers' remarks throughout the week.

The S&P 500 and the Nasdaq registered their largest weekly percentage drop since March on Friday, as benchmark Treasury yields hit multi-year highs while investors digested the Fed's hawkish outlook revisions.

The three benchmark indexes, including the Dow, were also eyeing their first quarterly declines so far this year heading into the last days of the September quarter.

Just a few days after the Fed's decision to let its key rate stand and likely keep restrictive policy in place for longer than previously anticipated, some policymakers warned of further hikes as they doubt if the inflation battle is over.

Uncertainty around the trajectory for interest rates, including a potential hike by year-end and expectations for fewer cuts next year, have pushed the 10-year Treasury yield to a 16-year high, hurting growth stocks.

Alphabet, Nvidia, Tesla and Meta Platforms remained under pressure on Monday, losing between 0.6% and 1.6% in premarket trading.

Investors will now monitor data on durable goods and the Fed's preferred inflation gauge Personal Consumption Expenditures (PCE) price index for August, second-quarter GDP, and remarks by Fed policymakers including Chair Jerome Powell through the course of the week.

"Now we're in a time where the lag (from the Fed's policy tightening) is here and if so, its going to have its effect now, which is when you start to really watch those indicators," said Thomas Martin, senior portfolio manager at GLOBALT Investments.

Traders' bets on the benchmark rate remaining unchanged in November and December stood at 74% and 59%, respectively, according to CME's FedWatch tool.

Investors also assessed other risks including high oil prices, a resumption of student loan payments in October and a government shutdown that is set to begin if lawmakers are unable to pass a budget by Sept. 30.

"There's a fair amount of uncertainty coming into a month that is considered to be one of the worst of the year and you have these other issues going on, so people are going to be cautious," Martin added.

At 8:19 a.m. ET, Dow e-minis were down 72 points, or 0.21%, S&P 500 e-minis were down 12 points, or 0.28%, and Nasdaq 100 e-minis were down 48 points, or 0.32%.

Media firms Warner Bros Discovery, Paramount Global , Netflix and Walt Disney gained between 0.4% and 2% after Hollywood's writers union reached a preliminary labor agreement with major studios on Sunday, a deal expected to end one of two strikes that have halted most film and television production.

HP Inc dipped 2.6% after Warren Buffett's Berkshire Hathaway sold nearly 4.8 million shares of the PC maker.

Footwear maker Nike and sportswear retailer Foot Locker lost 1.6% and 2.6%, respectively, after Jefferies downgraded both the stocks to "hold" from "buy".

U.S.-listed shares of Chinese firm

s dipped ahead of a week-long holiday in the world's second largest economy. Shares of Alibaba, PDD Holdings , Baidu and JD.com fell between 1.6% and 3.2%. - Reuters

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