Pre-market trading: Wall Street averted a rail strike crisis, but there are problems ahead
But it’s not the only potential catalyst for another sell-off in the market, as uncertainty continues to dominate.
look here: FedEx stock fell nearly 20% in presale trading on Friday after the company withdrew financial guidance it issued just a few months ago and said it would move to cut costs as demand for packages plummeted worldwide. The company is seen as a leader in the economy since it has insight into shipments across a wide range of industries.
1. The US Federal Reserve meets next week. Persistent inflation, fears of recession and slowing economic growth have shaken markets around the world. Now with major central banks making aggressive rounds of monetary tightening to fight inflation, investors fear they may go too far.
On Wednesday, the US Federal Reserve will announce its decision on the next round of interest rate hikes. Fed Chairman Jerome Powell, in the face of a very tight labor market and rising inflation, has sent an upbeat message to investors – suggesting the central bank is likely to raise interest rates by another 75 basis points for the third time in a row.
If the Fed remains aggressive at the expense of economic growth, we can expect months of sluggish employment numbers, especially wage data, and widening credit spreads that make corporate borrowing more expensive.
This means higher bond yields, lower stock prices, and less chance of a soft landing.
2. Earning season is coming. Another risk to Wall Street is weak corporate earnings in October.
Charles Schwab analysts expect weak earnings growth through 2022 compared to last year.
Global commodity flows, including vital supplies of fossil fuels, food and fertilizers, continue to be impeded no matter which side wins the battle. A new report from S&P Global Ratings estimates that the global food and energy shocks associated with the war will last until at least 2024. These shocks will continue to affect GDP and financial performance.
US mortgage rates jump to a 14-year high
U.S. mortgage rates jumped over 6% this week, hitting their highest level since the fall of 2008.
Sam Khater, chief economist at Freddie Mac, pointed out that stubbornly high inflation is to blame for raising interest rates.
Interest rates fell in July and early August as recession fears spread. But comments from Federal Reserve Chair Jerome Powell and recent economic data have drawn investors’ attention once again to the central bank’s fight against inflation, sending interest rates higher.
There is a silver lining for those interested in buying. As mortgage rates rise and home prices continue to rise, home sales are slowing. Prices may also drop soon.
With borrowing costs expected to continue to rise in the next few months, it is becoming increasingly clear that home prices need to fall to rebalance housing markets.
“Many sellers are aware of shifting market conditions and are responding by lowering their asking rates,” said Joel Kahn, associate vice president at the Mortgage Bankers Association. “These changes coincide with the time of year when buyers have historically found the best market conditions to find a bargain.”
The growing economic relations between China and Russia
Chinese leader Xi Jinping and his Russian counterpart Vladimir Putin met face to face on Thursday for the first time since Moscow sent troops to Ukraine earlier this year. Investors watched the meeting closely for clues about the state of their economic relationship.
Putin stressed the deepening of economic relations between the two countries in their meeting, noting that bilateral trade exceeded $140 billion last year. “I am convinced that by the end of the year we will reach new highs and in the near future,” he said.
Beijing has carefully avoided violating Western sanctions or providing direct military support to Moscow, but Chinese companies benefit from the exit of Western brands from Russia.
The first look at the University of Michigan’s September consumer survey was released at 10 a.m. ET.
Next week comes: It’s a busy week for central banks as the Federal Reserve and the Bank of England are set to reveal their latest policy decisions.