U.S. stock futures edge lower as Fed decision looms over market

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U.S. stocks fell Tuesday as the Federal Reserve prepared to kick off its two-day interest-rate-setting meeting, with a profit warning from Ford Motor Co. the latest example of the supply chain woes still hitting companies.

What’s happening
  • The Dow Jones Industrial Average DJIA, -1.12% dropped 297 points, or 1%, to 30,722, after dropping nearly 459 points at its session low.
  • The S&P 500 SPX, -1.12% was down 37 points, or 1%, at 3,838.
  • The Nasdaq Composite COMP, -0.71% declined 63 points, or 0.6%, to 11,472.
What’s driving markets

Monday’s market action was without conviction, where stocks opened lower yet closed higher on the least volume since Aug. 29.

The next Federal Open Market Committee decision looms over the market, as investors grapple not just with whether the central bank will make a 75 basis point rate hike or lift rates by 100 points, but also how high the Fed will signal rates will go in the future. The meeting starts Tuesday and ends Wednesday.

“Volumes remain light and the mood cautious, with few looking to take on large positions before hearing what the Fed says and where policymakers see rates going by the end of the hiking cycle,” said Fiona Cincotta, senior financial markets analyst at City Index, in a note. “This is what will drive the markets, not the rate hike tomorrow, but what the Fed plans to do next.”

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Meanwhile, Treasury yields, which move opposite to price, continued to march higher, with the rate on the 10-year note TMUBMUSD10Y, 3.564% jumping 12 basis points to trade near 3.60% after ending Monday at its highest since 2011. The yield on the 2-year note TMUBMUSD02Y, 3.966% continued to press toward the 4% threshold. Rising yields can weigh on stocks, making government bonds appear more attractive relative to riskier assets like equities.

See: Why rising Treasury yields are a drag on the stock market

The inflation problems are not limited to the U.S. Sweden’s Riksbank on Tuesday opted for a 100 basis point hike, and analysts expect at least a half-point rise when the Bank of England meets Thursday.

Data showed U.S. housing starts rose 12.2% in August after a revised 10.9% fall in July, while building permits dropped 10% in August.

Companies in focus
  • Ford Motor Co. F, -10.54% late Monday said inflation and parts shortages will leave it with more unfinished vehicles than expected and that payments to suppliers will be about $1 billion more than expected. Ford did nonetheless reiterate its full-year operating profit outlook. Shares fell 9.5%.
  • Apple Inc. AAPL, +1.52% announced price rises for the app store in a number of Asian and European countries, likely a response to the surge in the U.S. dollar DXY, +0.31%. Shares were up 1.2%.
  • Nordstrom Inc. JWN, -0.89% shares fell 0.7% after the department store chain said it adopted a shareholder rights plan, also known as a “poison pill,” that is effective immediately and lasts for one year.