Wall Street is set to open the first session of the week in negative territory, prolonging the bearish trail that led the main US stock market indices to close the worst week since June.
In the spotlight, yet another surge in US Treasury yields awaiting the most important event of the week: Jerome Powell’s Fed announcement on interest rates.
At approximately 13.50 Italian time, futures on the Dow Jones fell by 244 points (-0.79%), to 30,677 points; futures on the Nasdaq fall by around 0.90%, to 11,823, while futures on the S&P 500 lose 0.84% to 3,857.
The FOMC, the monetary policy arm of the Federal Reserve, will meet tomorrow to announce its decision on fed funds rates the day after tomorrow, Wednesday 21 September. Traders are betting on Powell Fed monetary tightening of 75 basis points, for the third consecutive time, in order to avert further spikes in inflation.
On July 27, the Fed raised fed funds rates by 75 basis points, for the second consecutive time, confirming its fight against runaway inflation in the United States.
With its second consecutive hike of 75 basis points, Powell & Co brought US fed funds rates into the new range of 2.25% to 2.5%, to a record high since the end of 2018.
The inflation nightmare in the States returned last week with the publication of the consumer price index.
Confirming how inflation is becoming more and more rooted in the US economy, and not just dependent on energy prices (which actually pointed downwards during the month), US core inflation strengthened in the month of August.
US headline inflation slowed to an annual rate of 8.3% from + 8.5% in July. However, the weakening of the CPI index took place at a slower pace than expected by the consensus of analysts, who had forecast an increase of + 8.1%.
On a monthly basis, headline inflation also rose by 0.1%, strengthening with respect to the unchanged figure in July, and confirming a growth higher, even in this case, than the estimates, which were for a decrease of 0.1%.
Looking at core inflation, the one that has fueled investors’ fears further, in this case the August trend was a jump of 6.3% on an annual basis, over + 5.9% in July, and even higher than the estimated + 6.1%; on a monthly basis, the core CPI index rose 0.6%, over the estimated + 0.3% and double the previous + 0.3% in July.
The numbers drowned out hope that US inflation has peaked, thus fueling fears that Jerome Powell’s Fed will continue on its aggressive rate hike path.
There are also those who feared a monetary tightening of 100 basis points.
The SOS rates come both from the stock market and from US Treasuries: in particular, just today the 10-year Treasury rates have exceeded the 3.5% threshold, positioning themselves at the record of the last 11 years.
Yields on two-year Treasuries, which are more sensitive to the Fed’s monetary policy decisions, shot up to 3.93%, a new high since 2007.