July 28, 2021

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US stocks dip from records ahead of Fed meeting on rates

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US shares are held on their record highs on Tuesday, investors were waiting to see whether or not a mixed bag of economic data, which would be enough for the Federal Reserve to end its massive support for the market.

The S&P 500 index fell by 0.2% in afternoon, one day after the return to an all-time high amid optimism that the Fed’s super-low interest rates, COVID-19 vaccines and the financial support of the government, will boost the economy more quickly.

The Dow Jones Industrial Average fell 86 points, or 0.3%, at 34,307 2:37 pm ET. The Nasdaq Composite index was down by 0.7%, from their own records.

The S&P 500 index fell 0.4% earlier in the day, the day after a report showed that the rate of inflation at the wholesale level increased from the previous month, more than economists had expected. Producer prices were 6.6% higher than a year earlier, an unprecedented result, the final proof that it is the rate of inflation, increases in the broader economy.

The fear is that high rates of inflation in the handle, it could force the Federal reserve to the left of the $ 120 billion in monthly bond purchases, which he has promised to keep the mortgage interest rate and the long-term interest rates are low, and the interest rate increase later on from their record lows.

The Fed said it still believes that the inflation rate is higher, it is only temporary, and will announce its latest interest rate decision on Friday afternoon.

“In terms of pricing, we find that the inflationary pressures, we believe that the courts have not yet decided on the terms and conditions, and the extent of this is when we see a flattening or a new criterion, the high prices will have to be anchored,” said Greg Bassuk, is the founder and CEO of AXS Investments.

The majority of economists expect the Fed again, saying on Wednesday that it was of the view that the inflation rate is higher, it is only of a temporary nature, which makes it insufficient to take action to support markets. However, they also say that on Wednesday, in the afternoon, you can be the first indication that the Fed is considering when to start reducing bond purchases.

A lot of investors are in agreement with the Federal reserve’s view that the high rate of inflation does not last very long, and this is expected to result in pulling the economy from the pandemic. A survey of fund managers found that more than 72% of the respondents believe that the high rate of inflation, it is only a “transitional period,” according to BofA Global Research. At the same time, the majority of you believe that any future decline in the share price is likely to be less than 10%.

 

In a quiet, reduction of the bond-buying, the price can be high in all of the markets, even in the midst of the criticism that they are too expensive, and in contrast to the pain that can occur as a result of the end of the Fed’s support.

There is limited evidence that the rate of inflation could be cool in some other parts of the economy. Wood and copper prices have fallen from their highs a few weeks ago. Copper fell 4% on Wednesday, while the shares of the mining company Freeport-McMoRan fell to 5.2%.

The rest of the reports in the economy on Tuesday, drew a mixed picture. Retail sales declined by 1.3% in April, a sharp reversal from the 0.9 percent in the previous month, leading to a much sharper decline than economists had expected.

This is probably due in part to the fading effect of the rescue funds from the government of the U.S. was sent to households earlier this year, which has led to higher costs in March and April. But economists say it may be a sign that the Americans are shifting more of their spending on flights, hotels, food, and other services, such as the economy recovers, as well as spending less on the things sold in the shops.

In a separate report, said that the country’s industrial production rose last month, more than economists had expected.

Technology stocks were among the biggest hurdles for the S&P 500 index, while the three stocks in the index rose for every two that fell.

Companies that have made solid gains, as the price of oil to rise. Exxon Mobil added 3.1%, and the French-1.9%.

The rate of return on the bonds have been relatively stable. The yield on the 10-year treasury bond was kept at 1.50%.

Earlier in the day, European stock markets closed modestly higher. Asian markets were mixed, with Japan’s Nikkei 225 up to 1% of the shares in Shanghai, down 0.9%.

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