Stocks In Holding Pattern Ahead of Rate Decisions This Week

Barry Adams
19 Sep, 2022
New York City

Benchmark indexes hugged the flat-line ahead of rate decision this week after a week of sharp sell-off. 

The U.S. Federal Reserve Bank's policy committee is set to announce its rate decision this Wednesday and investors are expecting a rate hike between 50 and 75 basis points. 

The yield on 2-year Treasury notes rose to 3.96%, 10-year Treasury notes jumped to 3.49% and 30-year bonds increased to 3.5%.  

The 10-year Treasury yield is now trading at a 11-year high. 

U.S. rates are expected to rise for the foreseeable future as the consumer price inflation is running above 8% and the inflation has stayed ahead of the Fed's target rate of 2% for nearly 24 months.  

Moreover, 13 central banks are scheduled to announce their rate decision this week as interest rates are expected to rise around the world. 

Last Friday, Russia lowered its key lending rate by 50 basis points, matching expectations. 

The People's Bank of China lowered its reverse repo rate for 14-day lending to 2.15% from 2.25% on Monday. 

The central  bank lowered its key lending rate to provide more liquidity in the financial system and spurred banks to increase lending in the housing, steel, and construction related industries. 

The Bank of England and the Bank of Japan are set to release their rate decisions on Thursday. 

On Wall Street, stocks were in a holding pattern ahead of the Fed's decision on Wednesday and investors await more insights from policymakers. 

The S&P 500 index fell 1.46 to 3,871.0 and the Nasdaq Composite index declined 0.3% or 31.0 points to 11,417.40. 

Future price of the immediate-month  delivery of crude oil eased 50 cents to $84.72 a barrel and natural gas was nearly unchanged at $7.74 a thermal unit. 

In Europe, indexes traded mixed on the first day of the week after falling 3% in the previous week. 

The DAX index inched up 0.3% to 12,776.28, the CAC-40 index fell 0.3% to 6,059.70 and the FTSE 100 index dropped 0.6% to 7,236.68. 

The dollar rose against all European currencies ahead of the key rate decision on Wednesday. 

The euro traded down to $0.99 and the British pound fell to a nearly a 4-decade low to $1.137. 

Stocks on European bourses generally traded sideways but with a downward bias. 

Volkswagen AG gained 2.4% to 201.40 euros and the automaker is planning to raise as much as 9.5 billion euro through the initial public offering of its sports car division Porsche Automobil. 

Porsche Auto is expected to fetch valuation between 70 billion and 75 billion euros.