Rate Anxieties Drag Major Averages 1%, Building Permits Fall

Barry Adams
20 Sep, 2022
New York City

Stocks opened lower and quickly accelerated declines as the Fed's policy committee began its two-day meeting. 

The yield on 2-year Treasury notes rose to 15-year high as investors debate the size of the next rate hike tomorrow. 

The S&P 500 index fell 1.3% to 3,850.63 and the Nasdaq Composite index dropped 0.9% to 11,430.14. 

Crude oil declined $1.70 to $84.06 a barrel and natural gas prices eased 5 cents to $7.69 a thermal unit. 

The yield on 2-year Treasury notes inched higher to 3.98%, 10-year notes traded up to 3.58% and 30-year bond jumped to 3.60%. 

 

Housing Starts Rise, Permits Fall 

Housing starts jumped 12.2% in August from July to a seasonally adjusted rate of 1.575 million units, the Commerce Department reported Tuesday. 

On an annual basis housing starts fell 0.1%. 

Single-family housing starts increased 3.4% to 935,000 units and multi-family home starts surged 28.6% to 621,000. 

Building permits dropped 10% from a year ago and fell 14.4% from the previous month to a seasonally adjusted rate of 1.517 million units . 

 

German PPI Surges

In Europe, benchmark indexes declined after German producer prices rose at a faster pace in August and Sweden lifted its rate by larger-than-expected amount. 

Producer prices in Germany soared at an annual rate of 45.8% in August after rising at 37.2% in July, the Destatis said Tuesday. 

On a monthly basis, producer prices rose at a record rate of 7.9% after rising at 5.3% in July. 

 

Sweden Lifts Rates by 1.0%, More Hikes to Follow 

Sweden's Riksbank lifted its key lending rate by 1.0% or 100 basis points to 1.75%, higher than 75 basis points expected by economists. 

The central bank also held out for higher rates over the next six months and the accompanying statement added that the monetary policy will adjust to bring down the current high inflation rate to 2% by 2025. 

The central bank estimated rates to rise to 2.25% by the year-end and inflation to hover near 8.6% in 2022 and decline to 8.5% in 2023 before declining to 2% in 2025.    

The DAX index fell 1.2% to 12,649.23, the CAC-40 index dropped 1.4% to 5,977.66 and the FTSE 100 index declined 0.8% to 7,181.92. 

 

Asian Markets Closed Higher, China Rates Stable  

Asian markets closed higher following higher closing in New York in the overnight trading. 

The People's Bank of China left its 1-year and 5-year lending rates unrevised, matching the market expectations. 

The central bank left the 1-year rate at 3.65% and the 5-year rate at 4.3% after trimming rates last month from 3.70% and 4.45% respectively.  

The Nikkei 225 index in Tokyo jumped 0.4% and in Hong Kong added 1.2%. 

The Sensex index in India gained 1.0% on the expectations of a jump in consumer demand during the upcoming festival season and the rupee held stable at 79.89 despite the rising dollar.