U.S. stocks are declining as the markets await tomorrow’s highly anticipated monetary policy decision from the Federal Reserve. The Central Bank is expected to deliver another 75-basis point rate hike, while the markets are also grappling with the possibility of a 100-basis point hike that stems from last week's hotter-than-expected consumer price inflation report. Housing starts rose much more than expected, while building permits dropped more than anticipated. In equity news, Ford announced that inflation and parts shortages will raise supply costs by $1 billion above initial expectations, but still reaffirmed its full year guidance. UnitedHealth Group was given permission from a federal judge to proceed with its acquisition of Change Healthcare, which the U.S. Department of Justice tried to block. Treasury yields are higher, particularly on the long end of the curve, and the U.S. dollar is increasing. Crude oil prices are declining, and gold is losing ground. Asian stocks finished broadly higher as China’s central bank kept its benchmark lending rates unchanged, and as Hong Kong is set to ease hotel quarantine rules. European stocks are declining in late-day trading amid a larger rate hike than anticipated from Sweden’s central bank, and as Germany’s producer price index unexpectedly soared.
At 10:51 a.m. ET, the Dow Jones Industrial Average is down 1.2%, the S&P 500 Index is declining 1.1%, and the Nasdaq Composite is decreasing 0.7%. WTI crude oil is moving $1.16 lower to $84.20 per barrel, and Brent crude oil is falling $1.66 at $90.34 per barrel. The gold spot price is trading $6.60 lower to $1,671.60 per ounce, and the Dollar Index is advancing 0.4% to 110.08.
Ford MotorCompany(F $14) stated that a combination of inflationary pressures and parts shortages will leave the company with more unfinished vehicles than initially expected. The automobile manufacturer estimates that Q3 inflation-related supply costs would be about $1 billion higher than anticipated. Despite this unexpected rise in costs, F reaffirmed its full-year guidance. Shares are falling.
In other equity news, a federal judge ruled that UnitedHealth Group Incorporated (UNH $521) could continue with its acquisition of Change Healthcare Inc. (CHNG $27), dealing a blow to the Biden administration’s healthcare anti-trust efforts as the U.S. Department of Justice tried to block the sale. Shares of UNH are declining, while CHNG is noticeably higher.
The S&P 500 Index fell sharply last week, bolstered by a hotter-than-expected August consumer price inflation report, which boosted Treasury yields and resumed the U.S. dollar's rally. For a look at the volatility, check out what our experts from the Schwab Center for Financial Research think in the article, Stock Market Volatility: Inflation Strikes Again. Given these conditions, Schwab recommends that investors stay disciplined. For stock investors, that means taking a sector-neutral approach and focusing on high-quality factors such as strong profit margins, high free-cash-flow yield, low volatility, and positive forward earnings revisions. Investors should also periodically rebalance their portfolios to maintain their strategic long-term allocations in the face of rapidly shifting markets.