Stock market slips as investors await US Fed decision. What to expect?

The stock market continued to fall on Monday morning after a short respite due to investors’ anticipation of the Federal Reserve rate decision expected on Wednesday. The sectors that were the worst performers were health care, energy, and real estate.

What is the impact of the stock market’s fall?

  • Nasdaq composite – 0.3% lower at noon EDT.
  • Dow Jones Industrial Average – down 0.1%
  • The S&P 500 was down 0.2%.
  • Small-cap Russell 2000 index – 0.2% lower.
  • In comparison with the same time on Friday, volumes are lower on the NYSE and the Nasdaq.

How has the market performed in the recent past?
Of the last five weeks, the Nasdaq has seen a downturn in four. However, it is expected that dip buyers may be attracted by the close to oversold technical climate. While almost approaching the 200-day moving average, the index went into a deeper fall, well below its main moving averages. Overall, in 2022, it fell by almost 28%.

The S&P 500 has also fallen in the last week, and it is now 5.5% lower than its 50-day moving average. While short-term bulls may see this as a good thing leading up to the decision on the market-moving rate later in the week, it may be wiser to wait for the setups to attain more ideal buy points before making a move.

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What can we expect?

It is reported that analysts have reduced their third-quarter earnings forecast by 5.5% from June 30, which may result in the biggest fall in earnings since 2020’s second quarter. It has been seen that the markets have justified a 75-basis point hike as an anti-inflation measure. However, investors’ estimates are skewed 80 percent toward the likelihood of a 75-basis-point hike, as opposed to a 20% chance of rates increasing by a percentage point.

How has the long awaited decision impacted the markets?

  • In the US equity session’s first hour, the 10-year U.S. Treasury note saw an increase of three basis points to 3.49%.
  • US crude oil is trading at $83.80 a barrel, a fall of more than 2%, which is almost the lowest price since January.
  • The S&P Energy Select Sector ETF (XLE) fell 1.7%, while the S&P Health Care Sector ETF (XLV) fell 2.1%.

The National Association of Home Builders indexhas decreased from its August level of 49 to a September level of 46, indicating that real estate equities have also suffered.

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