US stocks fell ahead of a momentous Federal Reserve meeting this week, at which the central bank is expected to offer some guidance on its way forward.
The S&P 500, Wall Street’s benchmark, fell 0.4 percent on Tuesday, erasing earlier gains, while the tech-heavy Nasdaq Composite slipped 0.9 percent. The S&P 500 fell during the previous session but posted a gain of almost 8 percent for October.
The central bank’s Federal Open Market Committee is expected to implement its fourth straight 0.75 percentage point rate hike on Wednesday in a bid to cool inflation, which has remained at the highest level in decades. Investors will also be watching closely for signs that the Fed is poised to slow its rate hike pace in December.
Traders are mixed on the outcome of the December meeting, with futures markets showing a 49% chance of a 0.75 percentage point gain and a 44% chance of a smaller 0.5 percentage point gain. Robust jobs data released on Tuesday shows a still healthy job market which, if sustained, could limit the chances of a slower rise in December. But the interest rate expectations on the futures market were little moved on Tuesday.
Demand for U.S. workers rebounded in September as employers added 437,000 job openings, bringing the total number of vacancies to 10.7 million, the Labor Department said. The numbers are “another example of data not cooperating with the Fed’s desire to slow the pace of rate hikes,” analysts at Citigroup said.
Meanwhile, the Institute for Supply Management said its index, which tracks factory activity, fell to 50.2 in October, suggesting a modest expansion in manufacturing output. The markets had expected a reading of 50.
The Fed has raised interest rates from near zero to their current range of 3 percent to 3.25 percent this year in an aggressive policy tightening that has dragged the blue-chip S&P 500 down from a record high in January.
Big tech has been hit particularly hard by the slowing economy and rising interest rate environment, with several companies posting weak earnings last week. Still, Uber’s third-quarter sales and earnings on Tuesday beat analysts’ expectations, sending the stock up 13 percent.
In Treasury markets, the 10-year Treasury yield fell less than 0.01 percentage point to 4.04 percent. The yield on the corresponding British government bond fell by 0.04 percentage points to 3.4 percent.
On the other stock markets, the European Stoxx 600 rose by 0.6 percent and the London FTSE 100 by 1.3 percent.
The gains followed a sharp rise in stocks in mainland China and Hong Kong. The CSI 300 stock index in Shanghai and Shenzhen rose 3.6 percent, while Hong Kong’s Hang Seng climbed 5.2 percent higher.
Analysts said the surge, which helped erase some of the losses suffered since the Chinese Communist Party’s 20th Congress ended a week ago, was fueled by unconfirmed rumors circulating online that the Chinese government was setting up a task force used to review plans to reopen.
Most of the day’s gains came after social media posts just before the end of the Hong Kong morning session, without citing sources, suggested China had set up a “reopening committee” to assess various reopening scenarios for early next year.
Analysts said the purchase seemed motivated by the rumors but were skeptical as to its veracity.
“There are quite a number of institutions buying stocks today,” said Louis Tse, chief executive of Hong Kong-based brokerage firm Wealthy Securities.
“The numbers are there and there is high turnover, but when China opens it will do so in stages and not all at once. They can’t afford to suddenly have so many cases.”