Major indexes fall: Fed not expected to raise rates

Stocks retreated on Tuesday as Wall Street awaited the results of this week’s Federal Reserve policy meeting.

The Dow Jones Industrial Average lost 106.57 points, or 0.31 per cent, to end at 34,517.73. The S&P 500 slid 0.22 per cent to 4,443.95. The Nasdaq Composite slid 0.23 per cent 13,678.19.

Disney slid more than 3 per cent after announcing plans to nearly double its investment in its cruise and parks business. Deere, often seen as a barometer of future economic activity, fell nearly 3 per cent in the session after investment bank Evercore ISI downgraded the stock due to agricultural production concerns.

The highlight of New York’s day was the debut of Instacart, the latest company to spark hopes of a revival for IPOs.

Instacart’s shares opened trading at $42 each after selling for $30 — the top of a marketed range — to raise $660 million for the company and selling stockholders in the year’s fourth-biggest US IPO. The shares, which jumped as much as 43 per cent, closed at $33.70 in New York, giving the company a market value of $9.3 billion.

The central bank’s two-day meeting begins on Tuesday. The Fed is not expected to raise rates when announcing its decision Wednesday, with traders pricing in a 99 per cent probability that the central bank skips a hike, according to CME Group’s FedWatch tool, a gauge of pricing in fed funds futures. Traders are pricing just a 29 per cent chance of a hike in November.

The Fed will also offer economic forecasts on Wednesday. Investors will watch for commentary around the path of inflation and future of monetary policy.

Leadership of the striking United Auto Workers union said more members could be called on to withhold labor if progress is not made by a Friday deadline. Stellantis advanced more than 2 per cent in the session, while Ford and General Motors each added more than 1 per cent.

West Texas Intermediate and Brent crude prices settled lower after hitting highs not seen since November. The move seemed to buoy market sentiment and lift stocks off their lows.

Overall, turning to US sectors, all sectors except Tech, Health and Communications Services closed lower overnight. Energy was the worst performer.

In commodity-related news, Bank of America notes that the recent spike in iron ore prices can be attributed to a surge in purchases by Chinese steel mills, which had significantly reduced their stockpiles before.

This increase in demand coincided with a decline in mill and port inventories, leading to higher iron ore imports in August.

Despite the price rally, Chinese steel mills are still experiencing negative profit margins, which typically discourage raw material purchases. The key question is what factors might sustain this iron price rally going forward.

The price of WTI crude oil for Cushing delivery has reached its highest premium since November, with futures surpassing $90 per barrel. Additionally, overseas buyers are now facing an extra cost of $1 to $2 per barrel to transport the crude to the Gulf Coast for export. These elevated prices are making American crude oil less attractive to buyers in Asia and Europe.

Historically, the US has been a go-to supplier for these regions when there was a global oil shortage, often driven by OPEC+ production cuts. However, the current high prices are making American crude less competitive as a solution to the global oil supply gap.

China's copper industry is experiencing a slowdown as it approaches its peak autumn season. Despite government support, reports indicating weak demand are causing concern among investors. Autumn is typically a busy period for copper fabricators, making this downturn worrisome.

Approximately 25 per cent of China's copper demand comes from the construction sector, which has been affected by the real estate crisis. Additionally, analysts are less optimistic about refined copper demand in the second half of the year due to China's slowing solar expansion and reduced household purchases.

Futures

The SPI futures are pointing to a 0.2 per cent fall.

Currency

One Australian dollar at 7:15 AM was buying 64.55 US cents.

Commodities

Gold lost 0.04 per cent. Silver fell 0.10 per cent. Copper dipped 0.70 per cent. Oil gained 0.24 per cent.

Figures around the globe

European markets closed mixed. London’s FTSE added 0.09 per cent, Frankfurt lost 0.40 per cent, and Paris closed 0.08 per cent higher.

Turning to Asian markets, Tokyo’s Nikkei fell 0.87 per cent lower, Hong Kong’s Hang Seng added 0.37 per cent while China’s Shanghai Composite closed 0.03 per cent lower.

The Australian sharemarket closed 0.47 per cent lower at 7,197.

Ex-dividends

Consolidated Ops Group (ASX:COG) is paying 4.7 cents fully franked
Flight Centre Travel (ASX:FLT) is paying 18 cents fully franked
Hearts and Minds (ASX:HM1) is paying 7 cents fully franked
Kelly Partners Group (ASX:KPG) is paying 0.4392 cents fully franked
Navigator Global Ltd (ASX:NGI) is paying 4.6577 cents unfranked

Dividends payable

Challenger Ltd (ASX:CGF)
Clinuvel Pharmaceuticals Ltd (ASX:CUV)
Codan Ltd (ASX:CDA)
Hansen Technologies Ltd (ASX:HSN)
Heartland Group Holdings Ltd (ASX:HGH)
Helia Group Ltd (ASX:HLI)
Link Administration Holdings Ltd (ASX:LNK)
Lynch Group Holdings Ltd (ASX:LGL)
MA Financial Group Ltd (ASX:MAF)
Resimac Group Ltd (ASX:RMC)
The Lottery Corp Ltd (ASX:TLC)
Veem Ltd (ASX:VEE)
Viva Energy Group Ltd (ASX:VEA)
Yancoal Australia Ltd (ASX:YAL)

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.
Disclaimer

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