NEW YORK — Wall Street opened lower on Tuesday as investors braced for a crucial week of inflation reports and the Federal Reserve’s upcoming interest rate policy decision. The Dow Jones Industrial Average fell 245 points, while the Nasdaq slipped by 0.1%. The S&P 500 also shed 0.4% early in the session.
The market’s cautious sentiment was influenced by the weaker-than-expected forecast from Fifth Third Bancorp, which saw its shares decline by 1.8%. The bank’s forecast raised concerns among investors, contributing to the broader market decline.
This week, all eyes are on the Federal Reserve’s announcement on interest rates, scheduled for Wednesday. Most analysts and traders expect the central bank to maintain current rates. However, the Fed’s updated economic projections and its stance on future interest rates will be closely scrutinized. The yield on the 10-year Treasury note fell slightly to 4.45% in anticipation of the Fed’s decision.
In premarket trading, futures for the S&P 500 dropped 0.3%, and futures for the Dow Jones Industrial Average fell by 0.4%. Despite the overall market downturn, Eli Lilly saw a positive shift, with its shares rising 2.2% after receiving favorable backing from federal health officials for its Alzheimer’s drug, donanemab. The Food and Drug Administration’s advisory committee voted unanimously that the drug’s benefits outweigh its risks, paving the way for potential full approval later this year.
General Motors also saw a boost, with its shares rising by 1% after the automaker announced a $6 billion stock buyback plan. This move provided a slight lift to its stock, which is up more than 32% for the year.
Treasury yields showed some movement ahead of the week’s inflation reports. The 10-year Treasury yield decreased slightly to 4.45%, and the two-year yield, which reflects market expectations for Fed policy, fell to 4.89%. Traders are eagerly awaiting data that will reveal whether inflation improved last month at both consumer and wholesale levels.
When the Federal Reserve last released its projections in March, it indicated that many policymakers expected roughly three rate cuts in 2024. However, expectations have since shifted, with traders now betting on one or two rate cuts based on current economic conditions, according to CME Group data. Recent economic indicators have been mixed, with some signs of cooling in the economy that might influence the Fed’s future decisions.
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In Europe, the markets were also under pressure. The FTSE 100 in Britain dropped 1% after government data revealed a cooling job market. The unemployment rate for February to April increased to 4.4%, marking its highest level since September 2021. The CAC 40 in Paris slid 1.2%, while Germany’s DAX decreased by 0.8%.
Asian markets showed varied results. Tokyo’s Nikkei 225 index gained 0.3% to 39,134.79 as investors awaited the outcome of the Bank of Japan’s meeting. The central bank had previously raised its benchmark interest rate in March for the first time in 17 years. Analysts anticipate additional rate hikes by the end of the year, with some expecting further increases as soon as July.
Hong Kong’s Hang Seng index fell 1% to 18,176.34, and the Shanghai Composite lost 0.8% to 3,028.05 after reopening from a public holiday. Investors in China are awaiting an inflation report due out Wednesday. In Australia, the S&P/ASX 200 slipped 1.3% to 7,755.40, while South Korea’s Kospi managed a modest gain of 0.2% to 2,705.32.
In commodities, US benchmark crude oil prices fell by 12 cents to $77.62 per barrel, reflecting a 12.8% decrease since early April. The decline in oil prices has provided some relief at the gas pump as the summer travel season progresses. Brent crude, the international benchmark, decreased by 11 cents to $81.52 per barrel.
The US dollar inched up to 157.07 Japanese yen from 157.04 yen, while the euro fell to $1.0734 from $1.0766.
On Monday, the S&P 500 had set a new record, rising 0.3% to 5,360.79, while the Nasdaq Composite also achieved a record high with a 0.3% increase to 17,192.53. The Dow Jones Industrial Average rose 0.2% to 38,868.04, marking a mixed end to a generally positive trend.
As investors await more data and the Fed’s decision, market volatility is expected to continue, with significant attention focused on economic indicators and central bank policy adjustments.
