Wall Street closed with heavy losses at the beginning of a key week for the US economy

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The Federal Reserve will make an interest rate decision on Wednesday as earnings season for big publicly traded companies continues New York Values

Wall Street closed with heavy losses at the start of a key week for the US economy

Traders in the New York Stock Exchange (REUTERS/Andrew Kelly)

Stocks fell on Wall Street on Monday, ahead of a week full of events that could influence the market, from interest rate decisions around the world to equity earnings reports. the largest US companies.

The S&P 500 fell 1.3%, giving up some of its gains from last week, when it reached its highest level since early December. The Dow Jones Industrial Average lost 0.7 percent and the Nasdaq composite lost 2 percent.

Markets have been sidetracked of late on concerns that the economy and corporate earnings may be about to take a sharp slump, along with hopes that inflation cools. b>have the Federal Reserve ease interest rates.

Wall Street closed with heavy losses at the start of a key week for the US economy

Traders work on the floor of the New York Stock Exchange (REUTERS/Andrew Kelly)

The central bank's next rate decision will be Wednesday, and most Investors expect it to announce a rise of only 0.25 percentage points. It would be the smallest increase since March, after a run of increases of 0.75 points and then 0.50 points, and would mean less added pressure on the economy.

Higher rates combat inflation by intentionally slowing down the economy, while dragging down investment prices. Inflation has been cooling since the summer amid last year's blizzard of rate hikes, but the economy has also shown signals of concern.

The big question is whether Fed Chairman Jerome Powell will give markets what they want to hear on Wednesday afternoon – hints that rate hikes will end soon and there might even be rate cuts by the end of the day. this year – or stick to the Fed's mantra that it plans to keep rates higher for longer, even if there is a modest recession.

“I think they have no intention of cutting rates this year,” says Sam Stovall, chief investment strategist at CFRA Research, adding that the Fed waits an average of about nine months after its last rate hike before cutting rates.

“They will reiterate that they don't want to make the mistakes of the 1970s,” he said, “but I think in the back of their minds, they are going to say that no matter what inflation indicator you look at, they all head in a staggered descending pattern.”

The central banks of Europe and the United Kingdom will also announce their latest rate hikes this week.

Wall Street closed with strong losses; losses at the start of a key week for the US economy

FILE PHOTO: The entrance of Wall Street to the New York Stock Exchange (REUTERS/Brendan McDermid)

Beyond interest rates, More than 100 S&P 500 companies are scheduled to report their earnings in the last three months of 2022 this week. Among them are tech heavyweights Apple, Amazon and parent Google. Since these companies are three of the four largest on Wall Street by market value, their stock movements have much more influence on the S&P 500 than others.

The only other stock to rival them for size, Microsoft, rocked Wall Street last week when it gave upcoming earnings forecasts that raised concerns about a slowdown in business spending on technology. Its shares fell 2.2% on Monday.

Companies appear to be on track to post slightly lower-than-expected earnings by the end of 2022, according to a report by BofA Global Research. That's an indication that the strong January enjoyed by the S&P 500 so far is due more to improving sentiment on Wall Street than to better fundamentals, wrote strategist Savita Subramanian.

Morgan Stanley strategists, led by Michael Wilson, warn that more difficult times may lie ahead.

“The reality is that the benefits are turning out even worse than feared based on the data, especially when it comes to margins,” they wrote in a report. “Second, investors seem to have forgotten the cardinal rule of 'Don't fight the Fed.' Maybe this week will serve as a reminder.”

Later this week, the US government will also release its latest monthly job market update. Hiring has remained remarkably resilient across the economy, even as housing and other corners weaken sharply under the weight of all the Fed rate hikes in the past year.

Some big tech companies have announced high-level layoffs after acknowledging they misread their post-pandemic boom. But the job cuts may be starting to spill over into other areas of the economy. Hasbro and 3M announced layoffs last week.

Overall, economists expect Friday's report to show that US employers added 187,500 jobs more than expected. which they cut in January. This would mean a slowdown from 223,000 December signings.

The yield on the 10-year Treasury rose to 3. 54% from 3.51% on Friday. The two-year yield, which tends to move more based on expectations for Fed actions, rose to 4.25% from 4.20%.

(With information from AP)

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