Us stocks opened lower on September 26, with the three major indexes falling more than 1%, as the latest reports on home sales and consumer confidence raised concerns about the state of the US economy.
Big tech stocks suffered across the board, with Amazon down more than 4 percent, Apple down more than 2 percent, and Google A and Microsoft down nearly 2 percent. Citigroup strategists said investors are selling the tech-heavy Nasdaq 100 index and taking short positions in the futures market.
Fed Nemesis Kashkari said Tuesday, "I think there's a 40% chance that the Fed will have to raise interest rates significantly to keep inflation in check."
Jpmorgan Chase CEO Jamie Dimon warned on Tuesday that the worst case scenario for the Federal Reserve's benchmark interest rate would be a rise to 7 percent and stagflation.
The three major US stock indexes all fell more than 1% Fed officials: 40% probability will sharply raise interest rates
On September 26, local time, the US stock market opened lower, and the three major stock indexes fell by more than 1%. By the close, the Dow was down 1.14% at 33,618.88; The S&P 500 fell 1.47% to 4,273.53. The Nasdaq fell 1.57 percent to 13,063.61 points.
"I think there is a 40 per cent chance that the Fed will have to raise interest rates significantly to keep inflation in check," Mr Kashkari said on Tuesday.
Kashkari posits two scenarios for the future path. The first is the case for a soft landing. After one more rate hike later this year, the FOMC will keep policy on hold long enough to bring inflation back to target over a reasonable period of time. Mr Kashkari estimates that the probability of this outcome is now set at 60 per cent, given real progress in reducing inflation and the performance of the Labour market. In the second scenario, underlying inflation turns out to be more stubborn than expected, and the aforementioned policies can only steer the economy smoothly toward 3% inflation. In that scenario, the Fed would have to raise interest rates further, possibly significantly, to push inflation back toward its 2% target. The good news, says Kashkari, is that there is no need for immediate judgment. The progress of inflation can be observed over the next few months to determine which scenario dominates.
Jpmorgan Chase Chief Executive Jamie Dimon warned on Tuesday that the worst case scenario for the Federal Reserve's benchmark interest rate would be a rise to 7 percent and stagflation. Dimon thinks 200 basis points from 5% to 7% would be more painful than 3% to 5%, and he's not sure the world is ready for 7%.
U.S. consumer confidence fell again in September
The US consumer confidence index fell to 103 in September, below expectations and the previous reading. The present situation index, based on consumers' assessment of current business and labor market conditions, rose slightly to 147.1 from 146.7. The U.S. Consumer Expectations index came in at 73.7 in September, with expectations falling back below 80, a level historically indicative of a recession next year. Consumer fears of an impending recession also intensified again, consistent with a brief economic contraction expected in the first half of 2024.
The U.S. consumer confidence index fell to 103.0 in September, falling for a second straight month on concerns about rising prices and the political environment. Dana Peterson, chief economist at the Conference Board, said written feedback shows consumers continue to be concerned about price increases in general, particularly for groceries and gasoline. Consumers also expressed concerns about the political situation and high interest rates. The decline in consumer confidence was evident across all age groups, but particularly among consumers with household incomes above $50,000.
Peterson added that expectations for the next six months fell back below the recession threshold of 80, reflecting lower confidence in future business conditions, job opportunities and incomes. Consumers may be hearing more bad news about corporate earnings, while job openings are shrinking and interest rates continue to rise, which makes big-ticket items more expensive. Expectations for interest rates fell after surging in the previous month of September, but the outlook for stock prices continued to fall. Notably, despite persistent complaints about rising prices, average 12-month inflation expectations have remained stable over the past three months. Nonetheless, the expected household financial situation six months from now (not included in the expectations index) has deteriorated further.
Big tech stocks hit Citi: Short positions increase in Nasdaq futures
On the sector front, all 11 major S&P 500 sectors fell. The utilities and consumer discretionary sectors led the declines with losses of 3.05 percent and 2.03 percent, respectively, while the energy sector fell the least at 0.50 percent.
Large tech stocks suffered across the board, with Amazon down more than 4%, Apple down more than 2%, Google A, Microsoft down nearly 2%, Tesla, Intel, Netflix down more than 1%, Nvidia, Facebook parent Meta slightly down.
According to CCTV news, on September 26 local time, the US Federal Trade Commission and 17 state attorneys general filed a comprehensive antitrust lawsuit against Amazon, aiming to stop the company from abusing its power to raise commodity prices, as well as prevent Amazon from imposing high fees on businesses selling goods on the platform.
In the lawsuit, the FTC accused Amazon of engaging in illegal practices across its online shopping platform and numerous services it offers to third-party sellers, enabling the company to extract "monopoly rents" from everyone in its sphere of influence.
It is reported that Amazon can improve the ranking of its own products in the product search results of its shopping platform, without considering other higher quality products. Amazon also charges high fees to sellers who rely on the platform to stay in business.
Citigroup strategists said investors are selling the tech-heavy Nasdaq 100 index and taking short positions in the futures market. The team led by Chris Montagu wrote in a note that the net short position in the Nasdaq 100 is now $8.1 billion, with all long positions closed. At the same time, S&P 500 futures have a small net short position, but still have $15 billion of long positions open. The short selling of tech stocks reflects growing concern that the Fed's interest rates will stay high for longer.
According to media reports, as Wall Street suffered a cross-asset sell-off last week, hedge funds increased their short bets on stocks, and a measure of hedge fund market positioning recorded its biggest decline since the March 2020 stock market crash.
According to Goldman's prime broker, fast-money investors increased their bearish positions, pushing their net leverage - a measure of risk appetite for long versus short positions - down 4.2 per cent to 50.1 per cent, the biggest weekly drop in portfolio leverage since the deep bear market in the early days of the coronavirus pandemic.
At the same time, short selling by hedge funds tracked by jpmorgan increased, while Morgan Stanley's clients cut their net leverage at a pace not seen since October.
Goldman Sachs data also showed that net selling by hedge funds last week reached its highest level since January 2022. At Morgan Stanley, clients are shorting expensive tech stocks, consumer retail stocks and artificial intelligence beneficiaries.
Lower net leverage means the so-called smart money has become less bullish on stocks. Another measure of hedge fund risk appetite is total leverage, which is the sum of long and short positions. When shorts increase, this indicator can move in the opposite direction of the net leverage trend, which is the case now. The rise in total leverage driven by shorts means that hedge funds are increasingly inclined to short stocks, and their conviction to do so is very strong.
Popular Chinese stocks were mostly lower, with the NASDAQ China Golden Dragon Index down 0.85%. Shell fell more than 3%, Pinjoduo, Xiaopeng Automobile fell nearly 3%, Jingdong fell 2.52%, ideal car, Alibaba and other fell more than 1%, Baidu, NetEase and other small declines; Huya rose 12%, good future rose more than 7%, New Oriental rose 2.51%, and Weilai rose slightly.
Us auto workers strike continues, Biden supports 40% pay raise, Musk warns Big Three will soon go bankrupt
According to multiple media reports, on September 26, the United Auto Workers Union entered the 12th day of the strike against the three major automakers in Detroit, and the strike wave further expanded.
United Auto Workers President Sean Fine said earlier that the current union and the three major automakers Ford negotiations have made some progress, or will reach an agreement; But talks with GM and Stylantes stalled, and the union decided to do more.
The United Auto Workers union has expanded its strike to include thousands more workers and 38 parts and distribution centers for General Motors and Stylantes in 20 states.
During a visit to a General Motors plant on the outskirts of Detroit on Tuesday, U.S. President Joe Biden voiced support for the United Auto Workers union's demand for substantial pay increases. 'Workers made a lot of sacrifices to save the auto industry back in 2008 and before, when the auto companies were in trouble,' he said. 'They're doing well now, so workers should be doing well and earning a lot more than they're getting now.'
Biden told striking workers to "hang in there," you're entitled to a big raise and other benefits. The UAW had already reduced its demand to 36 percent in collective bargaining. Asked on Tuesday if he agreed with the UAW's push for a 40 percent wage increase at auto companies, Biden said "yes."
Tesla CEO Elon Musk has since warned that the Big Three automakers will soon face bankruptcy if they meet the UAW's demands.
In a post on X, Musk said a 40 percent pay raise and a 32-hour work week would "undoubtedly put GM, Ford and Chrysler on the fast track to bankruptcy."