Following news that consumer confidence in the greatest economy in the world dropped to a four-month low, the S&P 500 Index and the Nasdaq 100 both decreased by 1.5%. The Cboe Volatility Index, or VIX, a measure of anxiety on Wall Street, climbed to its highest level since late May. One of the broadest indices of global equities, the MSCI All Country World Index, had a decline for an eighth day, matching its longest losing streak in the previous ten years.
The chief global strategist for LPL Financial, Quincy Krosby, declared that the market is currently in the hands of bears. “There is a wall of anxiety and uncertainty over the market. The selloffs haven’t been very dramatic, in fact, they’ve been fairly orderly. But the ambiguity persists.
According to data, consumer confidence fell to 103 from a revised 108.7 in August and fell short of the median prediction of 105.5 in an economist survey conducted by Bloomberg. Separate surveys also revealed that over the summer, as purchasers competed for a limited number of listings, home prices in the US soared to a record high while purchases of new homes plummeted to a five-month low.
According to Costco Wholesale Corp.’s quarterly report, comparable sales mainly fell short of expert projections, indicating that consumers are reducing their discretionary spending.
According to Stephen Stanley, chief US economist at Santander, “consumer attitudes in recent months appear even more sensitive than usual to inflation generally and petrol prices specifically.” The average consumer spends a sizable part of their income on food and energy and is unwilling to disregard those prices, whereas the Fed is primarily focused on core.
After reaching decade-high levels on Monday, Treasury yields gradually increased once more. The highest rate since 2006 was awarded for a $48 billion Treasury auction of two-year notes, yielding 5.085%. The Bloomberg Dollar Index rose, closing at its best level since early December while reaching a new peak for 2023. Oil started to rise again, rising back above $90 per barrel.
The US stock indices were weighed down by the tech giants Apple Inc., Microsoft Corp., Amazon.com Inc., and Google parent Alphabet Inc., which caused the tech sector to decline by more than 10% from its peak in July. Some of the market’s biggest gains this year in the soaring IT stocks are being undone by the prospect of more regulations. The long-term potential of these growth enterprises are coveted, but when projected profits are discounted at greater rates.
The Fed has made it clear repeatedly in the past week through its speakers that if the economy performs better than anticipated, policy would remain tighter for longer. Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, said that the US Federal Reserve will need to increase interest rates once more this year.
According to Paul Nolte, senior wealth manager at Murphy & Sylvest Wealth Management, “investors are starting to realise that a ‘higher for longer’ interest rate environment is a likely outcome and are slowly adjusting to the ‘new normal’.” “Higher-for-longer has been the Fed’s catchphrase for a while. The markets have only just started to take them at their word.
JPMorgan Chase & Co. chairman and CEO Jamie Dimon suggested that, in the worst-case scenario, US interest rates may rise to 7%, which would be unexpected for both consumers and companies. Ahead of a potential US government shutdown, traders are still concentrated on a month-end deadline.