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Wall Street Rebounds Off 2018 Lows as Focus Remains on the Fed Early Gains on Wall Street Fade as Crude Oil Slides
(35 minutes later)
HONG KONG — The panic that has gripped Wall Street abated on Tuesday, with stocks rising in early trading after a decline that had left the market at its lowest point in more than a year. The rebound was tempered somewhat by a slide in crude oil and energy stocks. Volatility returned to Wall Street on Tuesday as early gains faded after a slide in crude oil left energy stocks sharply lower.
Investors are focused on a meeting of Federal Reserve policymakers that begins Tuesday, amid concerns that the global economy is weakening, and corporate profit growth could slow. The Fed is still widely seen raising interest rates by a quarter point at the end of that meeting, on Wednesday, but expectations are growing that the central bank will also signal that it is aware that deteriorating conditions in financial markets could reflect real risks for the economy. Investors are jittery as the Federal Reserve’s policymakers begin a two-day meeting amid concerns that the global economy is weakening and corporate profit growth could slow. The Fed is still widely seen raising interest rates by a quarter point at the end of that meeting, on Wednesday, but expectations are growing that the central bank will also signal that it is aware that deteriorating conditions in financial markets could reflect real risks for the economy.
Markets have been highly reactive to any indication that the Fed’s plans are changing. When the Fed chairman, Jerome H. Powell, seemed to suggest in early October that the central bank was intent on raising interest rates, stocks plunged. Weeks later, when he made comments that were taken as an indication that the rate increases were near an end, they rose sharply.Markets have been highly reactive to any indication that the Fed’s plans are changing. When the Fed chairman, Jerome H. Powell, seemed to suggest in early October that the central bank was intent on raising interest rates, stocks plunged. Weeks later, when he made comments that were taken as an indication that the rate increases were near an end, they rose sharply.
Early Tuesday, President Trump repeated his plea with the Fed not to raise rates. Pointing to an editorial in The Wall Street Journal that argues against a final rate hike for 2018, Mr. Trump urged on Twitter that Fed officials avoid “yet another mistake.” Early Tuesday, President Trump repeated his plea with the Fed not to raise rates. Pointing to an editorial in The Wall Street Journal that argues against a final rate increase for 2018, Mr. Trump urged on Twitter that Fed officials should avoid “yet another mistake.”
Since stocks reached a high in late September, they’ve been brought lower by a range of concerns, from signs that the trade war between China and the United States is beginning to weigh on global growth to worries that higher interest rates will eat into corporate profits. The result has been a drop not only in stocks, but also risky corporate bonds and commodities. On Monday, the S&P 500-stock index fell more than 2 percent, bringing its losses for the year so far to nearly 5 percent. Since stocks reached a high in late September, they’ve been brought lower by a range of concerns, from signs that the trade war between China and the United States is beginning to weigh on global growth to worries that higher interest rates will eat into corporate profits. The result has been a drop not only in stocks, but also risky corporate bonds and commodities. On Monday, the S&P 500 fell more than 2 percent, bringing its losses for the year so far to nearly 5 percent.
[Read more about how investors have nowhere to go as stocks, bonds and commodities all tumble.][Read more about how investors have nowhere to go as stocks, bonds and commodities all tumble.]
Alan Greenspan, the former Fed chairman, weighed in on the recent turmoil in stocks, predicting that it marks the end of a nearly decade-long bull market. Alan Greenspan, the former Fed chairman, weighed in on the recent turmoil in stocks, predicting that it signals the end of a nearly decade-long bull market.
“It would be very surprising to see it sort of stabilize here and then take off again,” he said in an interview with CNN. Mr. Greenspan blamed the rise in long-term interest rates for the decline. From a low of 1.36 percent in mid-2016, the yield on the 10-year Treasury note — a key benchmark for interest rates — climbed above 3 percent in early October. The recent spate of market volatility has sent it down again however. It is currently around 2.85 percent.“It would be very surprising to see it sort of stabilize here and then take off again,” he said in an interview with CNN. Mr. Greenspan blamed the rise in long-term interest rates for the decline. From a low of 1.36 percent in mid-2016, the yield on the 10-year Treasury note — a key benchmark for interest rates — climbed above 3 percent in early October. The recent spate of market volatility has sent it down again however. It is currently around 2.85 percent.
Crude oil continued its decline Tuesday, with benchmark futures in the United States falling below $47 a barrel. Energy stocks were sharply lower as a result. Crude oil continued its decline Tuesday, with benchmark futures in the United States fell below $46 a barrel, and energy stocks were among the day’s worst performers. Exxon Mobil, for example, was down more than 3 percent.
Investors in energy markets are not just worried about economic growth. They are also concerned about a supply glut amid rising output in the United States and countries like Libya and Venezuela. OPEC has agreed to cut production by 1.2 million barrels per day, but those cuts won’t take effect until next year. Investors in energy markets are not just worried about economic growth. They are also concerned about a supply glut amid rising output in the United States and countries like Libya and Venezuela. OPEC has agreed to cut production by 1.2 million barrels per day, but those cuts will not take effect until next year.
[Read more about the factors affecting crude oil prices.][Read more about the factors affecting crude oil prices.]
Stocks in Europe were lower, while shares in Asia fell further after a speech on reform from China’s top leader sent markets down on Tuesday.Stocks in Europe were lower, while shares in Asia fell further after a speech on reform from China’s top leader sent markets down on Tuesday.
The speech by President Xi Jinping quoted Communist Party theory, failed to mention the U.S.-China trade war and offered little insight into Beijing’s plans. Though Chinese officials do not usually use such high-profile events as a forum for announcing new initiatives, many investors had been hoping that Mr. Xi might introduce new efforts to prop up China’s slowing growth or defuse trade tensions with President Trump. The speech by President Xi Jinping quoted Communist Party theory, failed to mention the trade war and offered little insight into Beijing’s plans. Though Chinese officials do not usually use such events as a forum for announcing new initiatives, many investors had been hoping that Mr. Xi might introduce new efforts to prop up China’s slowing growth or defuse trade tensions with Mr. Trump.
“The main question for Chinese markets at the moment is to what extent the government will stimulate the economy and whether there will be a trade deal with the U.S.,” said Tom Rafferty, China regional manager at The Economist Intelligence Unit. “The main question for Chinese markets at the moment is to what extent the government will stimulate the economy and whether there will be a trade deal with the U.S.,” said Tom Rafferty, China regional manager at the Economist Intelligence Unit.
“On both those fronts, Xi’s speech offered little in terms of specifics, and we remain highly skeptical that a deal with the U.S. will be done,” Mr. Rafferty said.“On both those fronts, Xi’s speech offered little in terms of specifics, and we remain highly skeptical that a deal with the U.S. will be done,” Mr. Rafferty said.
In Europe major exchanges were down less than 1 percent.In Europe major exchanges were down less than 1 percent.
Japanese stocks led the decline in Asia, with the Nikkei 225 index falling 1.8 percent. Hong Kong’s Hang Seng Index fell 1.1 percent.Japanese stocks led the decline in Asia, with the Nikkei 225 index falling 1.8 percent. Hong Kong’s Hang Seng Index fell 1.1 percent.