Asian stocks traded mixed on Tuesday, as investors awaited the outcome of the Federal Reserve’s policy meeting that could signal the future path of interest rates. The Dow Jones Industrial Average and the S&P 500 closed slightly lower on Monday, while the Nasdaq Composite dropped more than 1.5% amid a sell-off in technology shares.
The Fed is widely expected to keep rates unchanged this week, but traders will be focused on the so-called dot plot summary of economic projections. The two main questions are whether policymakers will retain their projections for one more 25 basis-point hike by year-end and how much easing they are penciling in for 2024. In June, they projected 1 percentage point of cuts.
Some analysts believe the Fed will take a “hawkish pause” this week and the futures market will reprice a higher probability for another rate hike before year end. Others think the Fed will continue to sound hawkish, with one remaining hike still penciled in for 2023 and the prospect of very slow easing.
The Fed’s revised forecasts for where the policy rate will ultimately come to rest and how long it’s likely to stay at that level will be equally important. Swap contracts that forecast rates over the next two years now peak around 4.5% in March 2023 – a full point higher than was expected after the last meeting in July.
Oil Prices Retreat After Hitting $95 a Barrel
Oil prices retreated on Tuesday, after hitting a near four-year high of $95 a barrel on Monday, as concerns over global supply disruptions eased. Brent crude, the global benchmark, fell 0.8% to $93.65 a barrel, while West Texas Intermediate, the US marker, dropped 0.9% to $90.32 a barrel.
Oil prices surged on Monday, as traders digested the impact of Hurricane Florence on US oil production and refining, as well as the looming US sanctions on Iran’s oil exports. The US Energy Information Administration estimated that Florence shut down about 9% of US crude output and 13% of refining capacity in the Gulf Coast region.
However, some analysts said the rally was overdone, as the storm damage was less severe than feared and US oil inventories were still ample. They also pointed out that other major oil producers, such as Saudi Arabia and Russia, could ramp up their output to offset any shortfall from Iran.
The oil market is expected to remain volatile in the coming weeks, as geopolitical tensions and supply-demand imbalances continue to influence prices. The Organization of the Petroleum Exporting Countries and its allies are scheduled to meet on September 23 in Algiers to review their production policy and assess the market situation.
Apple and Tesla Lead Tech Rebound After Monday’s Slump
Apple Inc. and Tesla Inc. led a rebound in technology shares on Tuesday, after both companies suffered heavy losses on Monday amid a broader market sell-off. Apple rose 1.2% to $223.84, while Tesla gained 2.4% to $294.14, as of 11:15 a.m. ET.
Apple was hit by a report from Goldman Sachs Group Inc. that lowered its earnings estimates for the iPhone maker, citing weaker demand for its new models and higher prices. The report also cut its price target for Apple from $240 to $235, implying a modest upside from its current level.
Tesla was dragged down by a tweet from its founder and CEO Elon Musk, who said he was deleting his titles at the electric-vehicle maker and would go by “the Nothing of Tesla.” Musk also said he had removed all his titles from his other company, SpaceX. The tweet raised questions about Musk’s state of mind and his leadership at Tesla, which is facing multiple challenges, including production bottlenecks, legal battles and regulatory scrutiny.
However, some analysts said the sell-off in both stocks was overdone, as they still had strong fundamentals and growth prospects. They also noted that both companies had loyal customer bases and innovative products that could give them an edge over their competitors.
Apple and Tesla are among the most widely followed stocks in the market, as they represent two of the most influential sectors in the economy: technology and transportation. Their performance could have a significant impact on the overall market sentiment and direction.