But it is not the only potential catalyst for another market sell-off, as uncertainty continues to dominate.
Look here: Shares of FedEx were down nearly 20% in premarket trading on Friday after the company withdrew financial guidance it issued just a few months ago and said it would cut costs as demand for packages fell across the world. world. The company is seen as a benchmark in the economy, as it has knowledge of shipping in a wide range of industries.
1. The United States Federal Reserve meets next week. Persistent inflation, recession fears and slowing economic growth have rattled markets around the world. As major central banks institute aggressive rounds of monetary policy tightening to combat inflation, investors fear they may go too far.
On Wednesday, the US Federal Reserve will announce its decision on its next round of rate hikes. Fed Chairman Jerome Powell, faced with a tight labor market and high inflation, sent an aggressive message to investors, indicating that the central bank is likely to raise interest rates by another 75 basis points for the third time in a row.
If the Fed remains aggressive at the expense of economic growth, we can expect months of cooling jobs numbers, especially wage data, and widening credit spreads that make it more expensive for businesses to borrow.
That means higher bond yields, lower stock prices and less chance of a soft landing.
2. Earnings season is coming up. Another risk for Wall Street is weaker corporate earnings in October.
Analysts at Charles Schwab forecast weaker earnings growth through 2022 compared to last year.
Global commodity flows, including critical supplies of fossil fuels, food, and fertilizer, continue to be hampered, regardless of which side is winning the battle. A new report from S&P Global Ratings estimates that war-related global food and energy crises will last until at least 2024. Those crises will continue to weigh on GDP and fiscal performance.
US mortgage rates jump to highest level in 14 years
Mortgage rates in the US topped 6% this week, reaching their highest level since the fall of 2008.
Stubbornly high inflation is responsible for driving up rates, said Sam Khater, chief economist at Freddie Mac.
Rates had fallen in July and early August as recession fears took hold. But comments from Federal Reserve Chairman Jerome Powell and recent economic data have drawn investors’ attention back to the central bank’s fight against inflation, driving rates higher.
There is a silver lining for those looking to buy. As mortgage rates rise and home prices remain high, home sales are slowing. Prices could also fall soon.
With borrowing costs expected to continue rising in the coming months, it is becoming increasingly clear that home prices must decline to restore balance to housing markets.
“Many sellers are recognizing the change in market conditions and are responding by cutting their sales prices,” said Joel Kan, associate vice president of the Mortgage Bankers Association. “These changes coincide with the time of year when buyers have historically found the best market conditions to find a bargain.”
The growing economic ties between China and Russia
Chinese leader Xi Jinping and his Russian counterpart Vladimir Putin met face-to-face on Thursday for the first time since Moscow sent troops to Ukraine earlier this year. Investors closely watched the meeting for clues about the state of their economic relationship.
Putin emphasized the deepening of the two nations’ economic ties at their meeting, noting that bilateral trade exceeded 140 billion US dollars last year. “I am convinced that by the end of the year we will reach new record levels, and in the near future,” he said.
Beijing has carefully avoided violating Western sanctions or providing direct military support to Moscow, but Chinese companies are taking advantage of the exodus of Western brands from Russia.
Until next time
A first look at the University of Michigan consumer confidence survey for September is released at 10 am ET.
Next week: It’s a blockbuster week for central banks with the Federal Reserve and Bank of England revealing their latest policy decisions.