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Wall Street turns to defensive mode on Fed’s reiteration of rate hike path


US stocks were under pressure as Fed officials reaffirmed the rate hike path after the stronger-than-expected retail sales data. The San Francisco Fed President Mary Daly expects the central bank will raise the fund’s rate by at least one more per cent before it pauses. Also, Target’s disappointing earnings sent retailers’ stocks down and weighed on S&P 500. However, the US bond yields slipped despite Fed’s comments, sending the US dollar index weakening further against the Eurodollar and the British Pound. Elsewhere, the UK October CPI hits a 41-year high of 11.1%, with energy prices being the biggest contributor, continuing to pull off the alarm of a possible economic recession in the country.

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  • Defensive stocks outperformed the S&P 500, suggesting investors sought safety. 9 out of 11 sectors in the S&P 500 finished lower, with Energy stocks leading losses, down more than 2%, due to a drop in oil prices, while growth stocks sectors were under pressure with most of the mega-cap companies’ shares finishing lower.
  • Nvidia shares rose 2.3% in after-hours trading due to a beat on the third-quarter revenue expectation. The chip maker faced global headwinds and the bottleneck of the PC demands. Its earnings per share came to $0.58 versus the $0.71 estimated, and the revenue is at $5.93 billion versus the $5.77 billion expected. The company sees a higher growth in revenue in the fourth quarter of between $6 billion plus or minus 2%. 
  • Target shares plunged 12% after the third-quarter earnings reports showed a 50% decline in profit, along with weak guidance for the fourth quarter. The retailer’s earnings per share came to $1.54 versus the $2.13 estimated, and revenue is at $26.52 billion versus the $26.38 expected. The company also said to cut expenses by up to $3 billion in the next three years.
  • NATO said there was no indication of an intentional Russian attack on Poland, which was likely caused by Ukrainian air defence missile but added: “Russia bears ultimate responsibility”, sending some relief to geopolitical tensions. 
  • The Eurodollar climbed to a four-month high on ECB’s vows to tame inflation. The ECB Vice President Luis de Guindos said the central bank will commit to bringing consumer prices down to the target rate of 2%, though he indicated it needs to be “cautious” regarding quantitative tightening, suggesting the central bank will not start reducing its 8.8 trillion euro balance sheet any time soon.
  • Asian equity markets are set to open lower. ASX futures were down 0.11%, Nikkei 225 futures fell 0.39% and Hang Seng Index futures slid 0.95%.
  • Crude oil fell after NATO cleared Russia’s missile attack on Poland, while demand concerns back to trader’s focus amid ongoing China’s covid curbs and gloomy global economic outlooks, despite the larger-than-expected draw of the US crude inventory data. 

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