US stocks dropped on Tuesday as investors turned their attention to the start of the Federal Reserve’s two-day policy meeting.
Traders are pricing in a 99% chance the Fed will choose to keep interest rates level this month, per the CME FedWatch tool, up from 92% odds last week.
Investors are also expecting a significant chance of another rate hike before year-end. Markets have priced in a 29% chance that Fed officials could hike rates 25 basis-points in November, and a 40% chance that the Fed’s benchmark rate will end the year above the current range of 5.25%-5.50%
“In recent weeks, the market narrative has shifted from optimism that inflation ahs been dealt with, to fears of an inflation reacceleration driven by robust consumer data and recovering oil prices,” Jupiter Asset Management head of fixed income Matthew Morgan said in a statement on Tuesday. “Consumer resilience has been surprising, and this period of volatility and uncertainty could be with us for some time.”
Prices reaccelerated 3.7% in August, slightly above the expected rate of 3.6%. The Fed will announce its next rate move at the conclusion of the Federal Open Markets Committee meeting on Wednesday at 2 p.m.
Traders are also nervously eyeing the price of oil, which continues to rise toward $100 a barrel. International oil prices pushed past $95 a barrel on Tuesday, with fears growing that further increases could disrupt the economic soft landing that many observers say has become more likely.
Here’s where US indexes stood shortly after the 9:30 a.m. opening bell on Tuesday:
Here’s what else is going on today:
In commodities, bonds, and crypto:
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