But it is not the only potential catalyst for another market sell-off, as uncertainty remains prevalent.
See here: Shares of FedEx are nearly 20% lower in premarket trading on Friday after the company said it was withdrawing financial guidance it issued months ago and cutting costs as demand for packages worldwide slumped. The company is seen as a driver of the economy because of its vision for multi-industry shipping.
1. The US Federal Reserve will meet next week. Persistent inflation, recession fears and slowing economic growth have rattled markets around the world. Now as major central banks implement aggressive rounds of tightening monetary policy to combat inflation, investors fear they may go too far.
On Wednesday, the US Federal Reserve will announce its next rate hike decision. Faced with a tight labor market and high inflation, Fed Chairman Jerome Powell delivered a grim message to investors — saying the central bank is likely to raise interest rates by another 75 basis points for the third time in a row.
If the Fed continues to be aggressive at the expense of economic growth, we can expect months of cooling employment figures, 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 crash.
2. Earnings season is coming. Another risk on Wall Street is softer corporate earnings in October.
Analysts at Charles Schwab forecast weaker earnings growth for 2022 compared to last year.
Global flows of goods, including critical supplies of fossil fuels, food and fertilizers, continue to be disrupted regardless of which side wins the battle. A new report by S&P Global Ratings estimates that war-related global energy and food shocks will continue until at least 2024. These shocks will continue to weigh on GDP and fiscal performance.
US mortgage rates have jumped to a 14-year high
US mortgage rates rose above 6% this week, reaching their highest level since the fall of 2008.
Very high inflation is responsible for rising rates, said Freddie Mac Chief Economist Sam Khater.
Rates fell 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 to the central bank’s fight against inflation by raising rates.
There is a silver lining for those who want to buy. As mortgage rates rise and home prices remain high, home sales slow. Prices may also drop soon.
With borrowing costs expected to continue to rise in the coming months, it is becoming increasingly clear that house prices must fall to bring housing markets back into balance.
“Many sellers are recognizing the change in market conditions and are responding by lowering their asking prices,” said George Ratiu, manager of economic research at Realtor.com. “These changes are consistent with when buyers have historically found the best market conditions to find a bargain.”
China and Russia’s economic relations are growing
Chinese leader Xi Jinping and his Russian counterpart Vladimir Putin met face-to-face on Thursday after Moscow sent troops to Ukraine earlier this year. Investors watched the meeting closely for clues about the state of their financial relationship.
At the meeting, Putin highlighted the deepening of economic relations between the two nations, and pointed out that bilateral trade exceeded 140,000 billion dollars last year. “I am sure that we will reach new records by the end of the year, and in the near future,” he said.
Beijing has carefully avoided violating Western sanctions or providing direct military aid to Moscow, but Chinese companies are taking advantage of the exodus of Western brands from Russia.
A first look at the University of Michigan consumer sentiment survey for September is released at 10:00 a.m.
It’s coming up next week: it’s the week when central banks hit it big with the Federal Reserve and the Bank of England to announce their latest policy decisions.
Correction: An earlier version of this story incorrectly attributed the quote to sellers recognizing a change in market conditions. George Ratiu, manager of economic research at Realtor.com, should be credited.