Sept. 28 financial breakfast: dollar takes a breather, rate hike worries weaken risk appetite, oil prices benefit from Gulf of Mexico supply constraints

By    28 Sep,2022

The dollar index traded near 114.19. The dollar made little progress in oscillating trade Tuesday, pulling back intraday from its strongest level in 20 years, although appetite for riskier assets remained weak amid talk of further rate hikes by Fed policymakers, and gold prices rebounded from a two-and-a-half-year low, but the risk of a looming rate hike remained; oil prices recovered more than 2 percent from a nine-month low, benefiting from from a nine-month low, benefiting from constrained supplies in the U.S. Gulf of Mexico ahead of Hurricane Ian.


Commodity Closing Conditions: Brent crude oil rose 2.6 percent to settle at $86.27 per barrel. U.S. crude oil rose 2 percent to settle at $78.50. U.S. gold futures rose 0.2 percent to settle at $1,636.20.

U.S. stocks closed: The Dow Jones Industrial Average fell 0.43 percent to close at 29,134.99; the S&P 500 fell 0.21 percent to 3,647.29; and the Nasdaq climbed 0.25 percent to 10,829.50.

Wednesday's Outlook

7:50 BOJ releases minutes of its monetary policy meeting, 15:15 ECB President Lagarde speaks.

Global Markets at a Glance

U.S. stocks sank deeper into a bear market on Tuesday, with the S&P 500 hitting its lowest closing level in nearly two years, as Federal Reserve policymakers showed a willingness to raise interest rates further, even at the risk of plunging the economy into recession.

The index S&P 500 has fallen about 24 percent since hitting a record high on Jan. 3. Last week, the index gave back the only remaining gains from its summer rally, touching its lowest closing level since November 2020, after the Federal Reserve hinted that high interest rates could be maintained in 2023. The S&P 500 has fallen for six straight sessions, the longest-lasting round of declines since February 2020.

U.S. St. Louis Fed President Bullard made the case for more rate hikes in a speech Tuesday, and Federal Reserve Bank of Chicago President Evans said the Fed needs to raise rates by at least another 100 basis points this year. Robert Pavlik, senior portfolio manager at Dakota Wealth, said, "It's disappointing, but it's not surprising that people are worried about the Fed, worried about where interest rates are going and worried about the health of the economy."

Wells Fargo analysts now believe the Fed will raise the federal funds rate marker range to 4.75%-5.00% by the first quarter of 2023. Seven of the S&P 500's 11 sectors fell, led by utilities and essential consumer goods stocks, which fell about 1.7 percent.