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Stock Market News for Sep 22, 2021

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U.S. stock markets closed mixed on Tuesday in a choppy session, as the Fed starts its two-day FOMC meeting. Market participants also remained shaky on possible bankruptcy of a large Chinese property developer and a discord in Washington over debt ceiling. Moreover, the Delta Variant of coronavirus remained another concern. The Dow and the S&P 500 ended in red while the Nasdaq Composite finished in positive territory.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) fell 0.2% to close at 33,919.84. Notably, 15 components of the 30-stock index ended in the green while 15 in red. However, the tech-heavy Nasdaq Composite finished at 14,746.40, rising 0.2% due to strong performance by large-cap technology stocks.

Meanwhile, the S&P 500 moved down 0.1% to end at 4,354.19, reflecting its worst 4-day decline since May. The Industrials Select Sector SPDR (XLI) and the Communications Services Select Sector SPDR (XLC) fell 0.5% and 0.4%, respectively. Six out of eleven sectors of the benchmark index closed in negative territory while five ended in green.

The fear-gauge CBOE Volatility Index (VIX) dropped 5.3% to 24.36. A total of 9.73 billion shares were traded on Tuesday, lower than the last 20-session average of 9. 5 billion. Advancers outnumbered decliners on the NYSE by a 1.32-to-1 ratio. On Nasdaq, a 1.35-to-1 ratio favored advancing issues.

Fed Kicked Off FOMC Meeting

The two-day FOMC meeting of the Federal Reserve has started on Sep 21. The outcome of this meeting will immensely impact financial markets. At present, economists and financial researchers are divided whether the central bank will give any definite sign, if not the dateline, related to the tapering of its existing $120 billion per month bond-buy program.

After its last FOMC meeting in June, Fed chairman Jerome Powell gave a signal that the Fed may start tapering this year although he maintained an extremely cautious view.

However, the rapid spread of the Delta variant of coronavirus and a possible slowdown of the U.S. economic growth, highly disappointing job additions in August and marginal decline in inflation rates in the last couple of months have compelled many experts to believe that the Fed may restrain itself from shifting from its ongoing ultra-dovish monetary policies.

Evergrande Crisis

Global stock markets including U.S. stock markets fell sharply on Monday following news that a large Chinese property developer, the China Evergrande Group, is in possible bankruptcy. The company faced a debt payment on its offshore bonds last week and said that it is suffering from unprecedented difficulties. It has more than $300 billion of offshore bonds.

U.S. markets continued to suffer on Tuesday due to the news as a section of market participants believe that default on debt servicing may have rippling effect on global financial sector. Moreover, a recession in the Chinese property development market will significantly reduce demand for metal and industrial products.

Government Debt Ceiling in Focus

On Sep 21, the House of Representative passed a bill in majority voting that will prevent a government shutdown and suspend the debt limit to prevent an economic disaster. However, the Republicans have threatened to block the bill in Senate. The Congress needs to pass a funding plan by Sep. 30 to prevent government shutdown. The clearance of the bill in House will enable the government to run up to Dec 3 and suspend the debt ceiling till December 2022.

Spread of Delta Variant

The spread of the Delta variant remains a threat to the robust U.S. economic recovery. Some recently released economic data has shown that the Delta variant has taken a toll on the economy and it may get worse as the winter season is approaching. Investors remained concerned though the infection rate has dropped marginally this month.

On Sep 21, The Walt Disney Co. (DIS - Free Report) announced that the subscriber growth of its Disney+ channel may face hurdle in the third quarter of 2021. CEO Bob Chapek said that the rapid spread of the Delta variant has delayed production of some of its titles. Consequently, shares of Disney plummeted 4.2%. The stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Economic Data

The Department of Commerce reported that housing starts increased 3.9% to a seasonally-adjusted annual rate of 1.615 million in August. The consensus estimate was 1.554 million units. July’s data was revised upwardly to 1.554 million units from 1.534 million units reported earlier. Year over year, housing starts jumped 17.4% in August.

Building permits advanced 6% to a seasonally-adjusted annual rate of 1.728 million in August. The consensus estimate was 1.62 million units. July’s data was revised downwardly to 1.63 million units from 1.635 million units reported earlier. Year over year, building permits climbed 13.5% in August.

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