Today in the Market (9/19/2022)

Good Evening. Following their worst week in three months for all three main indexes, U.S. equities recovered in the tumultuous final hour of trading on Monday.

The Dow Jones gained 0.64%, the S&P 500 increased by about 0.69%, and the Nasdaq rose 0.76%.

UNFINISHED VEHICLES

After Ford said supply costs are running $1 billion higher than anticipated in the current quarter, an indication of inflationary pressures spreading through the economy, Ford Motor Co. (F) saw a 4.66% decline in post-market trade.

The company reiterated its full-year profitability forecast, but it also warned that a lack of essential components would cause its stock of partially finished cars to remain high. Ford stated in a statement that it is experiencing unexpectedly high supply-chain costs.

Ford currently expects that as of the conclusion of the third quarter, there would be between 40,000 and 45,000 partially manufactured vehicles, the majority of which are “high-margin trucks and SUVs.” By the end of the year, it expressed confidence that it could finish and sell those automobiles.

SHIFT IN TREASURIES?

Despite prices falling to new multi-year lows, Vanguard, the second-largest asset manager in the world, thinks the painful collapse in U.S. Treasuries is about to finish, a senior portfolio manager at the company told Reuters.

Benchmark U.S. Treasury 10-year yields, which move counter-cyclical to prices, reached their highest level since 2011 on Monday. This development is a continuation of a trend that has caused bonds to be experiencing their worst year ever as a result of the Federal Reserve’s aggressive rate hike program to combat rising inflation. Markets generally anticipate that the central bank, which has already tightened monetary policy by 225 basis points this year, will increase rates by another 75 basis points on Wednesday.

Vanguard portfolio managers, however, think that Treasuries have already experienced their worst drops and the Fed will likely hold off on tightening monetary policy if GDP starts to decline significantly. In light of recent expectations for a more hawkish Fed, Malvern claimed that Vanguard has recently reduced its exposure to lower-quality credits.

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