MARKET RECAP

US stocks fell by 4.80% and bonds were off by 0.95%. The 2-year Treasury yield increased by 29 basis points. International stocks dropped by 3.30%.

On Tuesday, the Bureau of Labor Statistics announced that CPI had increased by 8.3% since last year, higher than what was anticipated. The Core CPA, which excludes energy and food, was up by 6.3% compared to 5.9% in June and July, indicating that price pressures remain intense. The S&P fell by 4.3% after the news and the 10-year treasury yield increased to 3.42% from 3.297%. According to Ryan Sweet, senior director of economic research at Moody’s Analytics, the average household is spending $460 more each month to buy the same basket of goods and services as last year.

Markets are now anticipating a fed-funds rate of about 4.25% in December, implying 75 basis point increases in September and November, and then another 25 basis points in December. The terminal rate is anticipated to be 4.45% in April.

FedEx announced weak, very weak, preliminary earnings due to weak demand. The stock fell by 22%. Ray Dalio of Bridgewater writes that a 4.5% fed-funds rate could mean a 20% drop in equity prices.

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