Investing.com – Apple’s profit warning isn’t just affecting stocks, it’s spilling into interest rate expectations, with markets now pricing in increased chances of a rate cut this year.
At the end of the year all the talk was about how long the Federal Reserve would pause before it hiked rates again. Now cuts are on the table, according to fed funds futures.
The chance of a rate cut at the May FOMC meeting jumped to 15.7% today from just 3.1% yesterday, according to Investing.com’s Fed Rate Monitor Tool.
There is actually a 1% chance of two cuts priced in for that month, whille there was no chance of that priced in the day before.
Looking out into the year, there is a more than 30% chance that interest rates will be lower in October. And while chances rates would be higher in October stood at more than 20% last week, they are at 0% now.
For long-term Treasury rates, the U.S. 10-Year yield sank to 2.58% in midday trading, off more than 3%, putting it at levels not seen in a year.
Money rotated into bonds, pushing prices up and yields down, as it poured out of equities following Apple’s warning on the revenue for its latest quarter.
Apple (NASDAQ:AAPL) blamed emerging markets and China specifically, increasing worries that the trade war between the U.S. and China is now eating away at corporate profits.
Those fears were exacerbated this morning when White House economic adviser Kevin Hassett told CNN that a “heck of a lot” of U.S. companies would be downgrading earnings until a trade deal between the two countries was struck.