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* Energy and bank stocks lead to pre-market declines
* All eyes on the Fed policy meeting later this week
* Futures decline: Dow 2.00%, S&P 1.81%, Nasdaq 1.76% (add comment, details, update prices)
By Devik Jain
September 20 (Reuters) – Wall Street was set to collapse at the opening Monday, as concerns over the pace of the economic recovery hit energy and banking stocks at the start of a week in which the Federal Reserve will decide potentially reduce its pandemic-era stimulus.
Oil companies, including Chevron and Exxon Mobil, led to a decline in pre-market trading, while economically sensitive manufacturers 3M Co, Boeing Co and Caterpillar Inc slipped between 2.4% and 3.0%.
Economy-related bank stocks including Morgan Stanley, JPMorgan Chase & Co and Bank of America Corp slipped between 2.2% and 3%, following US Treasury yields.
Major Wall Street indexes have been hit this month by fears that potentially higher corporate tax rates will hurt profits and have ignored signs that inflation may have peaked. The benchmark S&P 500 is on track to post a seven-month streak of straight gains.
All eyes will be on the Fed policy meeting on Wednesday, where the central bank is expected to lay the groundwork for tapering, although the consensus is that an actual announcement will be delayed until the November or December meetings.
“The wall of worry is only rising,” said Sam Stovall, chief investment strategist at CFRA Research in New York City.
The stubbornly increasing number of COVID Delta cases, the threat of a Fed cut, the possibility of slower-than-expected economic growth and the latest worry is that the (default) of the Chinese real estate developer could create some sort of ‘cascading financial effect. “
As of 8:35 a.m. ET, Dow e-minis were down 689 points, or 2%, S&P 500 e-minis were down 80 points, or 1.81%, and Nasdaq 100 e-minis were down. down 270.5 points, or 1.76%.
Morgan Stanley strategists said they expected a 10% correction in the S&P 500 as the Fed begins to ease monetary support, adding that signs of slowing economic growth could deepen it to 20% .
The CBOE volatility index, known as the Wall Street fear gauge, hit its highest level in more than four months.
Tech-related heavy stocks Microsoft Corp, Alphabet Inc, owner of Google, Amazon.com Inc, Apple Inc and Tesla Inc, which tend to perform better in times of economic uncertainty, lost between 1.4% and 3 , 7%.
Cruise liners slipped about 3.6%, while carriers United Airlines, American Airlines and Delta Airlines fell 2.9%, rising COVID-19 cases fueling fears of a recovery delayed travel demand. (Reporting by Devik Jain and Sagarika Jaisinghani in Bangalore; Editing by Arun Koyyur and Maju Samuel)