Traders work on the trading floor of the New York Stock Exchange (NYSE) in Manhattan, New York City, USA, 17 August 2021.
Andrew Kelly | Reuters
Stock futures fell sharply on Thursday as concerns increased that the Federal Reserve might remove incentives this year, which could curb an economy hurt by the spread of the Covid Delta variant.
Futures on the Dow Jones Industrial Average fell 361 points, or 1%. The Dow was down 380 points on Wednesday as the release of minutes of the Fed’s July meeting showed the central bank had begun to cut its monthly bond purchases by $ 120 billion before the end of the year.
S&P 500 futures lost 0.9% and Nasdaq 100 futures lost 0.7%.
“The minutes reflect a Fed poised to accelerate its tapering schedule into perhaps the next few months,” said Sean Bandazian, investment analyst at Cornerstone Wealth. “Both the Fed and the market participants have learned from the taper tantrum. Although we expect fewer surprises this time around, there is still reason to believe that we will experience volatility in all areas of the market with high interest rate sensitivity.”
WTI crude fell more than 3% to around $ 63 and copper lost more than 3% on worries about global growth without the Fed’s bond buying support. The 10-year government bond yield fell more than 4 basis points to 1.23%. (1 basis point corresponds to 0.01%.)
Goldman Sachs cut its economic growth forecast for the current quarter from 9% on Wednesday evening to 5.5%, adding to the negative sentiment. The company also sees higher-than-expected inflation for the rest of the year.
“The influence of the delta variant on growth and inflation is proving to be somewhat greater than we expected,” wrote Jan Hatzius, chief economist at Goldman Sachs, in the press release. “Spending on restaurants, travel and some other services is likely to decline in August, although we expect the decline to be modest and brief. Manufacturing is still suffering from supply chain disruptions, particularly in the auto industry, and this will likely mean less inventory build-up in Q3. “
Before the trading session, stocks closely related to the economy led to price losses. The steel manufacturer Nucor lost more than 3%. Oil companies Devon Energy and Occidental Petroleum lost around 3% and 4% respectively. Bergmann Freeport-McMoRan fell around 4%. General Motors lost about 2%. Reopening games like airlines and hotels were also lower.
The Fed’s central bankers planned at their July meeting to slow the pace of their monthly bond purchases, likely before the end of 2021, the minutes released on Wednesday afternoon show.
“Looking to the future, most participants noted that they believed it might be appropriate to start slowing asset purchases this year, provided the economy performs as expected,” the minutes read .
The Dow fell more than 1% on Wednesday for its worst performance in a month.
Robinhood stock fell 9% in pre-trading after its first earnings report as a publicly traded company. The app warned investors that a slowdown in trading could hurt third quarter results.
“For the three months ending September 30, 2021, we expect seasonal headwinds and lower trading activity across the industry to result in lower revenues and significantly fewer refinanced accounts than in the previous quarter,” the company said in the earnings release.
Nvidia stock bucked trend, rising more than 1% in pre-IPO trading after the chip giant’s quarterly earnings and revenue surpassed Wall Street estimates amid strong graphics card sales.
Investors will be monitoring new data on unemployment claims Thursday morning. Economists polled by Dow Jones expect a total of 365,000 for the week ending August 14, slightly less than the previous week’s total of 375,000.
From the week to Wednesday, the Dow and S&P 500 were each down 1.5%. The Nasdaq Composite is 2% lower.