The Stock Market Is Falling Again as Growth and Covid Concerns Build

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Updated Aug. 19, 2021 6:18 am ET / Original Aug. 19, 2021 5:05 am ET

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Investor attention is now turning to Federal Reserve Chair Jerome Powell's expected speech at the Jackson Hole symposium next week.

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U.S. stock market futures were indicating a lower open on Thursday, set to continue declines from Wednesday trading, as the future of U.S. monetary policy and global growth concerns related to the Covid-19 pandemic weighed on stocks.

Futures for the Dow Jones Industrial Average were pointing down around 340 points, set for a weak open after the index declined 382 points on Wednesday to close at 34,960. Futures for the S&P 500 and Nasdaq were also pointing to a lower open.

Investors will watch to see whether U.S. stocks will recover, after the S&P 500 declined more than 1% on Wednesday to post its largest one-day loss in a month. Analysts noted that the narrative from the last trading session remained broadly unchanged as markets moved into gear Thursday.

Concerns have centered on revelations from the July meeting minutes of the Federal Reserve’s monetary policy-making committee. Broader worries about global economic growth, especially in the face of the more contagious Delta variant of coronavirus, also dampened on investor sentiment.

The minutes of the Federal Open Market Committee suggested that the central bank could begin slowing its massive monthly asset purchases—a pandemic-era measure to add liquidity to financial markets—as soon as this year.

“The pattern for scaling back bond purchases is seemingly confirmed—a theoretical framework, then a decision taken in the fourth quarter, then action in the fourth quarter or early 2022,” said Paul Donovan, the chief economist at UBS Global Wealth Management.

“The Fed is scaling back because it is independent, and the motive for buying bonds was to supply needed liquidity. That liquidity is less needed, so bond buying is less needed,” Donovan added.

Read: Fed Minutes Suggest Tapering of Bond Purchases Could Begin Later This Year

Michael Hewson, an analyst at broker CMC Markets, noted that Wednesday’s worries—especially around the Delta variant—have lingered, and weighed on Thursday trading in Asia and Europe.

“Further weakness in Asia markets over increasing uneasiness about China’s regulatory crackdown as well as the uncertainty over rising Delta cases looks set to feed into further uncertainty as we look towards a lower European open,” Hewson said.

“Attention will now turn to next week’s Jackson Hole central bank symposium, which markets will hope offers further clues about timelines to a taper/slowdown in the pace of monthly asset purchases,” Hewson added. The major Wyoming symposium should give investors their next major chance to read into the Fed’s stance on monetary policy.

In Asia, Hong Kong’s Hang Seng declined 2.13% while the Shanghai Composite slipped 0.57% and Tokyo’s Nikkei 225 dipped 1.1%. The FTSE 100 in London was 2.2% lower as the pan-European Stoxx 600 fell near 2%. The CAC 40 in Paris moved 2.8% into the red and Frankfurt’s DAX dropped 1.8%.

Commodities also took a beating. Futures contracts for copper, one of the most important industrial metals and a barometer for global economic sentiment, fell nearly 3% to extend declines across the last month to 10%. Benchmark Brent crude was changing hands at just above $66 a barrel, down 3%.

In the day ahead, investors can expect economic data in the form of initial jobless claims for last week and continuing jobless claims for the week of Aug. 7, as well as the Philadelphia Fed manufacturing index for August.

On the earnings front, results are due from Estée Lauder, Kohl’s, Macy’s, Li Auto, NetEase, Applied Materials, and others.

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