Traders on the floor of the New York Stock Exchange.
Source: NYSE
The S&P 500 fell from a record high Thursday as investors await further details on the Federal Reserve’s plan to withdraw monetary stimulus from the central bank’s annual symposium on Friday.
Traders also watched new developments in Afghanistan, adding to risk averse sentiment. At least eleven U.S. Marines and one Navy medic were killed after two explosions outside Kabul airport on Thursday, the Associated Press reported.
The Dow Jones Industrial average lost around 159 points, or 0.4%. The S&P 500 and the Nasdaq Composite were also down 0.4%. Both the S&P 500 and the Nasdaq Composite closed at record highs on Wednesday, with the S&P 500 briefly trading above 4,500 for the first time.
Mixed economic data did little to change the bad mood. Initial weekly jobless claims stood at 353,000, the Labor Department reported Thursday, up slightly from 349,000 the previous week and more than economists expected.
Economic growth in the second quarter was 6.6% according to the second reading by the Department of Commerce published on Thursday. That was a slight upward correction from the previously reported 6.5% annual increase, but slightly lower than the Dow Jones estimate of 6.7%.
The Fed’s much-anticipated Jackson Hole Symposium will be held virtually on Friday this year, with many central bank speakers making comments to the media starting Thursday. At the event, central bankers could report on their plan to slow down the Fed’s monthly bond purchases.
Esther George, president of the Kansas City Fed, told CNBC Thursday morning that “given the progress we’ve seen,” a Fed throttling is “appropriate”, although she did not specify when she thought it should begin.
“If you look at the job growth last month, the month before, if you look at the current level of inflation, I would think that the level of housing we are currently offering is probably not needed in this scenario,” she said “So I would be ready to talk about tapers sooner rather than later.”
James Bullard, president of the St. Louis Fed, said the central bank should begin this effort soon and complete it by the end of March to prevent the US economy from overheating.
“I think we want to start the rejuvenation. The rejuvenation should be completed by the end of the first quarter of next year,” Bullard told CNBC on Thursday. “And then we can assess the situation and at that point we will be able to see if inflation has eased and if it has we will be in great shape. If it has not eased, we will we “have to be more aggressive to contain inflation.”
Salesforce tops the Dow, with its share price up 4% in the second quarter and a forecast that beat analysts’ estimates. Another cloud company, NetApp, gained more than 5%.
Zoom Video stocks rose more than 1.6% after Morgan Stanley upgraded the stock and forecast an 18% uptrend.
Shares in discount retailers Dollar Tree and Dollar General declined 11% and 4%, respectively, following the release of quarterly results. Abercrombie & Fitch slumped 10.5% as supply chain restrictions and delayed back-to-school purchases hurt sales.
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The benchmark ten-year government bond yield rose as high as 1.375% on Thursday, its highest level since the beginning of the month when it returned as high as 1.379% before pulling back.
“The yield on 10-year government bonds has continued to rise in the last few days and has exploded in [Wednesday’s] act and send a strong message that the US Delta variant of Covid may be peaking, which should build confidence, resume economic reopening and stimulate investment flows towards small caps and cyclical stocks, “said Jim Paulsen, Chief Investment Strategist at the Leuthold Group.
Chairman Jerome Powell will make remarks at the Fed summit on Friday. In response to the pandemic, the Federal Reserve has bought at least $ 120 billion a month in bonds to curb longer-term interest rates and stimulate economic growth.
“Expect investors to keep an eye on the Fed symposium for the remainder of this week for comments on the rate hike or the timing of rate hikes,” Paulsen said. “Either unexpected comments from the Fed or a failure or success in scaling 4,500 could add additional volatility to the equity and bond markets.”
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