Dow falls greater than 100 factors because the Fed removes stimulus
A trader works as a screen showing the press conference by Federal Reserve Chairman Jerome Powell following the announcement of Federal Reserve interest rates on the trading floor of the New York Stock Exchange (NYSE) in New York, the United States, July 31, 2019.
Brendan McDermid | Reuters
The averages of major U.S. stocks fell 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.
The Dow Jones Industrial Average lost around 130 points, or 0.4%. The Dow fell 380 points on Wednesday for its worst month-long performance as minutes of the July Fed meeting showed that the central bank had begun cutting its monthly bond purchases by $ 120 billion before the end of the year.
The S&P 500 lost 0.4% and the Nasdaq Composite lost 0.6%.
“The recent fit of market fear appears to be a combination of investor dizziness, finding an excuse to take profit and the bumpy road to reopening the economy, with new flavors of Covid on the rise,” said Art Hogan, chief market strategist at National Securities, it says in a note.
WTI crude fell more than 2% to below $ 64 and copper lost more than 1% on worries about global growth without the Fed’s bond buying support. The 10-year government bond yield fell more than 2 basis points to 1.247%. (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. “
Mixed economic data released on Thursday did not appear to contain the market slide. Initial jobless claims hit a new pandemic-era low of 348,000 last week, falling more sharply than expected the week before.
The Philadelphia Fed Index, a measure of growth in the region, was still showing expansion, but at a worse than expected level. The August value was 19.4 and thus below the 22 consensus of economists polled by Dow Jones.
Stocks closely related to the economy resulted in losses. The steel manufacturer Nucor lost about 3%. Oil companies Devon Energy and Occidental Petroleum each lost around 3%. Bergmann Freeport-McMoRan fell around 4%. General Motors was down more than 2%. Reopening games like airlines and hotels were also lower.
Robinhood stock fell 10% 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.
From the week to Wednesday, the Dow and S&P 500 were each down more than 1%. The Nasdaq Composite is lower than 2%.
– CNBC’s Michael Bloom contributed to the coverage.