Stocks traded mixed Thursday but were gaining momentum after the Federal Reserve indicated it could begin tapering stimulus this year even as surging coronavirus infections caused by the delta variant have raised worries about the pace of the U.S. recovery.
Oil prices maintained their slump and copper – a reliable benchmark for global growth prospects – tumbled below $9,000 a ton on the London Metals Exchange for the first time since April. Iron ore plunged as much as 10%.
Giving sentiment a bit of a lift was a fourth straight weekly fall in the number of Americans filing for first-time unemployment benefits The decline in jobless claims to a pandemic low suggests the labor market has been improving.
The Dow Jones Industrial Average declined 18 points, or 0.05%, to 34,941, the S&P 500 was up 0.31% and the Nasdaq gained 0.44%.
The yield on the benchmark 10-year Treasury fell Thursday to 1.237%.
A Market Correction Gains Steam but Wide Disparities Between Sectors Persist
Stocks finished sharply lower Wednesday after minutes from the latest Federal Reserve meeting showed that central bank officials said more progress was needed in the employment market before it considered tapering stimulus, but most said “it could be appropriate to start reducing the pace of asset purchases this year.”
“While the Fed minutes reveal more conviction in terms of starting to taper this year, they made the bold point that there’s no connection between tapering and rate hikes,” said Mike Loewengart, managing director of investment strategy at E*Trade. “That said, the start of tapering necessarily chips away at the tools at the Fed’s disposal, and in reality, after tapering, must come rate hikes.
“But that can be very far down the road. And keep in mind that there’s a pretty big caveat in the Fed’s potential move to start tapering, and that’s improvement on the jobs front. If you take a step back though, the Fed seeing some real economic progress is a good thing at the end of the day,” he added.
The Fed has been buying about $120 billion a month of Treasuries and mortgage bonds to help prop up the economy during the pandemic.
The central bank’s conference next week at Jackson Hole, Wyoming, will be top of mind for investors, with some expecting the Fed to provide a more definitive timeline on tapering. Federal Reserve Chairman Jerome Powell’s keynote speech will be closely scrutinized.
It’s the Wrong Conclusion to Assume the Fed Is Actually Ready to Tighten Policy
The economic calendar in the U.S. Thursday includes weekly Jobless Claims at 8:30 a.m. ET and the Philadelphia Fed Manufacturing Index for August at 8:30 a.m.
Macy’s (M) – Get Report reported second-quarter adjusted earnings of $1.29 a share, smashing estimates that called for a profit of 23 cents. Same-store sales at the retailer jumped 61.2%.
Nvidia (NVDA) – Get Report was rising Thursday after the largest U.S. semiconductor maker by market value issued an upbeat forecast for the fiscal third quarter even as the market for chip supplies remains tight.
