Thursday June 17th

17-06-2021

Stocks are set to continue post-Fed decision losses with Dow futures down 50 points

U.S. stock index futures fell slightly on Thursday, a day after the Federal Reserve’s rate outlook sparked a sell-off. Futures on the Dow Jones Industrial Average dropped 52 points, or 0.2%. S&P 500 futures shed 0.2% and Nasdaq 100 futures fell 0.3%. U.S. stocks fell Wednesday afternoon after the Fed moved up its timeline for rate hikes, seeing two increases in 2023. The central bank also said it sees inflation hitting 3.4% this year, well above its 2% long-term goal. The Dow Jones Industrial Average closed the day 265 points lower to 34,033.67. The blue-chip average dropped as many as 382 points during the day. The S&P 500 edged 0.5% lower to 4,223.70. The Nasdaq Composite dipped 0.2% to 14,039.68. Materials stocks were set to drop on Thursday as higher rates may further take the air out of a big commodities rally in 2021. China is also cracking down on the commodities surge to ease inflation fears. Freeport-McMoRan led materials stocks lower in premarket trading, down 2%. Copper futures were off by 2%. Some once-hot tech stocks were lower in premarket trading with Zoom Video and Tesla down by about 1%. Wells Fargo and Citigroup were higher in premarket trading on hopes higher rates will boost profits for banks. Overall market losses were tame since the Fed’s update with the S&P 500 still less than 1% from an all-time high. Markets rallied off their intraday lows Wednesday after Fed Chair Jerome Powell said projections for future rate increases should be “taken with a big grain of salt” and reiterated that he believes that inflation is transitory. Powell also did not issue guidance on when the central bank will begin tapering its bond-buying program. “You can think of this meeting that we had as the ‘talking about talking about’ meeting, if you’d like,” Powell said when asked about tapering. “I now suggest that we retire that term, which has served its purpose.” The Fed chair said the central bank will continue to monitor the economic recovery and will provide “advanced notice” before announcing any updates regarding tapering. “The market is reacting violently to the Fed’s upgrade to the inflation forecast and bringing those two interest rate increases forward, but I’m not sure what they were expecting considering some of the [inflation] numbers,” said Michael Arone of State Street Global Advisors. “There’s this disconnect between the summary of economic projections and what’s in the statement,” Arone said. “The big question is ‘is this transitory or is it more permanent?’ and what the Fed did today didn’t help clarify that conversation.” Investors await quarterly earnings reports from Adobe, Kroger and other companies on Thursday. Weekly jobless claims and the Philadelphia Fed business outlook will also be released. Shares in Asia-Pacific were mixed on Thursday, as investors watched for market reaction after the U.S. Federal Reserve on Wednesday moved up its timeline for rate hikes. In Japan, the Nikkei 225 fell 0.93% to close at 29,018.33 while the Topix index dipped 0.62% to finish the trading day at 1,963.57. South Korea’s Kospi closed 0.42% lower at 3,264.96. Mainland Chinese stocks, on the other hand, closed higher. The Shanghai composite gained 0.21% to 3,525.60 while the Shenzhen component advanced 1.234% to 14,472.37. Hong Kong’s Hang Seng index rose about 0.1%, as of its final hour of trading. Crude oil prices fell on Thursday pressured by a stronger U.S. dollar, but losses were limited by a big drop in crude oil inventories in the United States, the world’s top oil consumer. Brent crude oil futures dropped by 36 cents, or 0.5%, to trade at $74.03 per barrel after reaching its highest since April 2019 in the previous session. U.S. crude oil futures fell by 30 cents, or 0.4%, to $71.85 a barrel, after reaching its highest since October 2018 the previous day. Gold prices hovered near a more than one-month low on Thursday as the dollar and U.S. Treasury yields jumped after Federal Reserve officials projected interest rate hikes sooner than expected. Following a drop of 2.5% in the previous session to its lowest since May 6 at $1,803.79 per ounce, spot gold was slightly up 0.2% as of 0039 GMT in early Asian trade. U.S. gold futures were down 2.4% at $1,816.90 per ounce.