Thursday January 6th


Dow futures nudge higher after Wednesday’s Fed-induced sell-off

U.S. stock index futures 

edged higher in early trading Thursday, recovering after worries over tighter monetary policy led to the first losing regular trading session of the year. Futures on the Dow Jones Industrial Average gained 104 points, or 0.29%. S&P 500 futures were little changed and Nasdaq 100 futures fell 0.37%. Energy shares helped boost the market in early action as crude prices rose 1.5%. Marathon Oil gained 2.6%, Occidental Petroleum was up 2.2% and ExxonMobil rose 1.3%. Shares of Walgreens Boots Alliance gained 4% in premarket trading after reporting strong earnings for its latest quarter driven by customers going to stores for Covid treatments and at-home tests. Meanwhile, Bed Bath & Beyond shares fell about 8% after reporting a loss for its fiscal third quarter. Rate-sensitive stocks also were higher a day after minutes from the Federal Reserve’s December meeting revealed the central bank is getting ready to remove its economic help more more quickly than anticipated. Officials discussed reducing the Fed’s balance sheet in another move to dial back its pandemic-era easy monetary policy. As investors digested the minutes Thursday morning, the 10-year Treasury yield pushed above 1.75%, after ending last year at 1.51%. Bank of America saw its shares increase 1.5% premarket and Citigroup rose 1.4% and Wells Fargo gained 1.3%. The Fed’s plan to reduce the number of Treasurys and mortgage-backed securities it holds comes as it is already tapering its bond purchases and is set to hike interest rates after the taper concludes. “Almost all participants agreed that it would likely be appropriate to initiate balance sheet runoff at some point after the first increase in the target range for the federal funds rate,” the minutes stated. Stocks slid following the release of the minutes. The blue-chip Dow Jones Industrial Average closed 392.54 points, or 1.07%, lower after hitting an intraday record earlier in the session. The S&P 500 fell 1.94%. The tech-heavy Nasdaq saw its biggest one-day loss since February, losing 3.34%. “If you ride a wave of liquidity to the upside and that liquidity starts to go away, I don’t think it’s terribly surprising that you’re going to see a reaction,” said Kathy Jones, head of fixed income at Charles Schwab. “This was the year we were going to transition from extremely easy monetary policy and fiscal policy to less easy monetary and less expansive fiscal policy. That has to have some impact on risk assets that have risen because the discount rate was so low,” Jones added. All 11 S&P 500 sectors fell in Wednesday’s session. Elsewhere Thursday, shares of Allbirds rallied more than 4% after Morgan Stanley upgraded the shoe brand, whose stock has struggled since it went public in November. Also, crypto exchange Coinbase rose nearly 1% following a Bank of America upgrade that said the company is broadening its business. Initial claims for unemployment insurance ticked up to 207,000 for the week ending Jan.1. Economists surveyed by Dow Jones expect claims would total 195,000. The data comes a day ahead of the Labor Department’s key nonfarm payrolls report, which is expected to show that the economy added 422,000 jobs in December. However, payroll processing firm ADP reported Wednesday that companies added a much higher-than-expected 807,000 positions for the month, indicating a possible upside surprise to Friday’s count from the department’s Bureau of Labor Statistics. Shares in Asia-Pacific declined on Thursday following losses overnight that saw the Dow Jones Industrial Average notching its first decline of 2022. In Japan, the Nikkei 225 slipped 2.88% to close at 28,487.87 while the Topix index dipped 2.07% to 1,997.01. The Shanghai composite in mainland China closed 0.25% lower at 3.586.08 while the Shenzhen component slipped 0.663% to 14,429.51. South Korea’s Kospi fell 1.13%, closing at 2,920.53. Elsewhere, Hong Kong’s Hang Seng index reversed earlier losses and closed 0.72% higher at 23,072.86. Oil prices rose sharply on Thursday, extending a rally from the previous session, on escalating unrest in OPEC+ oil producer Kazakhstan and supply outages in Libya. The global benchmark Brent crude futures rose 93 cents, or 1.2%, to $78.78 a barrel. U.S. West Texas Intermediate (WTI) crude futures gained 87 cents, or 1.1%, to trade at $81.67 per barrel. Both contracts were trading at their highest since late November. Gold prices slid to a one-week low on Thursday as minutes of the U.S. Federal Reserve’s December meeting signaled quicker increases to interest rates, boosting the dollar and Treasury yields. Spot gold fell 0.6% to $1,798.36 per ounce by 1223 GMT, having touched its lowest since Dec. 29 at $1,792.30. U.S. gold futures fell 1.4 % to $1,799.40.