Wall Street ended Wednesday’s session sharply in the red, after the Federal Reserve’s highly anticipated meeting minutes showed that the central bank is indeed mulling a taper to its monthly asset purchases in the near term. It could come as early as the end of the year, according to the minutes.
Stocks edged lower after the minutes were released but the selloff accelerated into the close.
The Dow closed 1.1%, or 383 points lower, and the S&P 500 also fell 1.1%. The Nasdaq Composite closed down 0.9%.
Stocks edged lower following the release of the minutes from the Federal Reserve’s most recent meeting.
The Dow dropped 0.2%, or 73 points, and the S&P 500 also fell 0.2%. The Nasdaq Composite held onto its gains, and remains up 0.2%.
Even though the minutes showed that there is no consensus on the exact timing for the tapering of the Fed’s asset purchases as of yet, the central bank will likely go down that road sooner rather than later.
“In the short run, the market is going to remain focused on growth and Delta variant concerns,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.
“All eyes are turning to the Jackson Hole Symposium next week but this too may turn out to be anti-climactic,” said Michael Reinking, senior market strategist at the New York Stock Exchange, referring to the upcoming central bank symposium in Wyoming. “I don’t think Chair Powell will want to box himself in ahead of the [Fed’s] September meeting, especially in light of some of the recent disappointing economic data.”
The Federal Reserve may start tapering its billions of dollars of monthly asset purchases later this year, the central bank’s most recent meeting minutes showed.
“Various participants commented that economic and financial conditions would likely warrant a reduction in coming months. Several others indicated, however, that a reduction in the pace of asset purchases was more likely to become appropriate early next year,” the minutes from the July 27-28 meeting read.
At present, the Fed buys Treasury securities worth $80 billion and mortgage-backed securities worth $40 billion every month. But as the economy recovers, this spending spree stands to end.
With inflation spiking as the nation emerges from the worst of the pandemic and unemployment numbers going down, many experts believe the conditions warranting a tapering are rapidly approaching.
The stock market has a nervous energy about it. There’s so much to worry about: Delta, the state of the recovery, when the Federal Reserve will start tapering….
Among investors’ worries is that a cyclical slowdown is lurking beneath the recovery, said Brian Belski, BMO Capital Markets’ chief investment strategist.
Sentiment is important for the market, as well as the economy, and worries about a slowdown are increasing. This could mean a Fed that’s playing defense.
But it’s also why Belski expects a volatile and fear-driven market to persist into 2022.
“I don’t think people really understand what tapering is,” he mused, adding that many funds have underperformed because they tried to time the market during a period of high uncertainty.
The process would be this: first the Fed would stop buying assets, then it would wind down its holdings and then it would start selling assets.
For him, it’s still obvious where to put your money:
“US stocks are the best assets in the world, stay invested here, we have the best companies… that will continue to provide the best results,” he said on the CNN Business digital live show Markets Now.
The way we consume TV shows and movies has changed hugely over the past few years, and the pandemic gave this transition yet another boost.
Six-year-old service FUBO TV (FUBO) is benefiting from the stay-at-home-fueled appetite for streaming: Its subscribers grew 138% over the year to almost 682,000, blowing past analyst expectations.
CEO David Gandler said Fubo is positioned as a sports-first TV replacement service. “Sports is our key,” he told Alison Kosik on the CNN Business digital live show Markets Now.
The company is not yet profitable, but Gandler noted that in a subscription model, the more invested in content up front, the more the service will benefit long-term.
But to be in the black, “we’ve got some time to go,” he said,
The economy is still bouncing back strong from the pandemic recession. That much is undeniable.
Even though there’s plenty more room to grow, America’s electric growth could start to slow down soon, said Lakshman Achuthan, co-founder of the Economic Cycle Research Institute.
“While the US recovery has been absolutely record-breaking from the lows, don’t get used to it,” Achuthan said on the CNN Business’ digital live show Markets Now.
“Coming out of a deep recession the economy is like a coiled spring. It just bounces,” he added.
But no longer.
The Covid resurgence from the Delta variant isn’t the only reason for the upcoming slowdown, he noted. The sugar rush from stimulus is wearing off, and growth rates for various economic indicators have already peaked and are coming back down, Achuthan said.
So does that mean a recession is in sight? No.
But “when the dust settles you’ve got this slowdown that is set to persist as far as we can tell,” he said.
Investors are twiddling their thumbs a bit today, waiting patiently for the Federal Reserve’s meeting minutes that are due to be released at 2pm ET.
After a brief foray into positive territory, stocks are slightly lower around midday.
The Dow is 0.1%, or 27 points lower, and the S&P 500 is also down 0.1%. The Nasdaq Composite is more or less flat.
So what’s the deal with the minutes? Investors are hoping for more insight into how the Fed is thinking about tapering its asset purchases.
So far, we’ve gotten Fed Chairman Jerome Powell to admit that the central bank is now “talking about talking about it.” But nothing more concrete has been said.
“While we’re not likely to get any solid answers on the Fed’s next move until its Jackson Hole symposium next week, the market seems more certain that tapering is on the way despite the recent bad string of data,” said TD Ameritrade Chief Market Strategist JJ Kinahan.
Others are less sure we’ll get answers today.
“Given how much Fed commentary we’ve had over the last couple of weeks, I struggle to see the minutes offering much of value for the markets,” said Craig Erlam, senior market analyst at OANDA Europe in a note to clients. “Even the most dovish members of the Fed have come around to the idea of tapering this year.”
Stay tuned for 2 pm.
Maybe we spoke too soon and it won’t be another day of losses?
An hour into the trading day, there are green arrows on the board and the Dow is flat.
The S&P 500 and the Nasdaq Composite are both up 0.1%.
Still, the market has pulled back following a five-day streak of all-time highs that ended Monday.
US stocks kicked off in the red Wednesday, adding onto their losses from Tuesday.
In economic news, housing data was broadly in line with expectations, with housing starts pulling back slightly.
The Delta variant is beginning to rear its ugly head in economic data. But America’s booming housing market seems to be safe from it for now.
July data on building permits and housing starts were broadly in line with expectations: Last month saw just over 1.6 million building permits, about flat from the prior month. Housing starts slowed to 1.5 million, slightly underperforming analyst predictions as well as the June number.
“Builders pulled back on housing starts, wary of overcommitting on final new home prices in the face of volatile costs for land, materials and labor,” said Realtor.com Senior Economist George Ratiu in emailed comments.
But the gains in permits as well as completed homes are “a sign that expectations for the next months remain upbeat,” he added. He also said homebuilders are grappling with the opportunity to shore up profits now that lumber prices are declining from the sky-high pandemic levels.
While the housing market is holding up, other areas of the economy are showing signs of impact from the rise in Covid-19 infections. Last week, consumer sentiment crashed below its early-pandemic levels and yesterday’s retail sales report came in weaker than expected.
Lowe’s stock (LOW) tanked nearly 6% Tuesday after rival Home Depot (HD) reported that fewer customers shopped at its stores last quarter. But it turns out investors may have been wrong to assume that Lowe’s would post a clunker of a quarter in its own earnings report.
Lowe’s said Wednesday that earnings topped forecasts. So did sales, which rose slightly even as analysts were forecasting a drop from a year ago. But perhaps most impressively, Lowe’s raised its revenue outlook for the fiscal year, something that Home Depot failed to do, citing a “dynamic and challenging environment.”
Granted, expectations were lower for Lowe’s than Home Depot, which still managed to report earnings and revenue that surpassed estimates. Same-store sales, which measure how well stores open at least a year are doing, also fell at Lowe’s while they rose at Home Depot.
But Lowe’s CEO Marvin Ellison, a former Home Depot executive who joined Lowe’s after failing to turn around JCPenney, said in the earnings press release that he is “confident in the positive outlook for our industry” and predicted that the company would continue to improve its profit margins and market share.
Shares of Lowe’s appear set to rebound from their Tuesday slide, rising almost 5% in premarket trading. Home Depot was flat.
After ending a five-day win streak Tuesday, US stock futures were mixed Wednesday.
Investors are eagerly awaiting the minutes from last month’s Fed meeting, which could reveal how quickly Fed officials plan on tapering asset purchases or raising rates.
Here’s where things stand as of 6 am ET:
Apple, Google and other big companies around the world are continuing to add to their massive piles of cash, a sign that corporations are increasingly nervous about how the highly contagious Delta variant of Covid-19 could damage the global economy.
The world’s largest nonfinancial companies had a record $6.85 trillion in cash on their balance sheets as of the end of the second quarter, according to data from S&P Global Ratings. (Banks and other financial firms are usually excluded from corporate cash lists because they are required to hold a lot of money in cash due to the nature of their daily business operations.)
The second-quarter totals are up slightly from the end of 2020. Gareth Williams, global head of corporate research for S&P Global Ratings, estimates that the cash level could hit $7.1 trillion by year’s end.
Fintech lenders helped speed the delivery of forgivable government loans to small businesses crushed by the pandemic. But these tech-savvy lenders may also have opened the door to widespread fraud and misuse of taxpayer money.
Fintechs are almost five times more likely than traditional banks to have made “highly suspicious” loans through the $780 billion Payroll Protection Program (PPP), according to research published Tuesday.
Nine of the top ten PPP lenders with the highest rate of suspicious loans are fintechs — and the remaining one acts like a fintech company, according to the study by researchers at the McCombs School of Business at the University of Texas at Austin.
