Futures Little Changed After Turbulent Trading Yesterday

20 May 2021 · 3rd Party Analysis

Futures Little Changed After Turbulent Trading Yesterday


In Summary

  • Stock futures traded mixed and under pressure following a volatile day
  • FOMC minutes say the Fed could start discussing unwinding its monetary support

US stocks, commodities, and cryptocurrencies declined yesterday amid volatile trading. Market participants greatly decreased their risk appetite during the large part of Wednesday’s trading session. Near the end, investors shifted gears and accelerated their buying, pushing the market off its session lows.

The blue-chip Dow Jones Industrial Average index dropped as much as 587 points in the early hours. Later it was able to pare some of the losses and closed the session lower by roughly 160 points. The other two benchmark indexes also did well in the late hours, staging a strong bounce, but still not enough to end in the green.

The Dow Jones ended the session at 33,896.04 points, lower by 0.48% on the day, or 164.62 points. The broad-market S&P500 index declined 0.29%, or 12.15 points, to finish the session at 4,115.68. The tech-centered Nasdaq Composite closed virtually flat, after dropping 1.8% earlier in the day. The technology index ended Wednesday’s trading at 13,299.74, just 3.90 points lower, or 0.03%.

Inflation Concerns Still Present

Stock market investors increased their risk appetite in the second half of regular market hours after the Federal Open Market Committee published its meeting minutes. The FOMC minutes described Fed officials see the economy as “strengthening”, but it is still in recovery mode and requires the stimulus injected from the central bank to continue. Despite inflation concerns, Fed officials agree to maintain the current pace of $120bn a month of Treasury and mortgage bond purchases.

Among the 18 Fed officials, however, there are several who express concerns over rising inflation and want to discuss a plan for reducing the Fed’s bond-buying program in future meetings. “A number of participants suggested that if the economy continued to make rapid progress toward the committee’s goals, it might be appropriate at some point in upcoming meetings to begin discussing a plan for adjusting the pace of asset purchases,” the meeting summary said.

The majority of the policymakers at the Fed are aligned with Fed Chairman Jay Powell’s view that the central bank must make sure the monetary policy has given the markets plenty of support before withdrawing some of the current stimulus.

A day after the minutes were released, investors remained uncertain whether to bet on technology stocks or shares in real-economy companies. A risk-off mood is prevalent in the futures market on Thursday. Dow Jones futures are negative by about 0.50%. S&P futures are also to the downside, lower by roughly 0.40%. Nasdaq futures are down by 0.30%.

On the cryptocurrency front, traders and investors in the highly volatile emerging market experienced a turbulent and chaotic trading day yesterday. Chinese authorities announced that financial institutions in China are not allowed to deal with cryptocurrencies in any way, including receiving payments in cryptos or offering any products or services related to the digital coins. Bitcoin dipped over 30%, and Ether nosedived over 45%.

Even though most digital assets pared some losses, market participants today woke up to a market worth $300bn less. Bitcoin is now hovering around $40,000 per coin, while Ether trades slightly under $2,700. Dogecoin, the meme-coin promoted by Elon Musk, yesterday dropped more than 50% to $0.22. Today, Dogecoin has recovered a bit and is now trading near $0.35.

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