US Futures Steady After Sell-off Amid Fed Tapering Signals

19 Aug 2021 · 3rd Party Analysis

US Futures Steady After Sell-off Amid Fed Tapering Signals


In Summary

  • Futures on the Dow lower by 250 points ahead of the opening bell on Thursday
  • European markets slide as global uncertainty prevails after Fed signals tapering this year

Futures contracts tied to the three main stock gauges slipped in overnight trading, following the Federal Reserve’s statement that tapering could begin as soon as this year. Investors seem to be on the defense side of risk in pre-market activity as Dow futures dropped over 250 points ahead of Thursday’s open. S&P500 futures were also pressured, along with Nasdaq futures, each down more than half a percent.

On Wednesday, the major stock indexes experienced a strong wave of selling in the last hour of trading. The Dow Jones Industrial Average and the S&P500 slipped by more than 1% each. The tech-heavy Nasdaq Composite declined about 0.9% as tech giants slipped broadly.

Investors were anxious and cautiously optimistic to hear the latest from the Federal Reserve. Throughout the day, stocks swung between gains and losses until the US central bank released its minutes from the July 27-28 meeting. The publication, largely anticipated by traders and investors, contained key insights into the potential timing of dialing back the Fed’s monthly bond-buying program.

“Looking ahead, most participants noted that, provided that the economy was to evolve broadly as they anticipated, they judged that it could be appropriate to start reducing the pace of asset purchases this year,” the minutes said.

The summary noted the economy has progressed substantially toward the inflation goal set by the Fed. The other main priority, job growth, is “close to being satisfied”.

Bitcoin Traders Near the Flat Line

The meeting summary stressed that while most Fed officials were in favor of tapering this year, some members of the committee preferred to wait until early 2022 to initiate the first steps toward reducing the bountiful monetary stimulus of $120bn a month in asset purchases.

The Federal Open Market Committee (FOMC) has only three more meetings left this year. Analysts are quick to point out that there may not be much support among the 18 FOMC members to start tapering after the Sep 21-22 meeting. If consensus is reached in the Nov. 2-3 meeting, the Federal Reserve could start unwinding its bond-buying scheme shortly after.

Elsewhere, stocks in Europe on Thursday slipped at the opening with the Stoxx 600 losing as much as 1.5% in early deals. Major indexes across the eurozone are also in the red today as European investors are cautious to place increased bets on riskier assets like stocks.

Today’s cautious approach to trading European stocks followed yesterday’s rather passive market behavior when the region-wide Stoxx 600 ended the day modestly higher by less than 0.1%. Major European averages were mixed.

As stocks on both sides of the Atlantic are jittery from the latest Federal Reserve update, cryptocurrencies today are mostly unchanged.

Bitcoin is trading near its flat line for the day, currently gravitating toward the $44,400 level. Ether is little changed at around $3,000 per coin. The digital asset market this week has halted the recent sharp rise to higher grounds. Since Monday, bitcoin has erased about 5% of its value, while ether is down around 8%.

Still, over the past 30 days, major crypto tokens have performed remarkably well. Since July 20, Bitcoin is up about 50%, while the Ethereum coin is higher by 75%.

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