Wall Street Stocks Fall as Signs of Economic Slowdown Emerge

09 Sep 2021 · 3rd Party Analysis

Wall Street Stocks Fall as Signs of Economic Slowdown Emerge

WRITTEN BY ThorFX

In Summary

  • US stocks decline on Wednesday, while futures are under pressure on Thursday
  • Traders and investors expect the ECB to provide insights into its tapering framework today

Stocks on Wall Street slipped on Wednesday and Thursday’s futures prices hover in negative territory as market participants continued to weigh the prospects for growth of the US economy.

The broad-market S&P500 index closed down 0.1% on Wednesday, while the 30-stock Dow Jones Industrial Average declined about 70 points or 0.2%. The tech-heavy Nasdaq Composite snapped a four-day winning streak and retreated from a record high by falling 0.6%.

Equities on Wall Street declined broadly as investors reassessed potential next steps by the Federal Reserve along with a steady rise in Covid-19 cases. Cyclical sectors such as banking stocks and energy companies fell. Technology shares also skittered down as a cautiously optimistic mood spread over the financial markets.

Global stocks widely fell on Wednesday and remained under pressure early Thursday as central banks around the world contemplate unwinding the vast monetary support that has buoyed equities for over 18 months.

Moreover, several signs have appeared in recent weeks that point to a slowdown in economic growth globally. A Federal Reserve survey, called the Beige Book, indicated that the US economy has endured a slight downturn in recent months.

The sustained climb of Covid-19 infections, according to the Fed’s Beige Book released Wednesday, has dented the economic growth. “The deceleration in economic activity was largely attributable to a pullback in dining out, travel, and tourism in most Districts, reflecting safety concerns due to the rise of the Delta variant,” the US central bank said in the report.

“Looking ahead, businesses in most Districts remained optimistic about near-term prospects, though there continued to be widespread concern about ongoing supply disruptions and resource shortages,” the Fed noted.

Cash Concerns for US Treasury Department

Adding to mounting worries over the economic outlook, Treasury secretary Janet Yellen said on Wednesday the Treasury Department risks running out of cash by October unless Congress steps in and increases borrowing limits.

Ms. Yellen, in a letter to Congressional leaders, said she could not give “a specific estimate” of when the Treasury would run out of funds, but the “most likely outcome” would be by October.

“A delay that calls into question the federal government’s ability to meet all its obligations would likely cause irreparable damage to the US economy and global financial markets,” Janet Yellen told Congress in the letter. Dysfunctional labor-market conditions emerged in July, according to the latest Labor Department Job Openings and Labor Turnover Survey. Amid the Covid-19 pandemic in July, job openings outnumbered unemployed people by more than 2 million.

On Thursday, market participants are shifting their focus on the latest update on monetary policy from the European Central Bank. ECB policymakers meet today to debate reversing easy-money policies and to decide whether to keep interest rates unchanged at ultra-low levels.

A key topic would be the unwinding of as much as €80bn in monthly bond purchases under the €1.85tn Pandemic Emergency Purchase Programme (PEPP).

Crypto assets on Thursday remain pinned near unchanged levels. Bitcoin’s price hovers steadily above the opening level, currently near $46,300 per coin. Over the past couple of days, major tokens have largely stabilized from the crypto flash crash on Tuesday that wiped billions from the market capitalization.

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