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Market Snapshot: U.S. stocks fall as Fed’s taper intentions, rising COVID cases spark selling

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U.S. stocks slumped Thursday, a day after minutes of the Federal Reserve’s July meeting showed the central bank was preparing to pull back on its stimulus measures this year and as worries rise over the spread of the delta variant of the coronavirus that causes COVID-19.

What are major indexes doing?
  • The Dow Jones Industrial Average
    DJIA,
    -0.14%

    fell 141.88 points, or 0.4%, to 34,818.81.
  • The S&P 500
    SPX,
    -0.01%

    was down 16.62 points, or 0.4%, at 4,383.65.
  • The Nasdaq Composite
    COMP,
    -0.03%

    shed 62.32 points, or 0.4%, to trade at 14,463.59.

On Wednesday, U.S. stocks suffered their worst single session in a month. The Dow fell 382 points, the S&P 500 lost 1.1% and the Nasdaq Composite declined 0.9%.

What’s driving the market?

Investors were rattled by the release of the Fed minutes, even though its message — that tapering of the central bank’s bond purchases will likely start this year — was well choreographed in speeches by policy makers ahead of the release.

Investors remain upbeat about improving corporate earnings, but are growing concerned about the spread of the delta variant of coronavirus and its potential impact on global economic growth at the same as the Fed is talking about tapering its bond buying program.

“While the formula provided could in principle be consistent with a taper decision in September (particularly given the strong July employment report that came after the FOMC meeting), the overall tone of the debate — including multiple references to the delta variant — seem more consistent with a more methodical approach in which the Fed provides a clear signal in September that a taper decision is coming in November. That was and remains our call,” said economists at Evercore ISI.

Also noteworthy was a U.K. study, from the University of Oxford based on real-world data, that showed diminished effectiveness from coronavirus vaccines to the delta variant. After four to five months, the study found that two doses of the vaccine from Pfizer
PFE,
+1.26%

and BioNTech
BNTX,
-3.93%

was as effective as two Oxford-AstraZeneca
AZN,
+0.44%

jabs.

“It does seem that the case for caution is growing, whether that be the uncertainty around the timing and pace of the taper or the rising number of delta cases around the world,” said Craig Erlam, senior market analyst at Oanda, in a note.

“The findings from the Oxford study overnight showing a drop in the effectiveness of the vaccine 90 days after the second dose won’t alleviate delta concerns as it spreads rapidly across numerous countries,” he said.

Investors may look past data that showed first-time claims for U.S. unemployment benefits fell more than expected last week to 348,000, a pandemic low. Economists had expected 365,000 initial claims.

The Philadelphia Fed said its manufacturing index fell to 19.4 in August from 21.9 a month earlier.

Which companies are in focus?
What are other markets doing?
  • The yield on the 10-year Treasury note
    TMUBMUSD10Y,
    1.250%

    fell to 1.22%. Yields fall as bond prices rise.
  • The ICE U.S. Dollar Index
    DXY,
    +0.30%
    ,
    a measure of the currency against a basket of six major rivals, rose 0.2% and traded at a nine-month high.
  • Oil futures were on track to extend a losing streak to six sessions, with the U.S. benchmark
    CL00,
    -2.61%

    down 3.3% at $63.07 a barrel. Gold futures
    GC00,
    -0.26%

    were lifted 0.4% to $1,791.20 an ounce.
  • For equities, the selling was particularly intense in Europe, where miners dived nearly 5% to send the Stoxx Europe 600
    SXXP,
    -1.48%

    down by 1.8%, while London’s FTSE 100
    UKX,
    -1.41%

    dropped 1.7%.
  • In Asia, Hong Kong’s Hang Seng Index
    HSI,
    -2.13%

    dropped 2.1%, while the Shanghai Composite
    SHCOMP,
    -0.57%

    shed 0.6% and Japan’s Nikkei 225
    NIK,
    -1.10%

    declined 1.1%.

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