Before The Bell
Stock futures are pointing higher this morning following a modest selloff in the previous session owing to the potential for less accommodative Federal Reserve policy, as well as heightened geopolitical tensions. The bounce back shaping up appears to stem at least partly from the longstanding buy-the-dip strategy.
Stocks had been on a little bit of a run for most of the week on optimism that vaccine distribution would become more widespread after initial FDA approval. The vaccine was first made available under emergency use authorization.
But that bullishness faded on Thursday, in part because signs pointed to the possibility that the Fed might begin tapering its asset-purchase program sooner rather than later. Fed Chair Jerome Powell is scheduled to give an update (virtually) on policy today as part of the central bank’s annual Jackson Hole, Wyoming meeting.
There is still a line of thinking that Mr. Powell will continue to build the case for tapering at some point, rather than laying out a specific timeline. The fact the Fed Chair is speaking from Washington D.C. rather than in person points out the added uncertainty associated with traveling given the rise of the Delta variant of the coronavirus. The conference is being conducted online.
Stock trading on Thursday felt the weight of a more somber tone, as well, after news that a number of American service personnel had become casualties in Afghanistan.
On the day, the Dow Jones Industrial Average lost 192 points; the NASDAQ dropped 96 points; and the S&P 500 fell 26 points. Declining issues outpaced advancing issues by a wide margin on both the New York Stock Exchange and the NASDAQ.
Nevertheless, underlying support for stocks from the economy remains strong. According to Labor Department data, the four-week moving average of initial unemployment claims fell to a pandemic low yesterday. Meanwhile, the Commerce Department upwardly revised the economy’s rate of growth in the second quarter to 6.6%. Limited new restrictions by state and local governments have allowed business activity to largely go ahead, despite the spread of Delta variant.
In turn, the boom in the economy has led to a big jump in corporate earnings, with record share repurchases adding market support.
As for today, data released this morning on personal income for July came in higher than expected, while personal spending was in line with expectations.
Most likely, the content of Fed Chair Powell’s scheduled speech will affect investor sentiment, one way or the other.
– Robert Mitkowski
At the time of this writing, the author did not have positions in any of the companies mentioned in this article.
