Stocks slump, bonds waver with Fed Taper in focus
Stocks slid as the Federal Reserve signaled that a decision on a reduction of its bond-buying program could happen in 2021. Treasurys and the dollar were little changed.
The S&P 500 extended losses into a second day after minutes of the Federal Open Market Committee's July gathering said most officials agreed last month they could start slowing the pace of asset purchases later this year. While the record shows they don't yet have agreement on the timing or pace of tapering, most had reached consensus on keeping the composition of any reduction in Treasury and mortgage-backed securities purchases proportional.
"The minutes reflect a Fed that is prepared to accelerate its taper timeline to perhaps the next few months," said Sean Bandazian, an investment analyst at Cornerstone Wealth. "There is still reason to believe we will see volatility throughout areas of the market with high sensitivity to interest rates."
Fed Chair Jerome Powell will have an opportunity next week to delve into the policy and economic outlook, during the Jackson Hole symposium -- the central bank's most prominent annual conference.
Earlier Wednesday, St. Louis Fed President James Bullard said he would like to see the tapering of the asset-purchase program done by the first quarter of 2022. Several other officials, including Robert Kaplan of Dallas and Esther George of Kansas City, have urged the central bank to begin removing stimulus as soon as the September meeting. Chair Powell and Vice Chairman Richard Clarida have suggested they would like to see further progress before considering a move to taper.
In late trading, Robinhood Markets Inc. -- the pioneer of commission-free trading apps -- sank after reporting its first results since going public.
Elsewhere, oil dropped below $65 a barrel for the first time since May 24 as new waves of covid-19 threatened fuel demand.
Some of the main moves in markets:
Stocks
- The S&P 500 fell 1.1% as of 4 p.m. EDT
- The Nasdaq 100 fell 1%
- The Dow Jones industrial average fell 1.1%
- The MSCI World index fell 0.6%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was unchanged at $1.1710
- The British pound rose 0.1% to $1.3756
- The Japanese yen fell 0.2% to 109.80 per dollar
Bonds
- The yield on 10-year Treasurys was little changed at 1.27%
- Germany's 10-year yield declined one basis point to -0.48%
- Britain's 10-year yield was little changed at 0.57%
Commodities
- West Texas Intermediate crude fell 2.7% to $64.78 a barrel
- Gold futures were little changed
