Wall Street set to fall on taper fears, commodity weakness

(Reuters) – Wall Street indexes were set to fall on Thursday on concerns the Federal Reserve could begin to rein in its massive monetary stimulus, while commodity-linked stocks sank as oil and metal prices tumbled to multi-month lows.

FILE PHOTO: A trader works on the trading floor at the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S., August 5, 2021. REUTERS/Andrew Kelly

Minutes released on Wednesday from the Fed’s July meeting showed officials felt the employment benchmark for decreasing support to the economy “could be reached this year”, sending the S&P 500 down 1% in its worst day in a month.

Energy stocks including Chevron Corp and Exxon Mobil Corp dropped in premarket trade as oil sank on a surprise rise in gasoline inventories, while Freeport-Mcmoran Inc slipped 3.6% and led copper miners lower after prices of the red metal hit a four-month low. [O/R] [MET/L]

Concerns about the sudden tapering at a time when macroeconomic data was signaling a slowdown in U.S. economic growth have knocked Wall Street’s main indexes off record highs this week.

With the S&P 500 still up more than 100% from its pandemic-lows hit in March 2020, investors have also said stocks might be due for a significant drop.

“It’s a wall of uncertainty that’s surrounding markets, when markets are priced for perfection. People are taking money off the table,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

“There are other things that will probably cushion the market from any severe pullbacks. A lot of companies have raised their dividends, buybacks are back… whatever decline we’re headed for over the next few days, it’ll probably not be exaggerated.”

Data from the labor department showed the number of people filing for unemployment benefits hit a 17-month low last week, indicating that a job market recovery was well underway.

Strong second-quarter earnings continued to roll in, with Macy’s Inc and Kohl’s Corp rising 6.0% and 4.3%, respectively, after they raised their annual outlook as increasing vaccination rates bought more U.S. shoppers back to their stores.

Investors are now awaiting the Fed’s annual research conference in Jackson Hole, Wyoming, next week for any cues on the central bank’s next steps.

Many analysts expect the Fed to announce its plan to taper asset purchases as early as the Sept. 21-22 policy meeting.

U.S. S&P 500 E-minis were down 32.5 points, or 0.74%, at 08:30 am ET. Dow E-minis were down 303 points, or 0.87%, while Nasdaq 100 E-minis were down 89.5 points, or 0.6%

Shares of Robinhood Markets Inc tumbled 9.9%, after the owner of the popular trading app warned a trading frenzy among small-time investors that boosted its second-quarter revenue would slow down in the coming months.

Travel-related stocks including cruiseliners and airlines fell on fears the spread of the Delta variant of coronavirus could spark more travel restrictions.

Technology-related stocks Apple Inc, Amazon.com Inc and Facebook Inc were among the smallest decliners in early trading. The stocks far outperformed the S&P 500 last year as their products saw higher demand during widespread COVID-19 lockdowns.

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