The Thursday Market Minute
- Global stocks turn lower as taper talk, cryptocurrency rout sap risk sentiment ahead of weekly jobless claims.
- Minutes from the Fed's April meeting hinted at near-term discussions to trim monthly bond purchases, in what could be the first step in normalizing interest rate policy.
- Bitcoin stabilizes near the $39,000 mark following yesterday's 30% plunge/rally that may have hived more than $10 billion from global investor accounts.
- Benchmark 10-year note yields hold at 1.656% while the dollar index slips modestly lower to 90.107
- CDC data shows 125.5 million Americans have now been fully vaccinated against the coronavirus, with around 277.3 million doses administered as of Wednesday.
- U.S. equity futures suggest a softer open on Wall Street ahead of first quarter earnings from Kohl's and weekly jobless claims data at 8:30 am Eastern time.
U.S. equity futures are pointing to a mixed open Wall Street Thursday as investors react to a potential change in the Federal Reserve's low-rate policy stance and broader volatility linked to yesterday's crash in the cryptocurrency markets.
Weekly jobless claims fell to a fresh post-pandemic low of 444,000, the BLS said, although continuing claims edged 110,000 higher to 3.751 million.
Minutes from the Fed's April interest rate meeting indicated that "a number" of members of the Open Markets Committee, which calibrates interest rate policy for the central bank, thought it "it might be appropriate at some point in upcoming meetings to begin discussing a plan for adjusting the pace of asset purchases" if the economy were to continue its rapid recovery and inflation were to continue to accelerate.
A change in the Fed's $120 billion in monthly asset purchases -- which market professionals describe as 'tapering' -- would be the first step towards a boost in the Fed Funds rate, which currently sits at a record low range of between 0% and 0.25%.
"We believe the Fed intends to be patient and keep rates lower for longer, but by the end of this year the unanimous desire of the committee to keep rates low may dissipate and more disagreement may spill out into the public eye," said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance in Charlotte, North Carolina.
"In the meantime, cyclicals should have room to run and the growth versus value debate will rage on, while we wait for the Fed to change its collective mind on rates," he added.
The change in tone pulled U.S. stock lower yesterday afternoon and looks to hold back bulls heading into the Thursday session, even as bond markets -- ostensibly the first asset class that would react to a tapering of purchases -- remained relatively muted following a quick jump in the wake of the minutes' release last night.
Wednesday's cryptocurrency crash, which saw bitcoin prices plunge -- and then rally -- by as much as 30%, has also sapped risk appetite as investors look for a spillover into mainstream markets triggered by an estimated $9.2 billion in loses from the carnage in digital currencies.
Bitcoin prices, which hit a four-month low of just under $30,000 yesterday, have stabilized at the $39,000 level in early Thursday dealing, but could be susceptible to another sharp decline in the coming days.
In the meantime, futures suggest another weaker open on Wall Street with contracts tied to the Dow Jones Industrial Average indicating a 105 point opening bell decline and those linked to the S&P 500 priced for a 6.5 point retreat.
Nasdaq Composite futures are looking at a more modest 15 point gain as benchmark 10-year note yields hold at 1.656% following the weekly jobless claims data.
Oil prices were also active, with crude retreating for a third consecutive session amid a solid 1.3 million increase in domestic stockpiles, ongoing demand concerns in Asia and the prospect of a breakthrough in U.S. talks with Iran that could see its supply return to global markets.
WTI futures for July delivery were marked $1.03 lower at $62.32 per barrel while Brent contracts for the same month, the global benchmark, slid $1.18 cents to $65.48 per barrel.
In Europe, solid earnings and re-opening bets were offset by the fastest reading for factory gate inflation in Germany -- the region's biggest economy -- in nearly a decade, with the Stoxx 500 falling 0.03% on the session and Britain's FTSE 100 down 0.3% in London.
Overnight in Asia, the PBOC's decision to keep its benchmark lending rate unchanged for the thirteenth straight month provided some support for regional markets, but the prevailing 'risk off' dynamic left the MSCI ex-Japan benchmark 0.06% lower on the session while the Nikkei 225 closed 0.2% higher in Tokyo thanks in part to the biggest increase in exports since 2010.