Big Tech tugs Wall Street back from record high levels
Wall Street receded from record high levels on Wednesday, spooked by worries that the Delta coronavirus variant could blunt the economy’s recovery and on uncertainty about when the Federal Reserve may pull back its accommodative policies.
With few negative catalysts to dampen the risk-on sentiment, all three major U.S. indexes crept modestly higher.
“We’re in a ‘Goldilocks’ scenario with stocks right now, and the Fed is likely to remain accommodative,” said Oliver Pursche, senior vice president at Wealthspire Advisors, in New York. “By the same token we’ve had strong corporate earnings with forward guidance being lifted.”
“And while in July consumer sentiment weakened, there’s confidence that the consumer is going to continue to push things forward,” Pursche added.
Rising U.S. Treasury yields boosted rate sensitive financials, and sectors that stand to gain most from economic revival - smallcaps, chips and transports - were outperforming the broader market.
Days after the Food and Drug Administration gave full approval to the Pfizer-BioNTech COVID-19 vaccine, companies and institutions are moving toward either mandated inoculation, or penalization for those who forego the shot.Bullard’s interview will be followed by the minutes of the Federal Reserve’s July 27-28 policy meeting due at 2 p.m. ET. The minutes are likely to be poured over for clues to the timing of the central bank’s planned tapering of its monthly asset purchases of $120 billion in Treasurys and mortgage-backed securities.
News reports earlier this week said policy makers were nearing an agreement to begin scaling back purchases by November, with The Wall Street Journal reporting some policy makers were looking to end purchases by mid-2022.
A formal announcement on tapering is expected at either next week’s symposium on monetary policy in Jackson Hole, Wyoming, or the Fed’s September meeting.
Markets have been wobbly since a string of record closes for the S&P 500 index and the Dow, representing a notable comeback for equities that had looked wounded by questions about the impact of the spread of the coronavirus delta variant in the world’s two largest economies, the U.S. and China.
Monetary policy uncertainty, questions about corporate earnings growth in coming quarters, and brewing troubles in the Middle East, highlighted by the takeover of Afghanistan by the Taliban, has created some headwinds for bullish investors.
Still, some note that “it is quite impressive that U.S. markets are still within touching distance from record highs, defying an imminent withdrawal of Fed liquidity as well as a worsening delta outbreak in America and Asia, even with valuations being so stretched,” wrote Marios Hadjikyriacos, senior investment analyst at XM, in a note.