Stocks buckle, dollar slips as investors mull Fed action
Global equity markets and gold slumped, while the dollar eased on Thursday after the Federal Reserve reminded investors of the long slog ahead for a full recovery that was reinforced by data showing persistently high claims for U.S. unemployment benefits.
U.S. Treasury yields dropped and the yield curve flattened as investors expressed disappointment that after its policy-setting meeting on Wednesday the Fed did not unveil more measures to stimulate the economy.
Wall Street’s main indexes tumbled as the technology sector and related stocks slid further, with Apple Inc and Amazon.com Inc among the biggest drags on the Nasdaq.
The number of Americans filing new claims for unemployment benefits fell less than expected last week and applications for the prior period were revised up, suggesting the labor market recovery had shifted into low gear amid fading fiscal stimulus.
The Fed is doing all it can without appearing to be in panic mode, said Rick Meckler, a partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey.
Investors face few alternatives other than stocks so some are taking profits ahead of the U.S. presidential election in November from this year’s unexpected gains after the impact of the coronavirus pandemic, he said.
“The Fed has been the most predictable part of the U.S. government. They did exactly what they told you they were going to do, they’ve been doing exactly what they said they were going to do for now well over a year,” Meckler said.
“If there’s more stimulation to come it’s going to have to come from Congress and the president, and on that front we seem probably stymied until the election.”
Fed Chair Jerome Powell indicated a long road to “maximum employment” but some investors were disappointed by the lack of further stimulus plans even as policy-makers pledged to keep interest rates near zero for a prolonged period.
MSCI’s global benchmark for equity markets fell 0.66% to 571.19, while its emerging markets index fell 1.04%.
In Europe, the broad FTSEurofirst 300 index dropped 0.40% to 1,440.42.
On Wall Street, the Dow Jones Industrial Average fell 0.16%, the S&P 500 lost 0.51% and the Nasdaq Composite dropped 0.98%.
Traders were also taking in Bank of Japan and Bank of England meetings and plenty of emerging market action, but the tone was set by the events overnight at the Fed and in the trenches of the tech war.