A trader works on the floor at the New York Stock Exchange (NYSE) in New York, August 20, 2021.
Andrew Kelly | Reuters
The S&P 500 fell from a record on Thursday as investors await more details on the Federal Reserve’s plan to pull back on monetary stimulus from the central bank’s annual symposium on Friday.
Traders were also eying new developments in Afghanistan, which added to the risk-off sentiment. There was an explosion outside of the Kabul airport on Thursday, according to the Pentagon. Three U.S. troops were injured in what appeared to be a suicide bomb, Reuters reported.
The Dow Jones Industrial average lost 121 points, or 0.3%. The S&P 500 retreated by 0.5% and the Nasdaq Composite fell 0.5%. Both the S&P 500 and the Nasdaq Composite closed at records Wednesday with the S&P 500 briefly trading above 4,500 for the first time at one point.
Mixed economic data did little to change the sour mood. Weekly initial jobless claims came in at 353,000, the Labor Department reported Thursday morning, a slight increase from the prior week’s 349,000 and more than economists expected.
Economic growth totaled 6.6% in the second quarter, according to the Commerce Department’s second reading released on Thursday. That was a slight revision upward from the 6.5% annual increase previously reported, but slightly lower than the Dow Jones estimate of 6.7%.
The highly anticipated Jackson Hole symposium from the Fed will be held virtually this year on Friday, with many central bank speakers making remarks to the media beginning Thursday. At the event, central bankers could provide updates on their plan around tapering the Fed’s monthly bond purchases.
Esther George, President of the Kansas City Fed, told CNBC Thursday morning that “given the progress we’ve seen,” Fed tapering is “appropriate,” though she didn’t specify when she thinks it should start.
“When you look at the job gains we saw last month, the month before, you look at the level of inflation right now, I think it would suggest that the level of accommodation we’re providing right now is probably not needed in this scenario,” she said. “So I would be ready to talk about taper sooner rather than later.”
James Bullard, St. Louis Fed President, said the central bank should begin those efforts soon and wrap them up by the end of March to prevent the U.S. economy from overheating.
“I think we want to get going on taper. Get the taper finished by the end of the first quarter next year,” Bullard told CNBC Thursday. “And then we can evaluate what the situation is and we’ll be able to see at that point whether inflation has moderated and if that’s the case we’ll be in great shape. If it hasn’t moderated, we’re going to have to be more aggressive to contain inflation.”
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Chairman Jerome Powell is slated to make remarks on Friday as part of the Fed’s summit. The Federal Reserve has been purchasing at least $120 billion of bonds per month to curb longer-term interest rates and jumpstart economic growth in reaction to the pandemic.
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