S&P 500 falls slightly from record as investors await Fed summit

S&P 500 falls slightly from record as investors await Fed summit

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 slightly Thursday morning, following the benchmark’s rally above the 4,500 level for the first time ever in the prior session, as investors await the Federal Reserve’s annual symposium on Friday.

The S&P 500 lost 0.01% and the Nasdaq Composite fell 0.03%. The Dow Jones Industrial Average gained about 47 points, or 0.1%.

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. Economists polled by Dow Jones expected 350,000 Americans filed for unemployment last week.

Economic growth totaled 6.6% in the second quarter, according to the Commerce Department’s second estimate 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 Federal Reserve 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 monetary stimulus.

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.”

Salesforce is leading the Dow, with shares 5% higher on fiscal second-quarter earnings and forward guidance that exceeded analysts’ estimates. Ulta Beauty rose more than 1% after reporting strong results.

Zoom Video shares jumped more than 3.8% after Morgan Stanley upgraded the stock and predicted 18% upside.

On Wednesday, the S&P 500 gained 0.22% to close at a record, led by stocks that benefit from the economic reopening like airlines, cruise lines and financials. The 500-stock average crossed the 4,500 threshold for the first time ever on Wednesday, but closed below that level. The benchmark is up 105% from its pandemic low.

The Nasdaq Composite rose 0.15%, also notching a record close. The Dow Jones Industrial Average rose 39 points.

“While we remain believers in the secular bull market for US equities, we have suggested raising some cash in U.S. equities given lower highs (aka bearish divergences) across a variety of indicators, weaker August-October seasonality, the Presidential Cycle moving into its weakest period and bearish signals from margin debt,” wrote Stephen Suttmeier, technical research strategist at Bank of America.

The yield on the benchmark 10-year Treasury note rose as high as 1.352% Wednesday as concerns about slowing growth from the delta variant eased, hitting its highest level since earlier in the month when it yielded as much as 1.364%.

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“The 10-year Treasury bond yield has continued rising in recent days and exploded higher in [Wednesday’s] trading, sending a strong message that the Delta variant of Covid may be peaking in the U.S. which should improve confidence, restart economic reopenings, and drive investment flows toward small caps and cyclicals,” said Jim Paulsen, chief investment strategist at the Leuthold Group.

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.

“Expect investors to keep an eye on the Fed’s symposium the rest of this week for any comments about tapering or timing for interest rate hikes,” said Paulsen. “Either unexpected commentary from the Fed or a failure or success in scaling 4500 could bring additional volatility to the stock and bond markets.”

Several companies report quarterly earnings on Thursday including Dell Technologies, Gap, HP and Abercrombie & Fitch.

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