Stocks Fall Across Sectors, Futures Lower Ahead of FOMC Minutes

Stocks Fall Across Sectors, Futures Lower Ahead of FOMC Minutes

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Key Takeaways

• Stocks remain subdued on Wednesday, following yesterday’s losses
• FOMC minutes to shed light on Fed’s views on inflation and higher interest rates

US stocks slipped on Tuesday across the board as investors retreated from nearly all sectors, real-economy stocks in particular. The banking sector, shares of industrial firms, and energy companies, all declined, dragging the S&P500 to realize a loss on Tuesday with all four sectors falling over 1% each.

The market accelerated to the downside near the end of the session on Tuesday, resulting in major US indexes ending the day in negative territory. The S&P500 was the biggest decliner yesterday, losing 0.85%, or 35.46 points, to close at 4,127.83. The Dow Jones Industrial Average slipped 0.78%, or 267.13 points, to 34,060.66. And the tech-focused Nasdaq Composite dropped 0.56%, or 75.41 points, to end the session at 13,303.64.

Relatively choppy trading has been narrating the stock market recently as traders and investors are trying to make sense of surging inflation and how it translates to stocks’ valuations. Market participants are now in the process of figuring out whether inflation expectations will persist or prove temporary, as the Fed has suggested. If the Federal Reserve considers inflation pressures are here to stay, it could raise interest rates sooner than planned for the heated economy to take a breath.

Positive Signs for the European Economy

The ongoing economic rebound that is causing inflation is backed by the Fed’s efforts to buoy the economy, alongside the federal government which is injecting trillions of dollars into the market through Joe Biden’s stimulus packages. As a result, companies closely tied to the economy have benefited this year, such as banks, travel, and leisure companies, and others, relying on consumer spending.

Tech stocks are on the other end of high inflation and an economic reopening. As they are particularly sensitive to higher prices and rising inflation concerns, investors have retreated from technology, pushing the Nasdaq Composite lower by over 4% in the last 30 days. On Tuesday, high-flying tech stocks closed lower, including Facebook, Amazon, Apple, Netflix, and Google-parent Alphabet.

Equity futures on Wednesday remain subdued as investors are taking a risk-off approach to the market ahead of the FOMC minutes. Dow futures, S&P futures, and Nasdaq futures are all tilted to the downside by roughly 0.40% apiece.

Later on Wednesday, the Federal Open Market Committee publishes the minutes from its meeting two weeks ago. Investors will be looking to find any hints as to when the Federal Reserve could start tapering its bond purchases. The market will also be scrutinizing the minutes for insights over Fed’s views on rising inflation and prospects for higher interest rates.

Overseas, stocks in Europe on Wednesday are fairly flat after Tuesday’s quiet trading session ended relatively unchanged for major European indexes. The eurozone economy has begun to show signs of bouncing back from the double-dip recession this month.

Many European governments are now in the early stages of reopening their economies, which is expected to fuel growth and bring back social life and business activity. Consumer spending is seen as a primary tool to drive the rebound in the second quarter as more restrictions are being lifted across the old continent