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For all the talk about how the Federal Reserve was going to bore markets into submission with endless talk about tapering, it’s noteworthy that the S&P 500
SPX,
suffered its worst decline in a month on Wednesday. There wasn’t really anything shocking or surprising in the minutes from the Fed’s July meeting that was released on Wednesday, but the message is clear enough: The bond buying is going to stop, barring an economic catastrophe.
The losses looked set to continue on Thursday, and analysts are looking at the strength of the U.S. dollar
DXY,
— up to a nine-month high — as one factor why.
Kit Juckes, macro strategist at Société Générale, said he thinks short-term interest rates
TMUBMUSD02Y,
are what’s moving markets.
“Chances are that the dollar will go on benefiting from the focus on the Fed, but can’t go very far, given how far away the first rate still is. Maybe that means that the real driver will be positioning — the speculative market was bearish and short of the dollar a few months ago and is now square, at least, if not already long,” he wrote.
“I’m tempted to think that the recent pattern of marginal new highs by the dollar followed by a period of choppy trading, will continue, and will edge EURUSD
EURUSD,
down to 1.16, or even a bit below that, in the coming couple of weeks,” he said.
Marshall Gittler, head of investment research at BDSwiss Holding, noted the dollar’s strength even as bond yields
TMUBMUSD10Y,
fell. “That either means the dollar is trading as a safe-haven currency — which it hasn’t been recently — or it’s the famous ‘monetary policy divergence’ theme in play. If the latter, that would suggest further dollar strength on the horizon,” he said.
The buzz
A new U.K. study based on the country’s real-world experience found diminished effectiveness from coronavirus vaccines to the delta variant, and also found that the initial outperformance of two doses of the vaccine from Pfizer
PFE,
and BioNTech
BNTX,
eroded after four to five months to the level of two doses of the Oxford-AstraZeneca
AZN,
vaccine. Separately, economists at Goldman Sachs lowered their third-quarter U.S. growth forecast to 5.5% from 9%, though they raised their expectations for the next four quarters.
The economics docket includes the latest weekly jobless claims figures, and the Philadelphia Fed manufacturing index for August.
Retailers Macy’s
M,
and Kohl’s
KSS,
each handily beat earnings forecasts. After the close, chip-equipment maker Applied Materials
AMAT,
reports results.
Robinhood Markets
HOOD,
slumped, as the online broker issued a cautious outlook, saying third-quarter trading volumes would be lower.
Graphics microchip maker Nvidia
NVDA,
rose in after-hours trade after reporting record data-center and gaming revenue, as it struggles to complete the acquisition of microchip designer ARM from SoftBank.
Goldman Sachs
GS,
reached a $1.9 billion deal to buy NN Investment Partners, which has $355 billion in assets under supervision.
The markets
More red on the screen as U.S. stock futures
ES00,
NQ00,
traded lower.
Crude-oil
CL.1,
and copper
HG00,
futures each slumped by 3%. The CAC 40 lost over 2% in Paris, as in addition to the growth worries, luxury-goods makers including LVMH Moet Hennessy
MC,
dropped on worries over China’s crackdown on the wealthy.
Random reads
Comedian Larry David and legal scholar Alan Dershowitz are no longer friends, it seems.
A new high (low?) in over-the-top weddings. (The groom, it should be noted, can absolutely afford it.)
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