Dow futures nudge high after Wednesday's Fed-induced sell-off

Dow futures nudge high after Wednesdays Fed induced sell off

January 7, 2022: -Dow futures edged higher in early trading on Thursday, recovering after worries regarding tighter monetary policy led to the first losing regular trading session of the year.

Futures on the Dow Jones Industrial Average gained 104 points or 0.29%. S&P 500 futures were changed, and Nasdaq 100 futures decreased 0.37%.

Energy shares helped boost the market in early action as crude prices rose 1.5%. Marathon Oil gained 2.6%, Occidental Petroleum was up 2.2%, and ExxonMobil rose 1.3%.

Shares of Walgreens Boots Alliance gained 2.7% in premarket trading after reporting solid earnings for its latest quarter driven by customers going to stores for Covid treatments and at-home tests. Meanwhile, Bed Bath & Beyond shares fell about 8% after reporting a loss for its fiscal third quarter.

Rate-sensitive stocks were higher a day after minutes from the Federal Reserve’s December meeting revealed the central bank is getting ready to remove its financial help more quickly than anticipated. Officials discussed to reduce the Fed’s balance sheet in another move to dial back its pandemic-era easy monetary policy.

As investors digested the minutes Thursday morning, the 10-year Treasury yield pushed above 1.75%, after ending last year at 1.51%.

Bank of America saw its shares increase by 1.5% premarket, Citigroup rose by 1.4%, and Wells Fargo gained at 1.3%.

The Fed’s plan to reduce the number of Treasurys and mortgage-backed securities it holds comes as it is tapering its bond purchases and is set to hike interest rates after the taper concludes.

“Almost every participant agreed that it would likely be appropriate to initiate balance sheet runoff at some point after the first increase in the target range for the federal funds rate,” the minutes stated.

Stocks slid after the release of the minutes. The blue-chip Dow Jones Industrial Average closes 392.54 points, or 1.07%, lower after hitting an intraday record earlier in the session. The S&P 500 fell 1.94%. Since February, the tech-heavy Nasdaq saw its most significant one-day loss, losing 3.34%.

“If you ride a wave of liquidity to the upside and that liquidity starts to go away, I don’t think it’s surprising that you’re going to see a reaction,” said Kathy Jones, head of fixed income at Charles Schwab.

“This was the year we were going to transition from straightforward monetary policy and fiscal policy to less easy monetary and less expansive fiscal policy. That has to have an impact on risk assets that have risen because the discount rate was so low,” Jones added.

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Dow futures nudge high after Wednesday's Fed-induced sell-off
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Dow futures nudge high after Wednesday's Fed-induced sell-off
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Dow futures edged higher in early trading on Thursday, recovering after worries regarding tighter monetary policy led to the first losing regular trading
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