Traders Seek Havens on Kabul Blast, Hawkish Fed: Markets Wrap

U.S. equities fell Thursday as markets turned cautious after explosions in Afghanistan and ahead of a Federal Reserve gathering that may provide more clues about its approach to paring stimulus.

The S&P 500 and Nasdaq 100 slid after reports of U.S. and civilian casualties from blasts outside the Kabul airport as the U.S. attempts to evacuate the area. The decline came after non-voting members of the Federal Open Market Committee also made hawkish monetary comments, urging the Fed to start tapering its asset purchase program. Energy shares led the decline, while Treasury yields pared gains and gold rose.

Michael O’Rourke, chief market strategist at Jonestrading, said the quick drop in shares was likely a culmination of the morning news, including the uncertainty created by the explosions and the Fed commentary ahead of Chairman Jerome Powell’s speech at the Jackson Hole symposium.

Views are split on whether the address Friday will provide a clearer guide on tapering emergency Fed support. While the ongoing economic rebound and elevated inflation add to the case for starting policy normalization, the fast-spreading delta virus strain threatens a slower pace of recovery than some had expected.

If Powell fails to hint at when a taper announcement will occur, all eyes will next be on the August jobs report, said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance. The latest jobless claims and annualized gross domestic product data Thursday slightly missed estimates.

“A strong jobs report on Sept. 3 will lead to increased speculation that the Fed will announce their taper plans at the September FOMC meeting,” he said. “However, any weakness or disappointment in that report will push consensus back to the next Fed meeting.”

The Stoxx Europe 600 Index fell, dragged lower by basic resources and travel, while MSCI Inc.’s Asia-Pacific gauge snapped a three-day rally. WTI crude oil dipped below $68 a barrel. Bitcoin slid to around $47,000.

Here are some events to watch this week:

• Fed officials participate in the Jackson Hole Economic Policy Symposium on Friday
• July U.S. personal income and spending data Friday. Investors will scrutinize the personal consumption expenditures price index, an inflation measure closely watched by the Fed.

Some of the main moves in markets:

Stocks

• The S&P 500 fell 0.3% as of 11:37 a.m. New York time
• The Nasdaq 100 fell 0.3%
• The Dow Jones Industrial Average fell 0.2%
• The Stoxx Europe 600 fell 0.3%
• The MSCI World index fell 0.3%

Currencies

• The Bloomberg Dollar Spot Index rose 0.2%
• The euro fell 0.1% to $1.1760
• The British pound fell 0.3% to $1.3720
• The Japanese yen was little changed at 110.06 per dollar

Bonds

• The yield on 10-year Treasuries advanced one basis point to 1.35%
• Germany’s 10-year yield was little changed at -0.41%
• Britain’s 10-year yield was little changed at 0.59%

Commodities

• West Texas Intermediate crude fell 1.2% to $67.56 a barrel
• Gold futures rose 0.3% to $1,796.60 an ounce

Source