U.S. stock futures slumped on Friday, amid fears over the delta variant of coronavirus, the imminent tapering of Federal Reserve bond buying and China’s restrictions on its domestic economy.
What’s happening
- Futures on the Dow Jones Industrial Average YM00, -0.41% fell 164 points;
- Futures on the S&P 500 ES00, -0.34% lost 0.5%;
- Futures on the Nasdaq 100 NQ00, -0.03% slipped 0.3%.
On Thursday, major markets ended mixed, with the S&P 500 SPX, +0.13% and Nasdaq Composite COMP, +0.11% registering small gains, while the small-cap Russell 2000 RUT, -1.22% ended 1.2% lower.
What’s driving markets
With no U.S. economic data and few corporate news releases, traders will be left to focus on the developments from earlier this week.
“The key 10-year yields TMUBMUSD10Y, 1.231% were barely changed as equities reversed: suggesting that the move was more about the top-down risks to growth building, specifically around the delta variant, after several weeks when the bottom-up corporate news has provided support,” said Ian Williams, a strategist at U.K. broker Peel Hunt.
Michael Hartnett, chief investment strategist at Bank of America, says the market is acting in a recessionary fashion.
The U.S. yield curve, as measured by the gap between the 5- TMUBMUSD05Y, 0.755% and 30-year TMUBMUSD30Y, 1.856% bonds, is at a one-year low; global stocks excluding U.S. techs are unchanged the last eight months; emerging market stocks are negative this year; small cap stocks are breaking down; a range of commodities have fallen by double-digit percentages from highs; and the top four sectors of the S&P 500 in the second half of the year are utilities, health care, REITs and staples.
“I spent $32 trillion and all I got was this lousy W-shape recovery,” he quipped.
The Hang Seng HSI, -1.84% suffered through another rough session, falling 1.8% in Hong Kong, as the index is now 19% below its February highs on the continued regulatory crackdown in China. China on Friday passed a strict data privacy law that’s due to take effect in November.
The VIX VIX, +5.81% measure of stock market volatility jumped in the early hours, and the dollar DXY, +0.12% reached a fresh nine-month high.
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