Stock futures were lower on Friday as the markets close out a losing week driven by fears about what happens when the Federal Reserve begins to pull back its stimulus.
Dow Jones Industrial Average futures dropped 132 points, or 0.4%. Futures on the S&P 500 shed 0.4% and Nasdaq 100 futures lost 0.2%.
All three major stock indexes are on track to close the week lower. The S&P 500 and the Dow are both on track to post their worst weekly performances since June, while the Nasdaq is set to see its worst week since May. The S&P 500 is down 1.4% for the week through Thursday, while the Dow is off 1.75% and the Nasdaq Composite is 1.9%. lower.
The Federal Reserve’s minutes from its July meeting released this week showed the central bank is willing to start reducing its monthly asset purchases this year. Investors have sold equities and commodities this week and bought bonds on fears the move by the Fed may upend a global economy already under stress by the delta variant.
WTI crude oil has tumbled nearly 8% and copper has lost more than 7% on the fears, taking energy and materials stocks with them. The 10-year Treasury yield was at 1.24% on Friday morning, down from 1.28% at the end of last week and 1.78% in late March.
“With Fed tapering coming while delta variant keeps spreading, the transition away from liquidity/policy regime to more mid-cycle markets means we may experience a bumpier ride ahead,” wrote Barclays equity strategists in a note. “Market narrative may thus turn more cautious, as concerns about peaking growth rates, Delta variant and policy mistake may prove headwinds, at a time where seasonality and technicals are unfavourable.”
Tesla shares were slightly higher in premarket after Elon Musk’s electric car maker had an AI day, where it unveiled a new custom chip and plans to build a humanoid robot. Tesla shares are off 6% this week on concern about slowing growth in one of its key markets China.
The S&P 500 snapped a two-day losing streak in Thursday’s regular trading session while the Dow ended its third-straight day in red.
After volatile trading, the S&P 500 closed 0.1% higher. The Nasdaq Composite added 0.1%. The Dow bucked the trend and shed 66.57 points.
“Against a backdrop of thin liquidity as investors take summer vacations, minor stock market corrections are to be expected in a market that is pricing in peak earnings, extended price-to-earnings ratios and elevated economic growth expectations,” Richard Saperstein, chief investment officer at Treasury Partners, said.
The second quarter earnings season is largely in the rearview mirror, but a few companies are still on deck. Deere and Foot Locker are set to provide quarterly updates on Friday before the market opens.
—CNBC’s Pippa Stevens contributed reporting.
