Stock futures gave back gains after equities’ best day since July, with some volatility returning to markets as regulatory concerns in China at least temporarily offset optimism over the U.S. economic recovery.
Contracts on the S&P 500 declined. A day earlier, stocks posted a back-to-back session of advances, with equity investors looking past concerns over China Evergrande’s debt crisis, uncertainty over monetary and fiscal policy and ongoing debates in Washington.
Renewed signs of an escalating crackdown on cryptocurrencies in China sent prices of the major digital tokens tumbling Friday morning. Bitcoin (BTC-USD) fell another 5% to hover just above $41,200, while Ethereum (ETH-USD) sank nearly 10% to below $2,800. This came after the People’s Bank of China (PBOC) issued a statement barring domestic and overseas financial institutions and payments companies from providing cryptocurrency transactions and other services in China.
Earlier this week, cyclical stocks including the industrials, energy and financials sectors outperformed after the Federal Reserve signaled the economic recovery “has made progress” toward the central bank’s goals on employment and inflation. The Fed has also now primed markets for its asset-purchase tapering to begin as soon as November against the improving economic backdrop.
“It’s not a surprise to me that the Fed is moving forward with the tapering,” Jeff Schulze, ClearBridge chief investment strategist, told Yahoo Finance Live on Thursday. “If you think about the three month moving average … we’re at about 740,000 jobs created per month. That is stronger than anything we’ve ever seen pre-COVID.”
“For the first time in a long time, markets are cheering on a marginally more hawkish Fed,” he added. “It’s becoming clear to participants that we are moving past peak Delta, you’re going to see a very strong re-acceleration over the next couple of quarters, and that’s going to go a long way to keep earnings moving forward.”
Treasury yields held onto gains from Thursday, with the benchmark 10-year yield topping 1.41% to reach its highest level since July. The move higher in yields, however, did not appear to spook equity investors, nor did it weigh heavily on some of the technology and growth stocks that had taken a hit as rates rose earlier this year. The Nasdaq posted a gain of more than 1% as of Thursday’s close.
According to Mark Haefele, UBS Global Wealth Management’s chief investment officer, given the still-low Treasury yields seen during the pandemic, “Only a rise in real yields of more than 50 [basis points] over three months would likely weigh on equity returns, particularly in emerging markets.”
Other pundits also pointed to the Fed’s more constructive view on the recovery as a main factor helping send stocks on a late-week rally.
“A hawkish Fed was surprisingly welcomed by equity markets as it was seen as a confirmation of continued strength and ‘substantial progress’ made by the economy in recovering from the COVID shock,” Anu Gaggar, global investment strategist for Commonwealth Financial Network, wrote in an email.
“While we are far from the end of [quantitative easing] and near-zero rates, the tide seems to be beginning to change,” Gaggar added. “So far, the market had welcomed bad news as good news, but a market reacting to signs of an economy able to stand on its own without the monetary policy crutches is a refreshing change.”
7:21 a.m. ET Friday: Stock futures dip, giving back some of Thursday’s advances
Here’s where markets were trading ahead of the opening bell:
S&P 500 futures (ES=F): -17 points (-0.38%), to 4,421.00
Dow futures (YM=F): -107 points (-0.31%), to 34,537.00
Nasdaq futures (NQ=F): -80.25 points (-0.52%) to 15,223.25
Crude (CL=F): -$0.18 (-0.25%) to $73.12 a barrel
Gold (GC=F): +$5.10 (+0.29%) to $1,754.90 per ounce
10-year Treasury (^TNX): +0.8 bps to yield 1.418%
6:27 p.m. ET Thursday: Stock futures hold onto gains
Here were the main moves in markets as of Thursday evening:
S&P 500 futures (ES=F): +3.25 points (+0.07%), to 4,441.25
Dow futures (YM=F): +15 points (+0.04%), to 34,659.00
Nasdaq futures (NQ=F): +2.5 points (+0.02%) to 15,306.00
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter