Stocks were steadying after an ugly selloff in the last session, though equities around the world tumbled to follow Wall Street’s Wednesday performance.
Futures for the Dow Jones Industrial Average indicated an open less than 20 points or 0.1% higher, after the index dropped 392 points Wednesday to close at 36,407. The wider S&P 500 was set to start just below flat, while futures for the Nasdaq signaled an open 0.3% lower. The tech-heavy index bore the brunt of the market rout Wednesday, plunging 3.3%, leading it to the worst three-day start to a calendar year since 2008.
Investors’ nerves were shaken Wednesday by December meeting minutes from the Federal Open Market Committee suggesting a hawkish turn for the Federal Reserve. Minutes show the central bank’s monetary policy body considering earlier and faster interest-rate increases and a quicker start to policy tightening through the normalization of its massive balance sheet.
Overseas markets were closed before the minutes were released, so the response of traders in Europe and Asia was delayed until Thursday. Tokyo’s Nikkei 225, which analysts say has been closely correlated with the Nasdaq, dropped 2.9%. The pan-European Stoxx 600 was 1.2% lower.
“The December FOMC minutes last night shattered the early year calm in financial markets,” said Jim Reid, a strategist at Deutsche Bank in the U.K.
“The shift in sentiment came against the backdrop of continued rises in sovereign bond yields,” Reid added. “There are a few other big questions outstanding, including how many rate hikes would take place before quantitative tightening begins and how Treasury and mortgage-back security holdings would be treated during runoff.”
The Fed minutes came after a rally in recent days amid positive signs for the U.S. economy, which has been echoed by a rise in Treasury yields. The yield on the benchmark 10-year U.S. note was up again Thursday to near 1.73%; it started the week at 1.54%.
The move in bonds exacerbated a selloff in tech stocks, because higher yields tend to discount the present value of future cash flows; the valuations of many tech companies rely on the notion of profits years into the future.
Bitcoin and other cryptocurrencies continued to feel the pressure when the leading digital asset sold off after the Fed minutes were released. Bitcoin was down more than 9% to below $42,700, according to price data from CoinDesk.
Write to Jack Denton at email@example.com