A trader works on the trading floor of the New York Stock Exchange (NYSE) in Manhattan, New York City, USA, 10 August 2021.
Andrew Kelly | Reuters
Major U.S. stock indices struggled amid concerns that the Federal Reserve might remove incentives this year, which could curb an economy battered by the spread of the Covid Delta variant.
The S&P 500 traded near the flatline. The Dow Jones Industrial Average lost around 120 points, or 0.3%. The Nasdaq Composite gained 0.2%.
The S&P 500 and Dow posted a second consecutive day of losses on Wednesday, with the Dow dropping more than 380 points for its worst performance in over a month. Minutes from the Fed's July meeting showed that the central bank had begun cutting its monthly bond purchases by $ 120 billion before the end of the year.
"The recent fit of market fear appears to be a combination of investor dizziness, finding an excuse to take profit, and the bumpy road to reopening the economy, with new flavors of Covid on the rise," said Art Hogan, chief market strategist at National Securities, it says in a note.
Defensive stocks such as consumer staples and healthcare rose, helping to contain the decline. Procter & Gamble and Merck each gained around 1%.
Stocks of tech stocks like Microsoft, Netflix and Nvidia also hit the green. Nvidia stock rose inches after the chip giant's quarterly earnings and revenue surpassed Wall Street estimates amid strong graphics card sales.
Stocks closely related to the economy resulted in losses. The steel manufacturer Nucor lost about 3%. Oil companies Devon Energy and Occidental Petroleum each lost more than 5%. Bergmann Freeport-McMoRan fell about 6%. General Motors was down more than 3%. Reopening games like airlines and hotels were also lower.
WTI crude fell more than 3% to around $ 63 and copper lost more than 2% on worries about global growth without the support of Fed bond purchases. The 10-year government bond yield fell 3 basis points to 1.243%. (1 basis point corresponds to 0.01%.)
Goldman Sachs cut its economic growth forecast for the current quarter from 9% on Wednesday evening to 5.5%, adding to the negative sentiment. The company also sees higher-than-expected inflation for the rest of the year.
"The influence of the delta variant on growth and inflation is proving to be somewhat greater than we expected," wrote Jan Hatzius, chief economist at Goldman Sachs, in the press release.
Investors digested mixed economic data released Thursday. Initial jobless claims hit a new pandemic-era low of 348,000 last week, falling more sharply than expected the week before.
The Philadelphia Fed Index, a measure of growth in the region, was still showing expansion, but at a worse than expected level. The August value was 19.4 and thus below the 22 consensus of economists polled by Dow Jones.
Robinhood stock fell 9% after its first earnings report as a publicly traded company. The app warned investors that a slowdown in trading could hurt third quarter results.
"For the three months ending September 30, 2021, we expect seasonal headwinds and lower trading activity across the industry to result in lower revenues and significantly fewer refinanced accounts than in the previous quarter," the company said in the earnings release.
From the week to Wednesday, the Dow and S&P 500 were each down more than 1%. The Nasdaq Composite is around 2% lower.
– CNBC's Michael Bloom contributed to the coverage.