Global Markets fall; will that continue?
Global markets fall right after publishing the FED minutes. What mostly markets picked up from FED minutes is that they will start tapering much earlier than prevouse expectations.
As we read in the minutes, "Most participants judged that the Committee's standard of 'substantial further progress' toward the maximum-employment goal had not yet been met," according to the Fed's minutes. "Most participants remarked that this standard had been achieved concerning the price-stability goal."
On the other hand, when we read all details, we can generally find out that the Federal Reserve Open Market Committee still has a way to reach the exact plan and final agreement. For tapering, still, we have disagreements between some members that they believe the economy is growing fast enough and we have to start tapering the asset purchases somewhere in 2021, comparing other members that saying labor market is far than satisfactory, to reach the actual improvement in the labor market, it needs still more support, so they think that need to wait until at least the beginning of next year before starting to reduce bond purchases.
For those FOMC members that had a cautious outlook on the labor market, today's Initial Jobless Claims can cause doubts, as US weekly jobless claims fall to a 17-month low. In the week ended August 14, the total Americans that claimed unemployment benefits fell 29K to spring a 17-months low, by just 348K claims. The fourth straight weekly decline leads the total claims to their lowest level since mid-March 2020.
With today's labor market data, we now have to price more on tapering in 2021, which will not favor stock markets in general.
Last night and as of the close, the SP 500 and the Dow Jones set the most significant closing decline since July 19 for the second consecutive day, by 1.07% and 1.08%, respectively. Nasdaq also tested a 2-week low at 14,842. Today in the futures markets also decline continued. Before the cash market opens, DJI and SP500 losing around 0.7%, and Nasdaq trading lower by 0.45%. As we can see in the technical charts and fundamental data, the mid-term decline can continue its way towards lower numbers.