A trader works on the trading floor on the last trading day before Christmas on the New York Stock Exchange (NYSE) in Manhattan, New York City, December 23, 2021.
Andrew Kelly | Reuters
Stock futures were largely flat in overnight trading on Wednesday after the large US stock averages fell sharply in this year’s first losing regular trading session.
Futures on the Dow Jones Industrial Average rose around 45 points, or 0.1[ads1]%. The S&P 500 futures were little changed and the Nasdaq 100 futures were close to flatline.
Minutes from the Federal Reserve’s December meeting revealed that the central bank was discussing reducing the balance in another move to aggressively repel its simple monetary policy from the pandemic.
The Fed’s plan to reduce the number of government bonds and mortgage-backed securities it has comes as it is already stepping down its bond purchases and is set to raise interest rates after the downsizing has ended.
“Almost all participants agreed that it would probably be appropriate to start balancing runoff at some point after the first increase in the target area for the federal funds rate,” the minutes state.
The shares fell after the publication of the minutes. The blue-chip Dow Jones Industrial Average closed 392.54 points, or 1.07%, lower after breaking an intraday record earlier in the session. The S&P 500 fell 1.94 percent. Technology-heavy Nasdaq experienced its biggest loss in one day since February, losing 3.34%.
“If you’re driving a liquidity wave upside down and that liquidity is starting to disappear, I do not think it’s very surprising that you’ll see a reaction,” said Kathy Jones, head of fixed income investing at Charles Schwab.
“This was the year we were going to move from extremely simple monetary policy and fiscal policy to less simple monetary policy and less expansive fiscal policy. It must have some impact on risk assets that have risen because the discount rate was so low,” Jones added.
All 11 S&P 500 sectors fell in Wednesday’s session.
Investors are awaiting quarterly earnings reports from the Walgreens Boots Alliance and Bed Bath & Beyond before the bell rings on Thursday.
On the data front, the weekly report on unemployment is scheduled for release on Thursday morning.
– CNBC’s Jeff Cox contributed to this report.