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Stock futures fall after Fed minutes highlight taper talk 

Stock futures dropped Thursday morning to extend losses from a day earlier, driven by jitters over a potential shift in monetary policy that might remove some of the stimulus underpinning equity markets. 

Contracts on the S&P 500 fell about 0.8% ahead of the opening bell. Earlier, both the S&P 500 and Dow dropped more than 1% to post a back-to-back session of losses. Treasury yields retreated across the long end of the curve, and the benchmark 10-year yield sank back below 1.3%. 

Shares of Robinhood (HOOD) dropped more than 8% after the trading platform delivered its first earnings report since going public, with the print pointing to a revenue slowdown in the current period due to seasonal weakness in third-quarter trading. Cisco Systems (CSCO), a Dow component, also saw shares drop after its sales and profit guidance disappointed against some lofty Wall Street expectations. 

Equity markets have come under pressure on the back of the Federal Reserve’s July meeting minutes. These suggested central bankers were moving forward with their debate over the timing and scope of the tapering of their crisis-era asset purchase program, with most participants expecting the U.S. economy to make enough of a recovery to meet the “substantial further progress” necessary to trigger a slowdown in purchases by later this year. 

New data on the labor market on Thursday appeared to vindicate the Fed’s assessment of the recovery. Initial unemployment claims took a major step lower last week, falling to the lowest level since March 2020, and signaling another leap forward in improvements in the labor market. 

“With a growing number of officials now openly discussing the possibility of tapering beginning soon on the back of July’s strong employment report, it looks more likely than not that the wind-down will begin later this year, rather than early next year as we had previously thought,” Andrew Hunter, senior U.S. economist for Capital Economics, wrote in a note.

“Regardless, the minutes also made clear that an earlier taper does not necessarily mean that the Fed will bring forward plans to start raising interest rates, with many officials believing that the FOMC should ‘clearly reaffirm the absence of any mechanical link between the timing of tapering and that of an eventual increase in … the federal funds rate,'” he added.

Some pundits suggested the Federal Reserve’s escalating talk around tapering is at least partially by design.  

“The Fed is doing a masterful job of leading us down the taper exhaustion path, so when they actually do taper, we’ll be so exhausted talking about it, it won’t cause the volatility in the market,” Andrew Slimmon, managing director at Morgan Stanley investment management told Yahoo Finance. “That’s what I really think they’re doing: They’re going back and forth and back and forth. And at the end of the day, tapering just means they’re buying fewer bonds than they used to, but they’re still buying bonds.”

8:50 a.m. ET: Macy’s, Kohl’s deliver upbeat sales guidance, sending shares higher 

Retailers Macy’s (M) and Kohl’s (KSS) posted second-quarter earnings results and guidance that exceeded consensus estimates, suggesting a more robust return of in-person shopping than analysts were previously expecting. Shares of both companies jumped in early trading. 

Macy’s said it sees its current-quarter net sales coming in between $5.04 billion and $5.19 billion, exceeding Wall Street’s estimates for $4.76 billion, according to Bloomberg data. The rosy outlook added to optimism around stronger-than-expected second-quarter results: Adjusted earnings of $1.29 per share were well above the 20 cents expected. Revenue of $5.65 billion grew 59% over last year and also exceeded estimates. 

Kohl’s posted adjusted earnings of $2.48 per share on revenue of $4.22 billion for the second quarter, topping estimates on both measures. Sales were up 31% compared to the year-ago period. The company added it now sees full-year sales increasing in the low-twenties percentage range, with this outlook a step above its previous guidance for mid-to-high teens percentage range increases for the year. 

8:35 a.m. ET: Jobless claims dip to fresh pandemic-era low as labor market recovery picks up steam

Weekly new unemployment claims dropped to the lowest level since March 2020 last week, improving more than expected. 

New filings came in at 348,000 for the week ended August 14, the Labor Department said Thursday. This took out the previous pandemic-era low of 368,000, and dropped from the prior week’s 377,000 new claims. Continuing claims across state programs were 2.82 million for the week ended August 7, also marking the lowest level since March 2020.

The total number of claimants across all programs also moved lower, with more individuals rolling off both state and federal enhanced unemployment benefits. For the week ended July 31, about 11.7 million Americans were claiming benefits across all programs, marking a drop of about 311,000 from the prior week. 

7:14 a.m. ET Thursday: Stock futures extend declines, Dow futures drop nearly 300 points

Here’s where markets were trading ahead of the opening bell Thursday morning:

  • S&P 500 (^GSPC): -32.25 (-0.73%) to 4,362.25

  • Dow (^DJI): -285.00 (-0.82%) to 34,602.00

  • Nasdaq (^IXIC): -84.25 (-0.57%) to 14,765.00

  • Crude (CL=F): -$2.47 (-3.77%) to $62.99 a barrel

  • Gold (GC=F): +$7.60 (+0.43%) to $1,792.00 per ounce

  • 10-year Treasury (^TNX): -4.5 bps to yield 1.228% 

6:15 p.m. ET Wednesday: Stock futures open lower

Here’s where markets were trading Wednesday evening: 

  • S&P 500 futures (ES=F): -3 points (-0.07%) at 4,391.50

  • Dow futures (YM=F): -24 points (-0.07%) to 35,863.00

  • Nasdaq futures (NQ=F): -1.5 points (-0.01%) to 14,847.75

NEW YORK, NY – AUGUST 16: Wall St. and Broad St. signs are seen by the New York Stock Exchange (NYSE) building in the financial district of New York City, United States on August 16, 2021. (Photo by Tayfun Coskun/Anadolu Agency via Getty Images)

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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