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Market Snapshot: Dow futures drop on worries over U.S. and China

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U.S. stock futures slumped on Friday, amid fears over the delta variant of coronavirus, the imminent tapering of Federal Reserve bond buying and China’s restrictions on its domestic economy.

What’s happening

  • Futures on the Dow Jones Industrial Average
    YM00,
    -0.53%

    fell 164 points;

On Thursday, major markets ended mixed, with the S&P 500
SPX,
+0.13%

and Nasdaq Composite
COMP,
+0.11%

registering small gains, while the small-cap Russell 2000
RUT,
-1.22%

ended 1.2% lower.

What’s driving markets

With no U.S. economic data and few corporate news releases, traders will be left to focus on the developments from earlier this week.

“The key 10-year yields
TMUBMUSD10Y,
1.235%

were barely changed as equities reversed: suggesting that the move was more about the top-down risks to growth building, specifically around the delta variant, after several weeks when the bottom-up corporate news has provided support,” said Ian Williams, a strategist at U.K. broker Peel Hunt.

Michael Hartnett, chief investment strategist at Bank of America, says the market is acting in a recessionary fashion.

The U.S. yield curve, as measured by the gap between the 5-
TMUBMUSD05Y,
0.760%

and 30-year
TMUBMUSD30Y,
1.862%

bonds, is at a one-year low; global stocks excluding U.S. techs are unchanged the last eight months; emerging market stocks are negative this year; small cap stocks are breaking down; a range of commodities have fallen by double-digit percentages from highs; and the top four sectors of the S&P 500 in the second half of the year are utilities, health care, REITs and staples.

“I spent $32 trillion and all I got was this lousy W-shape recovery,” he quipped.

The Hang Seng
HSI,
-1.84%

suffered through another rough session, falling 1.8% in Hong Kong, as the index is now 19% below its February highs on the continued regulatory crackdown in China. China on Friday passed a strict data privacy law that’s due to take effect in November.

The VIX
VIX,
+6.69%

measure of stock market volatility jumped in the early hours, and the dollar
DXY,
+0.10%

reached a fresh nine-month high.

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