US: Stocks and commodities drop on Fed, growth worries

[NEW YORK] Stocks dropped, while Treasuries and the US dollar rose as concern about the withdrawal of Federal Reserve stimulus mixed with growing angst around the coronavirus and global supply chains.

The S&P 500 was down for a third day, and a gauge of equity volatility headed for its biggest weekly increase since January. Commodities sold off, with iron ore plunging and oil on track for its longest losing streak since the early days of the pandemic.

The rout in Chinese companies listed in the US deepened after the industry was hit with a fresh round of proposed regulations, with Alibaba Group Holding and Baidu tumbling.

Investors are bracing for the withdrawal of unprecedented liquidity as the developed world looks to mass vaccinations to keep the recovery on track. However, the persistent spread of coronavirus and slowing China growth raise questions about whether the global economy can absorb the winding down of quantitative easing. That is pushing them to buy protection against equity swings.

"The US equity markets are overdosed with cheap liquidity and keep posting new highs despite a sticky global pandemic, repeated lockdown measures, shattered economies, lost jobs, hammered lives and escalating inflation," said Ipek Ozkardeskaya, a senior analyst at Swissquote Bank. "Therefore, any hint on QE tapering could have a meaningful impact on the market sentiment."

The S&P 500 fell 0.6 per cent as at 9.30am New York time. The Nasdaq 100 fell 0.4 per cent. The Dow Jones Industrial Average fell 0.7 per cent.

The Stoxx Europe 600 fell 1.8 per cent. The MSCI World index fell 1.1 per cent.

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