US stocks posted their biggest drop on Tuesday amid fears that the global recovery will lose momentum due to another COVID-19 outbreak.
Aside from that, investors followed closely the remarks of Fed Chairman Jerome Powell in the recent virtual town hall meeting, during which he stated that the "powerful tools" of the central bank have limitations. Healso said the pandemic will most likely persist for a long time, so the economy has little chance to return to pre-crisis rates.
Next week, Fed members will meet for another conference.
Craig Earlam, a senior analyst at Oanda Europe, said the markets are currently depending on news from the Fed, and this is unlikely to change unless the situation with the Delta strain exacerbates.
Nevertheless, the S&P 500 has been rallying for the past five days, and it was only yesterday that it fell by 0.90%. Much of the decline was from the 2.2% drop in shares of Tesla and Facebook. Home Depot also sagged after the company posted weaker-than-expected earnings.
With regards to statistics, sentiment in US builders fell to a 13-month low in August amid high costs and continued supply shortages. US retail sales also slipped more than expected in July, reflecting a steady shift in service spending. It could also mean that consumers have become more price-conscious as inflation rises.
On the bright side, industrial output rose, thanks to higher raw material prices and near-record job openings.
Other important events for this week are:
- policy decision of the Reserve Bank of New Zealand and briefing by Governor Adrian Orr (Wednesday);
- minutes of the meeting from FOMC (Wednesday);
- policy decision of the Bank of Indonesia and briefing by Governor Perry Warjiyo (Thursday).