NEW YORK | Wed May 29, 2013 8:50am EDT
(Reuters) – Stock index futures pointed to a lower open on Wednesday, indicating a drop from record highs at the open as investors continued to question the longevity of the Federal Reserve’s stimulus program.
Supportive monetary policies from central banks around the world have lifted equity markets this year, with the S&P 500 up more than 16 percent. On Tuesday, stocks soared and the Dow closed at another record high after the Bank of Japan and European Central Bank reassured investors that policies designed to boost economic growth would stay in place.
Last week, indexes fell on concerns that the program may be scaled back sooner than expected, and strong economic data on Tuesday stirred speculation that the Fed may begin tapering off its program soon. The concerns sent U.S. Treasury debt yields to their highest levels in over a year and pulled equities back from session highs.
“(Tuesday) was the first time we saw rates spike on concerns about the Fed tapering, and if that spreads, it will have negative ramifications for the rest of the market,” said Adam Sarhan, chief executive of Sarhan Capital in New York.
While strong corporate earnings have also contributed to the equity market’s surge in 2013, central bank stimulus has pushed investors to add to positions on market declines, limiting extended selloffs. So, any change to the stimulus program may prompt a round of profit taking.
“There’s still a question about how much we can grow without stimulus, and what will happen to the market when rates go up,” Sarhan said.
S&P 500 futures fell 9 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures slipped 75 points and Nasdaq 100 futures fell 13.5 points.
Cyclical companies, closely tied to the pace of economic growth, have been volatile on uncertainty over the Fed’s stimulus measures. Bank of America (BAC.N) fell 0.8 percent to $13.24 in premarket trading while JPMorgan Chase & Co (JPM.N) was off 1 percent at $54.05.
In company news, Smithfield Foods (SFD.N) surged 25 percent to $32.55 in premarket trading after China’s Shuanghui Group agreed to buy the company for $34 a share.
Trina Solar Ltd (TSL.N) slumped 10 percent to $6.10 in premarket trading after the company reported its seventh straight quarterly loss.
Apple Inc (AAPL.O) Chief Executive Tim Cook said late Wednesday he expected the tech giant to release “several more game changers,” hinting that wearable computers could be among them.
(Editing by Bernadette Baum and Nick Zieminski)