Stock futures are slightly higher after Wednesday’s divestment

A trader works on the trading floor on the last trading day before Christmas on the New York Stock Exchange (NYSE) in Manhattan, New York City, on December 23, 2021.

Andrew Kelly | Reuters

Stock futures were slightly higher in overnight trading on Wednesday after the major US stock averages fell sharply in the first losing regular trading session of the year.

Futures on the Dow Jones Industrial Average added about 65 points, or 0.2%. S&P 500 futures rose 0.1% and Nasdaq 100 futures rose 0.1%.

Minutes from the Federal Reserve meeting in December revealed that the central bank was discussing reducing its balance sheet in yet another move to aggressively recall its easy monetary policy from the pandemic.

The Fed’s plan to reduce the number of government bonds and mortgage-backed securities it holds comes as it is already downsizing its bond purchases and is set to raise interest rates after the downsizing is completed.

“Almost all participants agreed that it would probably be appropriate to commence balance sheet drains at some point after the initial increase in the federal funds rate target range,” the minutes state.

The shares fell after the publication of the minutes. The blue-chip Dow Jones Industrial Average closed 392.54 points, or 1.07%, lower after hitting an intraday record earlier in the session. The S&P 500 fell 1.94 percent. The technology-heavy Nasdaq experienced its biggest loss in one day since February with a loss of 3.34%.

“If you ride a wave of liquidity upwards and that liquidity starts to disappear, I do not think it is very surprising that you will see a reaction,” says Kathy Jones, head of fixed income at Charles Schwab.

“This was the year we had to move from extremely light monetary and fiscal policy to less light monetary policy and less expansive fiscal policy. It has to have some impact on risk assets that have risen because the discount rate was so low,” Jones added.

All 11 S&P 500 sectors fell in Wednesday’s session.

Investors await quarterly earnings reports from Walgreen’s Boots Alliance and Bed Bath & Beyond before Thursday.

On the data front, the weekly report on unemployment applications is scheduled to be published Thursday morning.

—CNBC’s Jeff Cox contributed to this report.

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