US stocks slumped after the Federal Reserve's meeting minutes yesterday showed policymakers expressed concerns about low volatility in equity, currency and fixed-income markets.
The Fed released the notes from its June 17-18th meeting, when the central bank's Federal Open Market Committee cut monthly bond purchases by $10bn to $35bn. At the time Fed Chair Janet Yellen had said interest rates will probably stay low for a considerable time.
The minutes showed the Fed is set to end its bond buying programme in October, but was unclear about the timing of the first interest rate rise.
"Interestingly the minutes mentioned that the members were concerned that the recent low volatility in financial markets showed that investors were not factoring in a more hawkish approach from central banks," Alpari UK analyst James Hughes pointed out.
"This clearly shows that the Fed are also worried about the weak foundations the equity market rally is based on and that the gains could unravel at lightning speed if something was to catch them of guard. It seems there is an overall complacency from traders and investors at the moment and that no one will take heed of the warnings until markets finally do show this is a serious matter by posting huge declines."
Turning to today's agenda, a report showed initial claims for unemployment benefits unexpectedly dropped by 11,000 last week to 304,000, falling close to their lowest levels in seven years.
The figures from the Labor Department surprised analysts who had widely expected no change from the prior week's reading of 315,000.
The four-week moving average for new claims, which smooths out week-to-week volatility, fell by 3,500 to 311,500, compared with the 315,000 forecast.
"Despite the modest rise during the final week of the month, the June average marks the lowest level of continuing claims since the end of the recession and suggests that the separations side of the labor market has continued to improve following an uptick in continuing claims at the start of 2014," Barclays Research said.
In earnings, companies in the S&P 500, (SPX) including Citigroup, JPMorgan Chase & Co., Goldman Sachs and Johnson & Johnson, will report quarterly results between now and July 23rd.
The US 10-year yield fell four basis points to 2.51%.
West Texas Intermediate crude futures dropped 0.139% to $108.12 per barrel, according to the ICE.