- Stocks volatile after Fed minutes
- Job offers fall less than expected
- Indexes up: Dow 0.4%, S&P 0.75%, Nasdaq 0.69%
Jan 4 (Reuters) – The S&P 500 ended higher on Wednesday, but below its session high in volatile trading following the release of minutes from the Federal Reserve’s latest meeting, which showed that officials focused on controlling inflation even as they agreed to curb their interest. walking pace
Officials at the Fed’s Dec. 13-14 policy meeting agreed that the U.S. central bank should continue to raise the cost of credit to control the pace of price increases, but gradually sought to limit risks to economic growth.
Investors were studying the Fed’s internal deliberations for clues about its future path. After the meeting, Fed Chairman Jerome Powell had said more hikes were needed and took a more hawkish tone than investors had expected at the time.
While some money managers said the minutes contained no surprises, the market appeared to be hoping for some sign that the Fed is at least considering easing its tightening policy.
“The market is like a child asking for ice cream. Parents say ‘no,’ but the market keeps asking because parents have given in in the past,” said Burns McKinney, portfolio manager at NFJ Investment Group LLC in Dallas. “The market still thinks it will get ice cream, but not as soon as they thought before.”
McKinney pointed to the minutes as evidence of Fed officials’ concern that unwarranted easing of financial conditions would complicate their efforts to fight inflation.
The Dow Jones Industrial Average (.DJI) rose 133.4 points, or 0.4%, to 33,269.77; the S&P 500 (.SPX) gained 28.83 points, or 0.75%, to 3,852.97; and the Nasdaq Composite (.IXIC) added 71.78 points, or 0.69%, to 10,458.76.
The S&P’s rate-sensitive technology index ( .SPLRCT ) lost ground after minutes before ending up 0.26%. Even the banking sector (.SPXBK), which benefits from higher rates, pared gains but still ended up 1.9%.
Energy (.SPNY) was the weakest of the 11 major S&P industrial sectors, closing down 0.06%, while real estate (.SPLRCR) was the strongest, closing down 2.3%, followed by 1.7% in materials (.SPLRCM).
Also on Wednesday, Minneapolis Fed President Neel Kashkari also stressed the need to continue raising rates, setting his own forecast that the policy rate should be paused initially at 5.4%.
“The Fed minutes are a good reminder that investors expect rates to remain high throughout 2023. Amid a persistently strong labor market, it makes sense that fighting inflation remains the name of the game for the Fed,” Fed chief Mike Loewengart said. model portfolio construction at the Morgan Stanley Global Investment Office in New York.
“The bottom line is that while we’ve reversed the calendar, the market headwinds from last year remain.”
Market participants now see a 68.8% chance of a 25 basis point Fed rate hike in February, but still see rates peaking below 5% in June. .
Earlier in the day, data showed U.S. job offers in November pointed to a tight labor market, giving the Fed cover to keep its monetary tightening campaign longer, while other data showed that manufacturing contracted further in December.
In 2022, US stocks were hit by recession worries due to aggressive monetary policy tightening, with all three major stock indexes posting their steepest annual losses since 2008.
On the Nasdaq 100 (.NDX), the biggest gainer was U.S. shares of JD.Com Inc, which rose 14.7% on hopes of a post-COVID-19 recovery in China. The biggest decliner was Microsoft, down 4.4% after a UBS analyst downgraded the stock to “neutral” from a “buy” rating.
Advances outnumbered decliners on the NYSE by a ratio of 4.30 to 1; on the Nasdaq, a 2.74 to 1 ratio favored the advancers.
The S&P 500 posted five new 52-week highs and no new lows; the Nasdaq Composite posted 84 new highs and 51 new lows.
On U.S. exchanges, 11.35 billion shares changed hands, compared with an average of 10.83 billion shares over the past 20 trading days, which included some weak volume due to the holidays.
Reporting by Sinéad Carew and Chuck Mikolajczak in New York, Shubham Batra, Amruta Khandekar and Ankika Biswas in Bangalore; Editing by Shounak Dasgupta and Jonathan Oatis
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