Stocks climb as Fed minutes show determination on rates
NEW York — Wall Street ended Wednesday broadly higher after minutes from the Federal Reserve’s last meeting indicated that the central bank intends “expeditiously to raise interest rates to more neutral levels in its fight against inflation.”
The S&P 500 gained 0.9% while the Dow Jones Industrial Average gained 0.6%. The Nasdaq gained 1.5%. The indexes are now on track for a weekly gain after trading in the red in the beginning.
The minutes of the Fed meeting from earlier this month show that most officials agreed that half-point hikes to the Fed’s benchmark short term rate “would likely” be appropriate at the central bank’s next two meetings in June and July. This would be twice the normal hike.
The central bank has increased interest rates to combat the highest inflation in 40 years. Traders are eager to get fresh insight into Fed officials’ thoughts. The minutes of the Fed meeting didn’t reveal any significant surprises.
” The market is showing a relatively muted response to what was already embedded within the public sphere,” stated Bill Northey (senior investment director at U.S. Bank Wealth Management).
The S&P 500 rose 37. 25 points to 3,978.73. The Dow gained 191. 66 points to 32,120.28. The Nasdaq rose 29 points to 11,434.74.
Small-company stocks rose far more than the rest of the market, a sign of bullishness on the economy. The Russell 2000 gained 34. 34 points, or 2%, to 1,799.16.
The yield on the 10-year Treasury, which helps set mortgage rates, slipped to 2. 75% from 2. 76% late Tuesday. The broader market is volatile due to rising inflation and its effect on consumers and businesses. Investors are also concerned by the Fed’s aggressive plan for raising interest rates to combat inflation. They hope that the Fed will not act so aggressively as to slow down the economy and cause a recession. Russia’s invasion in Ukraine in February added to the already high energy costs. This has made inflation worse for both consumers and businesses. Supply chains became even tighter over the last month as China locked down several major cities to fight rising cases of COVID-19.
” The overarching theme, especially in the past few weeks is that investors are becoming increasingly cautious about growth and the economic outlook,” stated Jason Draho from UBS Global Wealth Management, head of asset allocation for the Americas. “It’s one of the big reasons why you’re seeing the inability for the stock market to get any kind of momentum.”
At the May 3-4 meeting, the Fed raised its key interest rate by a half-percentage point, its most aggressive move since 2000. It also indicated that there would be more rate increases. The Fed wants to tame inflation by making it more difficult for individuals and businesses borrow money.
The minutes showed that many policymakers agreed that they could “assess” the effects of their rate increases over the next months and, depending upon the economy’s health adjust their policies.
The economy has shown more signs of improvement and financial markets have fallen sharply since the Fed meeting.
The S&P 500 gained ground Monday, but lost ground again Tuesday due to more losses in technology. The S&P 500 has just come off a seven-week losing streak, which almost ended the bull market in stocks that began in March 2020..
Retailers saw the greatest gains, despite being beaten down by inflation fears in recent days. Those worries dissipated when Nordstrom, a high-end department store operator, reported higher sales and raised its profit forecast. It’s stock jumped 14%. The market was also lifted by
Technology stock. Microsoft rose 1.1%.
Many companies saw strong growth after reporting solid financial results. Investors were given strong forecasts despite the persistently rising inflation. After increasing its revenue and profit forecasts for the year,
TurboTax software manufacturer Intuit grew 8.2%. Caleres, the owner of Famous Footwear, surged 29.9% after also raising its profit forecasts for the year.
Homebuilder Toll Brothers grew 8% after reporting strong profits a day after the sector was hit hard by a disappointing government report about new home sales.
Wendy’s jumped 9.8% after Trian Fund Management, which already owns 19% of the company, said it was considering buying the rest of the company.
Asian markets closed higher than the European markets.
Veiga reported from Los Angeles.
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