Major Averages Close Narrowly Mixed Following Fed Minutes


After ending the previous session sharply lower, stocks showed a lack of direction over the course of the trading day on Wednesday. The major averages spent the day bouncing back and forth across the unchanged line before eventually closing mixed.

While the Nasdaq crept up 14.77 points or 0.1 percent to 11,507.07, the S&P 500 edged down 6.29 points or 0.2 percent to 3,991.05 and the Dow dipped 84.50 points or 0.3 percent to 33,045.09.

With the modest decreases on the day, the Dow and the S&P 500 once again fell to their lowest closing levels in a month.

The narrowly mixed close on Wall Street came following the release of the minutes of the Federal Reserve’s January 31-February 1 monetary policy meeting.

The minutes revealed a “few participants” favored raising rates by 50 basis points compared to the 25 basis point rate hike that was ultimately announced.

“The participants favoring a 50-basis point increase noted that a larger increase would more quickly bring the target range close to the levels they believed would achieve a sufficiently restrictive stance, taking into account their views of the risks to achieving price stability in a timely way,” the Fed said.

The Fed members eventually agreed to raise the target range for the federal funds rate by 25 basis points to 4.50 to 4.75 percent.

The smaller rate hike came after the central bank raised rates by 75 basis points in November and by 50 basis points in December.

The minutes noted all participants continued to anticipate that ongoing rate increases would be appropriate to achieve the Fed’s dual goals of maximum employment and inflation at the rate of 2 percent over the longer run.

The minutes acknowledged that inflationary pressures have moderated but noted price growth remains well above the Fed’s 2 percent target, with labor market tightness contributing to continuing upward pressures on wages and prices.

“Overall, the minutes continued to underscore that the FOMC maintains a hawkish posture as its main goal is to significantly lower inflation,” said Nationwide Chief Economist Kathy Bostjancic.

She added, “And this requires economic growth to be below its potential growth rate, which is estimated to be around 1.8%, for some period of time.”

The Fed’s next monetary policy meeting is scheduled for March 21-22, with CME Group’s FedWatch Tool currently indicating a 79.0 percent chance of another 25 basis point rate hike and a 21.0 percent chance of a 50 basis point rate hike.

Sector News

Most of the major sectors ended the day showing only modest moves, contributing to the lackluster close by the broader markets.

Oil service stocks showed a substantial move to the downside, however, with the Philadelphia Oil Service Index plunging by 2.7 percent to its lowest closing level in well over a month.

The sell-off by oil service stocks came as the price of crude oil for April delivery tumbled $2.41 or 3.1 percent to $73.95 a barrel amid concerns about the outlook for demand.

Considerable weakness was also visible among gold stocks, as reflected by the 2.2 percent slump by the NYSE Arca Gold Bugs Index. Gold stocks fell sharply even as the price of the precious metal was little changed.

On the other hand, natural gas stocks turned in a strong performance amid a spike by the price of the commodity, driving the NYSE Arca Natural Gas Index up by 1.2 percent.

Chemical stocks also showed a notable move to the upside, with the S&P Chemical Sector Index climbing by 1.2 percent after ending Tuesday’s trading at its lowest closing level in over a month.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Wednesday. Japan’s Nikkei 225 Index slumped by 1.3 percent, while China’s Shanghai Composite Index fell by 0.5 percent.

The major European markets have also moved to the downside on the day. While the U.K.’s FTSE 100 Index has slid by 0.8 percent, the French CAC 40 Index and the German DAX Index are down by 0.5 percent and 0.4 percent, respectively.

In the bond market, treasuries regained ground after moving sharply lower in the previous session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.2 basis points to 3.923 percent.

Looking Ahead

With the Fed expressing concerns about labor market tightness, trading on Thursday may be impacted by reaction to a report on weekly jobless claims.

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