Stocks retreated from their highs on Wednesday, but remained in positive territory after minutes from the Federal Reserve meeting showed the central bank will continue to aggressively raise interest rates to curb high inflation.
The Dow Jones Industrial Average rose 62 points, or 0.19%, but was off the day’s high. The S&P 500 and Nasdaq Composite also fell slightly, but were still up 0.59% and 0.55%, respectively.
Stocks fell when the minutes of the Fed’s December meeting revealed hawkish sentiment at the central bank, even though it announced a half-percentage-point rate hike, less than an earlier gain. They also signaled that the Fed intends to keep interest rates higher until there is enough data to show that inflation has cooled.
“We’ve cut the stock market’s gains in half. I think it reinforces that the Fed doesn’t want the market to get ahead of itself in celebrating a slowdown in rate hikes because rates are going to stay higher for longer,” said Peter Boockvar of Bleakley Financial Group in New York. Say.
“In a sense, the Fed is playing a lot of balls, they want to slow down the pace of rate hikes, but they don’t want the market to have a party, which eases financial conditions,” he added. “They want to tighten policy to curb inflation, But they don’t want to cause a recession.”
Earlier in the day, stocks rose after economic data and a dismal first session of the year on Tuesday.
The November Job Openings and Labor Turnover report (JOLTS) came in slightly better than expected, pointing to continued strength in the labor market amid central bank rate hikes to curb inflation. On the other hand, the ISM manufacturing index showed that the sector contracted after a 30-month expansion, suggesting that rate hikes may be slowing the economy.
Next, investors will focus on Friday’s jobs report for more information on the economy’s performance amid the Federal Reserve’s rate hikes.
“It’s a wait-and-see mode,” said Art Hogan, chief market strategist at B. Riley Financial. “Investors are always going to be concerned about putting money in after a year that has been pretty bad in every way, and we saw that in real time at least the first two sessions.”