Dow holds fourth day’s gains, stocks rise after Fed minutes indicate flexibility in rate hikes

Latest / May 26, 2022 / DRPhillF / 0

Stocks closed higher on Wednesday as investors took the message of flexibility from the release of the Federal Reserve’s meeting minutes in early May turning its path to higher interest rates.

How did the shares trade?

The Dow Jones Industrial Average rose 191.66 points, or 0.6%, to 32,120.28 points.
The S&P 500 SPX gained 37.25 points, or 1%, and ended at 3,978.73 points.
The Nasdaq Composite Index rose 170.29 points, or 1.5%, to close at 11,434.74 points.
It was the Dow’s biggest 4-day winning streak, at 2.8%, in about a month, according to Dow Jones market data.

On Tuesday, the Dow Jones Industrial Average rose 0.2% to 31,928.62, its third straight gain. The S&P 500 fell 0.8%, snapping two consecutive days of gains, while the Nasdaq Composite fell 2.4% to 11264.45, its lowest closing level since November 3, 2020.

What drives the markets?

Stocks closed higher after the Federal Reserve released the minutes of its early May meeting, which indicated that the central bank remains open to rethinking aggressive plans to raise interest rates to tame high inflation.

The May meeting minutes showed support for half-point moves by the Federal Reserve as it seeks interest rates “urgently towards neutral” during the next two meetings and high inflation remains the main focus.

“The only thing this Fed is very good at is scaling,” Eric Meirlis, managing director of global markets at Citizens, said over the phone. “I chose to see this as an admission that they wouldn’t go headlong down the road,” he said. “They realize that things can change.”

Concerns have mounted that the Federal Reserve could tighten financial conditions too sharply and harm the economy, particularly with businesses and households already facing the most severe price pressures in decades.

Fear that economic growth will slow quickly, with the war in Ukraine and China’s coronavirus shutdown, has exacerbated expectations.

US stock indices suffered this month after bleak earnings expectations from many major retail traders. More reports this week could help inform how other companies are dealing with inflationary pressures. snowflake snow
+2.42%
and Nvidia NVDA,
+ 5.08%
To publish quarterly reports after the Wednesday bell. costco cost,
+ 0.55%
He will report on Thursday.

“I think the market has bottomed out,” Peter Cardillo, chief market economist at Spartan Capital Securities, said by phone.

The S&P 500’s recent test of the 3850 level, but then to find a higher ground, helped explain its rationale. Cardillo also said investors have been “subject to discounting from higher inflation,” a severe tightening of financial conditions by the Federal Reserve and the possibility of a recession.

Read: The S&P 500 is hovering near the bear market. Its ferocity may depend on the economy.

Federal Reserve Chairman Jerome Powell earlier laid out plans for the central bank to boost the benchmark interest rate by half a percentage point at the next FOMC meetings in June and July, bringing it close to 2% by August.

Next, Bill Adams, chief economist at Comerica Bank, said he expects the Fed to make a series of quarter-percentage point rate increases at its September, November and December meetings, pushing the Fed funds up 2.5% to 2.75%. Scope at the end of the year.

Read: Fed Bostick calls for caution as Fed raises rates: ‘Even fire trucks with sirens slow at intersections’

The minutes also focused on potential direct sales of mortgage securities to the central bank as it looks to cut its balance sheet approaching $9 trillion. Adams said at Comerica that he expects these to start in September, in a written comment.

On the economic front, Wednesday’s forecast from the Congressional Budget Office pointed to higher inflation that will continue into next year. In the data, US factory orders for long-term goods such as machinery and electronics rose 0.4% in April, indicating that the economy was still growing at a steady pace in early spring. Economists polled by the Wall Street Journal had expected a 0.7% increase.

What companies have been the focus of attention?

shares Dick’s Sporting Goods Inc.
dks,
+ 9.69%
It rose 9.7% on Wednesday, after apparel and sporting goods stores reported first-quarter financial results that beat expectations.
Express Inc. EXPR participates,
+ 6.72%
It jumped 6.7% on Wednesday, after the apparel retailer posted a smaller-than-expected loss for the first quarter and provided higher-than-consensus guidance.
Wendy
wen,
+ 9.77%
It rose 9.8% after longtime contributor Trian Fund Management said it was exploring an acquisition or other potential deal for the restaurant chain. Trian is the company’s largest shareholder, with a 19.4% stake.
Kohl’s Corp.
KSS,
+ 11.89%
Shares rose 11.9% on Wednesday after Reuters reported that bidders continue to surround retailers at lower prices than they were earlier this year, but still well above the stock’s recent trading levels.
Nordstrom
JWN,
+ 14.02%
It jumped 14% after the retailer raised its annual sales and earnings forecasts late Tuesday.

How did you trade other assets?

The 10-year Treasury yield is TMUBMUSD10Y,
2.711%
It fell 1.2 basis points to 2.746% as investors sought safety in government debt. Yields and Treasury prices move against each other.
ICE DXY dollar index,
-0.06%And
Which measures the US currency against major currencies, it rose 0.3%.
In CL.1 oil futures,
+ 0.80%And
WTI July delivery CLN22,
+ 0.80%
It rose 0.5% to settle at $110.33 a barrel. Gold for June GCM22 Delivery,
+ 0.02%
It fell 1% to close at $1,846.30 an ounce.
Bitcoin BTCUSD,
-0.52%
It rose by 1% to nearly $29,600.
In European stocks, Stoxx Europe 600 SXXP,
+ 0.42%
It closed up 0.6%, while the FTSE 100 UKX index in London closed,
+ 0.24%
It rose 0.5%.
In Asia, Shanghai Composite SHCOMP,
+ 0.50%
It ended up 1.2%, while the Hang Seng HSI in Hong Kong ended,
-0.24%
Gaining 0.3% and Japan’s Nikkei 225 Index,
-0.27%
It decreased by 0.3%.