Market Snapshot: U.S. stocks finish higher for second day after Fed minutes show officials expect slower pace of rate hikes ahead

United States

U.S. stock indexes finished higher for a second day on Wednesday in a choppy session after the latest meeting minutes from the Federal Reserve showed most policy makers expect a slower pace of interest rate hikes will “soon be appropriate”, even if they are uncertain how high the benchmark rate will rise.

How stock indexes traded?
  • The Dow Jones Industrial Average DJIA, +0.50%  rose 95.96 points, or 0.3%, to finish at 34,194.06
  • The S&P 500 SPX, +0.59%  gained 23.68 points, or 0.6%, ending at 4,027.26
  • The Nasdaq Composite COMP, +2.17% advanced 110.91 points, or 1%, to end at 11,285.32

Stocks finished higher on Tuesday, with the S&P 500 closing up 53.64 points, or 1.4%, to 4,003.58, the Dow industrials gaining 397.82 points, or 1.2%, to close at 34,098.10. The Nasdaq Composite advanced 149.89 points, or 1.4%, to close at 11,174.40.

What drove markets?

November’s Federal Reserve meeting minutes revealed that it would soon be time to slow the pace of interest-rate increases, but FOMC officials were still unsure how much further the benchmark rate will go up. The Fed hiked its policy rate by 75 basis points to a range of 3.75% to 4% at its meeting earlier this month.

The central bank’s staff for the first time said a recession will be possible in the next year with some saying there is an increasing risk that the Fed’s actions “would exceed what was required” to bring inflation down to acceptable levels, according to the minutes.

U.S. Treasury yields fell after the minutes were published. The yield on the 2-year Treasury note TMUBMUSD02Y, 4.508% fell 3.6 basis points to 4.481% from 4.517% on Tuesday, while the yield on the 10-year Treasury note TMUBMUSD10Y, 3.700%  slipped to 3.708%. The U.S. dollar index DXY, -1.00%, a measure of the currency against a basket of six major rivals, dropped nearly 1.1% to 106.07.

Market analysts don’t see the minutes shedding any new light on the policy debate.

“There wasn’t a lot of new information,” said Ryan Sweet and Oren Klachkin, two economists at Oxford Economics, in an emailed comment. “Policy makers appear set to slow the pace of rate hikes. This mirrors comments from Fed officials since the last meeting and is consistent with our forecast for a 50 basis point rate hike in December.”

Despite Wednesday’s economic data suggesting U.S. economic growth is slowing, investor sentiment looks to be improving.

“The FOMC has been keen to stress that the fight against inflation is not over yet and we expect rate rises to continue well into 2023, but the slowing of the pace of the hikes will add fuel to increasing market excitement.” said Nigel Green, chief executive officer of deVere Group. With stock markets being forward-focused, Green thinks these minutes will set the mood until the end of 2022.

The Federal Reserve meets next on Dec. 13 and 14. Traders widely expect a 50-basis-point hike at the next meeting, with some betting on a 24% chance of a 75 basis points hike, according to CME Group’s FedWatch Tool.

Don’t miss: Fed’s Bullard set to talk inflation, interest rates in MarketWatch Q&A Monday

Earlier, in U.S. economic data, U.S. durable-goods orders rose 1% in October while jobless benefit claims rose 17,000 to 240,000 in the latest week, the highest level since August.

Meanwhile, the S&P Global flash U.S. services purchasing managers indexes in November dropped to 46.1 from 47.8. S&P Global flash U.S. manufacturing purchasing managers indexes in November fell to 47.6 from 50.7. Any number below 50 reflects a contracting economy. The University of Michigan’s final November consumer sentiment index fell in November to 56.8 and remained depressed, reflecting concerns about high inflation and the increasing possibility of a recession.

U.S. new home sales advanced 7.5% to a seasonally-adjusted annual rate of 632,000 in October from a revised 588,000 in the prior month, the Commerce Department reported Wednesday. 

U.S. stock exchanges will be closed for Thanksgiving Day on Thursday, Nov. 24, and reopen the next day only for a shortened session on Black Friday, the annual end-of-year shopping event, with trading ending at 1 p.m. Eastern on Nov. 25.

Read: This isn’t a ‘close your eyes and buy anything’ kind of market

Elsewhere, oil prices CL.1, -4.32% were modestly lower, while natural-gas futures NG00, +4.78% climbed 7.2% to $ 7.269 per million British thermal units, with European natural-gas futures also surging after Russian energy giant Gazprom threatened to cut deliveries through a Ukraine pipeline to Europe. Markets are also waiting on news of an agreement between the U.S. and its allies over a price cap on Russian oil.

Companies in focus
  • Nordstrom JWN, -4.24% finished 4.2% lower on Wednesday after the retailer swung to a surprise quarterly loss and joined other stores in reporting lower sales, saying it was “right-sizing” its inventory.
  • Deere DE, +5.03% rose 5% toward a seven-month high after the agriculture, construction and forestry equipment maker reported fiscal fourth-quarter sales that were well above expectations, and provided an upbeat full-year outlook.
  • Citigroup C, -2.21% stock dropped 2.2% after the bank was told it must address weaknesses in its management of financial data by U.S. banking regulators.
  • Manchester United’s  MANU, +25.84% stock jumped 25.8% on Wednesday after the club’s owners confirmed they are exploring potential financial investment or an outright sale of the storied Premier League club.
  • HP Inc. HPQ, +1.80% shares finished 1.8% lower after the company’s executives on Tuesday announced plans to cut up to 10% of their workforce in the coming years while issuing weaker-than-expected earnings guidance.
  • Credit Suisse CSGN, -6.12% shares fell 6.1% after the bank’s shareholders overwhelmingly approved a plan to raise 4 billion francs ($ 4.2 billion) on Wednesday. In two votes, shareholders backed a plan for a private placement as well as a rights offering of discounted shares. 

— Barbara Kollmeyer contributed to this article