Wall Street ended Wednesday’s volatile trading session with modest gains for major stock indexes. Investors scanned the minutes of the Federal Reserve’s most recent interest-rate policy meeting to find clues as to what the central bank might do next.
After a day of fluctuating between small gains or losses, the S&P 500 gained 14 points to 3,845, or 0.4%. This was its third consecutive gain. The Dow Jones Industrial Average rose 0.2%, while the Nasdaq gained 0.4%.
However, small company stocks were not in decline, which is a sign of investors’ concern about economic growth. The Russell 2000 lost 0.8%.
Investors are still concerned about inflation, rising interest rate and a possible recession.
Minutes from the Fed’s two day meeting last month reveal that policymakers at the central bank concluded that higher interest rates may be necessary to curb a worrying trend: consumers anticipating higher inflation. They also admitted that rate hikes could lead to a weaker economy.
Tom Martin, Senior Portfolio Manager at Globalt Investments, stated that the minutes of the Fed did not offer any major surprises for Wall Street.
Martin stated, “What the Fed will say in July is going to be much more fascinating.”
Technology companies gained ground, which helped to offset losses at energy companies. As crude oil prices fell, chipmaker Nvidia saw a 1% increase and Exxon Mobil saw a 2% drop.
The yield on bonds rose dramatically. The 10-year Treasury yield, which is used to set mortgage rates, rose to 2.93% on Tuesday, from 2.81%.
However, the wider market is still in a deep slump, which has dragged S&P 500 into a bearish market, more than 20% below its highest point.
Wall Street is concerned about the Federal Reserve’s efforts to control inflation and the possibility that its plan could lead to a recession.
Businesses and consumers have been affected by inflation throughout the year. After Russia invaded Ukraine in Feb., price increases increased. China also locked down key cities to stop rising COVID-19 incidences. This worsened the supply chain problems.
Inflation was worsened by rising oil prices, which sent gasoline prices to new highs in the U.S. The U.S. crude oil price is still up 27% over the previous year, but they have been falling throughout the week which is a welcome sign for those who hope for an indication that inflation may be decreasing.
U.S. crude oil prices fell 3.2%. Prices fell below $100 per barrel on Tuesday for the first time since May.
In an effort to curb inflation, central banks have increased interest rates. The Fed has been especially aggressive in shifting from historically low interest rates during the height of the pandemic, to unusually high rate increases now. There are concerns that the central banking could push the envelope and force economic growth to halt, causing a recession.
Inflation is likely to be rising, and energy prices could fall in the coming weeks.
“This relieves the Fed of its pressure,” Katie Nixon, chief investment officer at Northern Trust Wealth Management said. “If gas prices drop, it will affect consumer sentiment which could allow the Fed to take at least some of the pressure off.
Investors are still closely following economic data to find clues about the Fed’s future position. This includes how inflation is moving, what it means, and what its impact will be. In a sign of the health of the labor market, a government report on May’s job openings beat expectations. The growth of the U.S. service industry was less than anticipated in June, according to a report.
Wall Street will closely monitor Friday’s U.S. government release of June employment data.
