U.S. Stocks Fluctuate Before Closing Modestly Higher

Stocks fluctuated over the course of the trading day on Wednesday before eventually ending the session modestly higher. With the uptick on the day, the S&P 500 and the Nasdaq once again reached new record closing highs.

The major averages all closed in positive territory, although the Nasdaq inched up just 1.42 points or less than a tenth of a percent to 14,665.06. The Dow climbed 104.42 points or 0.3 percent to 34,681.79 and the S&P 500 rose 14.59 points or 0.3 percent to 4,358.13.

The higher close on Wall Street came as the minutes of the Federal Reserve’s latest monetary policy meeting signaled the central bank will not be in a hurry to begin scaling back its asset purchase program.

The minutes of the June meeting reiterated Fed Chair Jerome Powell’s view that “substantial further progress” towards the goals of maximum employment and price stability has not yet been met.

The Fed has repeatedly said it plans to continue to its asset purchases at a rate of at least $120 billion per month until “substantial further progress” has been made toward its goals.

While various participants expect conditions for beginning to reduce the pace of asset purchases to be met somewhat earlier than they had previously anticipated, others saw incoming data as providing a less clear signal about the underlying economic momentum.

The minutes said some participants determined the Fed would be able to make a better assessment in the coming months and emphasized the central bank should be “patient in assessing progress toward its goals and in announcing changes to its plans for asset purchases.”

The Fed said participants agreed to continue assessing the economy‘s progress toward the central banks goals at coming meetings and to begin to discuss their plans for adjusting the path and composition of asset purchases.

“In addition, participants reiterated their intention to provide notice well in advance of an announcement to reduce the pace of purchases,” the Fed said.

Paul Ashworth, Chief U.S. Economist at Capital Economics, described the Fed minutes as “a little less hawkish than feared.”

“The minutes of the Fed’s mid-June FOMC meeting were not as hawkish as we suspected, given the shift in the median interest rate projection, which now shows two rate hikes in 2023, and post-meeting comments by various officials,” Ashworth said.

He added, “In particular, there seems to be only limited support for beginning to taper the monthly asset purchases anytime soon.”

Ashworth said it still appears that the Fed won’t begin tapering its asset purchases until the start of next year but noted a pre-announcement could come as soon as September.

Sector News

Housing stocks moved sharply higher amid a continued decrease in treasury yields, resulting in a 2 percent jump by the Philadelphia Housing Sector Index.

Considerable strength was also visible among steel stocks, as reflected by the 1.9 percent gain posted by the NYSE Arca Steel Index.

On the other hand, energy stocks extended Tuesday’s sell-off, as the price of crude oil once again turned lower over the course of the session. Crude for August delivery tumbled $1.17 to $72.20 a barrel.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index and the NYSE Arca Oil Index plunged by 2.2 percent and 2.1 percent, respectively.

Airline stocks also showed a significant move to the downside, dragging the NYSE Arca Airline Index down by 1.5 percent to its lowest closing level in almost five months.

Notable weakness also emerged among semiconductor stocks, with the Philadelphia Semiconductor Index falling by 1.4 percent.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance on Wednesday. Japan’s Nikkei 225 Index slumped by 1 percent, while China’s Shanghai Composite Index advanced by 0.7 percent.

Meanwhile, the major European markets all moved to the upside on the day. While the German DAX Index jumped by 1.2 percent, the U.K.’s FTSE 100 Index climbed by 0.7 percent and the French CAC 40 Index rose by 0.3 percent.

In the bond market, treasuries extended the strong upward move seen in the previous session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 4.9 basis points to 1.321 percent.

Looking Ahead

Following a couple relatively quiet days on the U.S. economic front, trading on Thursday may be impacted by reaction to the weekly jobless claims report.

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