US stocks rise slightly after Fed minutes release

US stocks rose on Wednesday as traders weighed in on questions about the economy and looked for clues to the Federal Reserve’s next moves in the minutes of its last meeting.

The S&P 500 rose 14.59 points, or 0.3%, to 4,358.13, setting a new record. The Nasdaq Composite extended its recent winning streak to four sessions and also hit an all-time high, gaining 1.42 points, or 0.01%, to 14,665.06.

The Dow Jones Industrial Average added 104.42 points, or 0.3%, to 34,681.79.

Meanwhile, bond yields continued to decline sharply, with the yield on 10-year U.S. Treasuries hitting multi-month lows on Wednesday, reflecting investor anxiety about the economy and concerns about the highly contagious Delta variant. of Covid-19.

Investors have propelled major stock indexes into record territory as the economy recovered from the pandemic-induced recession, jumping from one asset class to another – tech stocks, growth stocks, value stocks , bonds, even bitcoin – in search of the best returns.

While investors have been encouraged by the Federal Reserve, which has said it does not plan to withdraw its short-term support policies, the central bank’s monetary policy has triggered a surge in inflation that is causing both supply and labor shortages, and could hamper economic growth. This complicates the situation for investors.

“While we doubt that the stimulus and spin-off deals are entirely dead, they may now have largely run their course,” said Oliver Allen of Capital Economics.

The market is now driven by growth concerns, said Peter Boockvar, chief investment officer at Bleakley Advisory Group. There are signs that growth is leveling off, he said, but inflation is not. It looks like the so-called stagflation of the 1970s.

This dynamic, he said, is the cause of falling bond yields, which in turn affects stocks. “It’s inflation that’s causing the slowdown,” Boockvar said.

Government bonds continued to rally, taking the benchmark 10-year T-bill yield to 1.321%, its lowest close since February 18. On Tuesday, the yield closed at 1.369%. Yields fall when bond prices rise.

These lower returns have fueled the appetite for assets like growth stocks that offer higher returns.

“It’s really the tech space that has driven the market,” said Esty Dwek, head of global market strategy at Natixis Investment Solutions. “Over the next few weeks and months, hopefully we’ll see US growth hold up well, this will continue to support the markets.”

Federal Reserve Chairman Jerome Powell said policymakers discussed in June a possible reduction in the bond buying program.


Photo:

pool / Reuters

Oil markets have prolonged a volatile period after the Organization of the Petroleum Exporting Countries and its allies failed to agree on a deal to increase production earlier this week. US crude fell 1.6% to $ 72.20 a barrel after suffering its biggest one-day drop since May on Tuesday.

The United States has spoken to OPEC members and is encouraged to reach a deal that allows production to rise, taming soaring oil prices, Jen Psaki, press secretary of the United States, told reporters on Tuesday. the White House.

The Federal Reserve’s minutes of its June meeting, released on Wednesday afternoon, showed policymakers debating how and when to start withdrawing support from the economy. The minutes reflected the growing division over the timing of rate hikes and the decline in asset purchases.

A press conference in June after the Fed meeting caused the market to fall last month, but investors now appear to be much less worried about the central bank.

“They showed us that they don’t sleep at the wheel and watch inflation, but they still expect it to be transient,” Ms. Dwek said.

Data from the Institute for Supply Management on the service sector fell short of economists’ expectations on Tuesday, signaling that the pace of economic growth could slow. This led to the rally in bonds on Tuesday, said Paul Flood, multi-asset fund manager at BNY Mellon Investment Management.

The weaker data “takes some heat away from concerns about tightening policies sooner rather than later,” Flood said. “The fall in bond yields puts the relative opportunity more in favor of the stock markets,” he added.

Figures from the jobs report showed a pickup in hiring in June, but the moderate overall pace of gains in recent months suggests employers are still struggling to fill the abundance of open positions. Sarah Chaney Cambon of the WSJ explains why workers might not be eager to take on these jobs just yet. Photo: Mike Bradley for The Wall Street Journal

The latest labor market reports seem to confirm this. The number of job postings in May remained stable at 9.2 million, according to the Bureau of Labor Statistics, after April was revised to 9.2 million from 9.3 million. This is mostly in line with economists’ expectations and a sign that the economy remains healthy but has not fully recovered.

“One of the keys to the future will be the job market. He hasn’t made enough progress “for the Fed to withdraw its stimulus packages, Ms. Dwek said.

Some Chinese companies listed in the United States have extended their recent losses. Didi Global fell 4.6% to $ 11.91 and Full Truck Alliance fell 4.2% to $ 17.00, after falling on Tuesday. Earlier this week, the cybersecurity regulator in Beijing announced investigations into the data practices of leading tech companies.

Overseas, the pancontinental Stoxx Europe 600 climbed 0.8% to 459.53, its second-highest close on record.

The Shanghai Composite Index rose 0.7% to 3,553.72, while Japan’s Nikkei 225 fell 1% to 28,366.95.

Write to Anna Hirtenstein at [email protected] and Paul Vigna at [email protected]

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