The Nasdaq Composite jumped 2.2% Wednesday as investors took away a message of flexibility from the release of minutes of the early May Federal Reserve meeting about its path to higher interest rates.
How are stocks trading?
- The Dow Jones Industrial Average DJIA rose 309 points, or 1%, to 32,242.
- The S&P 500 SPX gained 56 points, or 1.4% to 3,997, after flipping between small gains and losses.
- The Nasdaq Composite COMP advanced 244 points, or 2.2% to 11,508
On Tuesday, the Dow industrials rose 0.2% to 31,928.62, its third straight gain. The S&P 500 SPX, +1.06% fell 0.8%, snapping two straight days of gains, while the Nasdaq Composite COMP, +1.59% slumped 2.4% to 11,264.45, its lowest close since Nov. 3, 2020.
What’s driving the markets?
Stocks set session highs after the Federal Reserve released minutes of its early May meeting, which signaled the central bank remains open to rethinking aggressive plans to raise rates to tame high inflation.
Minutes from the May meeting showed support for half-point moves by the Fed as it seeks to get its policy rate “expeditiously toward neutral,” over the next couple of meetings and that high inflation remains a key focus.
“The one thing this Fed is very good at is being measured,” said Eric Merlis, managing director of global markets at Citizens, by phone, as he was sifting through the minutes. “I chose to see this as a recognition that they’re not going to go headlong along a path,” he said. “They recognize things could change.”
Concerns have been mounting about the potential for the Fed to tighten financial conditions too sharply and damage the economy, particularly with businesses and households already facing the sharpest price pressures in decades.
The fear is economic growth will slow quickly, with the war in Ukraine and China’s COVID lockdowns worsening the outlook.
U.S. benchmark stock indexes have suffered this month after grim earnings outlooks from several major retailers. More reports this week could help inform how other companies are handling inflationary pressures. Snowflake SNOW, +2.42% and Nvidia NVDA, +4.27% are set to post quarterly reports after the bell Wednesday. Costco COST, +0.79% will report on Thursday.
“I think the market has put in a bottom,” said Peter Cardillo, chief market economist at Spartan Capital Securities, by phone.
The S&P 500’s recent testing of the 3,850 level, but then finding higher ground, helped inform his rationale. Cardillo also said investors have been “through the discounting process of high inflation,” aggressive tightening of financial conditions by the Fed and the probability of a recession.
Read: S&P 500 hovers near bear market. Its ferocity may depend on the economy.
Fed Chairman Jerome Powell earlier laid plans for the central bank to boost the benchmark interest rate by half-a-percentage point at the next two FOMC meetings in June and July, bringing it to near 2% by August.
The minutes of May meeting “are a month old and the markets have a lot of time change in the meantime, and it won’t really affect anything going forward,” said Randy Frederick, managing director of trading and derivatives at Charles Schwab.
In economic data on Wednesday, orders at U.S. factories for long-lasting goods such as machinery and electronics rose 0.4% in April, signaling the economy was still growing at a steady pace in the early spring. Economists polled by The Wall Street Journal had forecast a 0.7% increase.
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Which companies are in focus?
- Shares of Dick’s Sporting Goods Inc. DKS, +9.35% soared nearly 11% Wednesday, after the sporting goods and apparel retailer reported fiscal first-quarter results that beat expectations.
- Express Inc. shares EXPR, +5.04% jumped about 10% Wednesday, after the clothing retailer posted a narrower-than-expected loss for the first quarter and offered guidance that was above consensus.
- Wendy’s WEN, +10.33% rallied more than 10% after long-time shareholder 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, +11.86% shares gained 12% on Wednesday after Reuters reported that bidders continue to circle the retailer at lower prices than earlier this year, but still well above recent trading levels of the stock.
- Nordstrom JWN, +13.85% surged 12% after the retailer raised its annual sales and profit forecast late Tuesday.
How are other assets trading?
- The yield on the 10-year Treasury note TMUBMUSD10Y, 2.742% was steady, about 1 basis point lower at 2.75%, as investors sought safety in government debt. Yields and Treasury prices move opposite each other.
- The ICE Dollar Index DXY, +0.20%, which measures the greenback against major currencies, was up 0.3%.
- In oil futures CL.1, +0.89%, West Texas Intermediate crude for July delivery CLN22, +0.89% gained 0.5% to settle at $110.33 a barrel. Gold for June delivery GCM22, -0.62% dropped 1% to close at $1,846.30 an ounce.
- Bitcoin BTCUSD, +0.98% was up 1.8% at nearly $30,000.
- In European equities, the Stoxx Europe 600 SXXP, +0.63% closed up 0.6%, while London’s FTSE 100 UKX, +0.51% edged 0.5% higher.
- In Asia, the Shanghai Composite SHCOMP, +1.19% finished 1.2% higher, while Hong Kong’s Hang Seng Index HSI, +0.29% gained 0.3% and Japan’s Nikkei 225 index NIK, -0.26% dropped 0.3%.
—-Barbara Kollmeyer contributed reporting to this article.
