U.S. Stocks Close Lower After Fed Minutes


U.S. stocks ended lower on Wednesday after the minutes of the Federal Reserve’s June meeting showed almost all policymakers expected additional rate hikes later this year.

The Dow Jones Industrial Average fell 129.83 points, or 0.38 percent, to 34,288.64. The S&P 500 lost 8.77 points, or 0.20 percent, to 4,446.82. The Nasdaq Composite Index declined 25.12 points, or 0.18 percent, to 13,791.65.

Seven of the 11 primary S&P 500 sectors ended in red, with materials and industrials leading the laggards by losing 2.47 percent and 0.60 percent, respectively. Meanwhile, communication services and utilities led the gainers by rising 1.21 percent and 1.10 percent, respectively.

U.S. stocks moved lower one day after the Fourth of July holiday, with investors weighing the Fed’s June minutes released Wednesday afternoon. The minutes showed that policymakers decided against a rate increase amid concerns over economic growth, citing the lagged impact of monetary policy. They also wanted to slow the speed of rate hikes to give the Fed more time to assess the effect of past hikes.

Although seeing room to skip the June meeting after 10 consecutive rate increases, almost all officials believed that maintaining a restrictive stance for monetary policy would be appropriate to achieve the Fed’s inflation objectives, expecting additional rate hikes but at a slower pace, according to the Fed’s minutes.

The minutes contained little new information that might move markets, said Jose Torres, senior economist with Interactive Brokers, in an interview with MarketWatch. “Everyone knows that the Fed wants to move higher.”

The Federal Open Market Committee (FOMC) has around 88 percent probability to raise the benchmark interest rate by another 25 basis points at its July meeting, according to data from the CME FedWatch Tool on Wednesday afternoon.

For U.S. economic data, new orders for manufactured goods increased 0.3 percent to 578.0 billion U.S. dollars in May, the U.S. Census Bureau reported on Wednesday. This is the fifth gain in the past six months, following a 0.3 percent increase in April, but lower than market expectations of 0.8 percent.

“We see risks of persistent core inflation to mean U.S. rates could move higher and stay at these levels for longer. While the Federal Reserve left rates unchanged at its June meeting, the projections of top officials pointed to a further 50 basis points of tightening,” according to an analysis published by UBS Global Wealth Management.

“What’s more, fears of higher rates, a few disappointing economic numbers, or a shift in equity market sentiment could quickly unravel optimism about U.S. growth resilience and its underpinnings, like consumer resilience,” said UBS.