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Wall Street ends up as investors absorb Fed minutes

Stock Markets Jul 06, 2022 06:06PM ET
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© Reuters. FILE PHOTO: Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., June 30, 2022. REUTERS/Brendan McDermid

By David French

NEW YORK (Reuters) - Wall Street put a seesaw day behind it to close higher on Wednesday, as investors digested new clues on the U.S. central bank's approach to rate policy and its inflation fight detailed in the minutes from the latest Federal Reserve meeting.

After a brutal selloff in global equity markets in the first half of the year, nervous investors are keeping a close watch on central bank actions as they try to assess the impact of aggressive rate hikes on global growth.

They got their latest data point on Wednesday afternoon, when the minutes of the June 14-15 policy meeting detailed how the U.S. central bank was prompted to make an outsized interest rate increase. The minutes were a firm restatement of the Fed's intent to get prices under control to address stubborn inflation and concern about lost faith in the central bank's power.

The 0.75 percentage-point rate increase which came out of the meeting was the first of that size since 1994. According to the minutes, participants judged that an increase of 50 or 75 basis points would likely be appropriate at the policy meeting later this month.

Prior to the minutes' publication, investors had been pricing in another 75-basis-point rate increase at the upcoming July 26-27 gathering, meaning the fact that both 50 basis points and 75 basis points remained on the table pointed toward the Fed acknowledging the impact of its rate rises on the economy.

The minutes reflected participants' concern about rate increases having the potential for a "larger-than-anticipated" impact on economic growth.

"I think people are heavily focused on the terminal rate of what the Federal Reserve's increases are, and the 50-75 debate just points towards where you end up," said Jason Pride, chief investment officer of private wealth at Glenmede.

He noted that a 50 basis-point hike would point toward a terminal rate of 3%, while 75 basis points indicated a peak of 3.25% or 3.5%. At 3.5% or above, the likelihood of recession is about 50%.

Prior to the publication of the minutes, all three Wall Street benchmarks had endured a seesaw session, and while there were further swings between positive and negative territory in the moments after the 2 p.m. EDT release, markets built solid gains for the rest of the day.

The Dow Jones Industrial Average rose 69.86 points, or 0.23%, to 31,037.68, the S&P 500 gained 13.69 points, or 0.36%, to 3,845.08 and the Nasdaq Composite added 39.61 points, or 0.35%, to 11,361.85.

Eight of the 11 S&P subsectors closed higher, with utilities and technology leading the way. The biggest outlier was the energy index, which slipped 1.7% as crude prices fell to a 12-week low on recession fears. [O/R]

Elsewhere, Uber Technologies (NYSE:UBER) Inc and DoorDash Inc fell 4.5% and 7.4%, respectively, after Amazon.com Inc (NASDAQ:AMZN) agreed to take a 2% stake in Just Eat Takeaway.com's struggling U.S. food delivery business, Grubhub.

Rivian Automotive Inc gained 10.4% after the electric-vehicle maker's deliveries nearly quadrupled as it ramped up production.

Volume on U.S. exchanges was 11.31 billion shares, compared with the 13.08 billion average for the full session over the last 20 trading days.

The S&P 500 posted 2 new 52-week highs and 29 new lows; the Nasdaq Composite recorded 20 new highs and 109 new lows.

Wall Street ends up as investors absorb Fed minutes
 

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Comments (20)
Dave Jones
Dave Jones Jul 06, 2022 10:21PM ET
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These so called investors are actually the fed and a few institutions. And they know exactly what's going on.
DEBJANI RAUT
DEBJANI RAUT Jul 06, 2022 10:21PM ET
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You are 100% correct. Ruling Leaders either from India or USA or Europe are same and always try to showcase that economy is very good conditions. Fed, RBI in India are puppets of government and they are given instructions to lift markets. Yesterday only major portion of companies touched 52 week low in Dow and Nasdaq. General investors are bleeding.
Kerry Ditto
Kerry Ditto Jul 06, 2022 7:47PM ET
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If the current condition were at nomination and confirmation steps for Powell's 2nd term consideration, he would have zero chance. This explains why he dragged his feet last year having kept saying inflation was transitory. Why do people have to suffer because of irresponsible Fed?
Kerry Ditto
Kerry Ditto Jul 06, 2022 7:01PM ET
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The decisively inverted yield curve is seriously meaningful. Ignoring it would be at own risk.
Kerry Ditto
Kerry Ditto Jul 06, 2022 6:38PM ET
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this becomes an uninvestable market. Fed dragged their feet till uncontrollable inflation hit. Then, belatedly they are doing wrong things in wrong time. So be it.
Ricky Singh
Ricky Singh Jul 06, 2022 3:02PM ET
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Wow !!!What a garbage reporting !!!It already was in red before yesterday and today … and its green anyways !!
Keith Wilson
Keith Wilson Jul 06, 2022 2:27PM ET
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Weak website. 30 minutes after Fed minutes released and zero update
Ricky Singh
Ricky Singh Jul 06, 2022 1:59PM ET
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Green coming 🚀
Glenn Andrades
Glenn Andrades Jul 06, 2022 1:40PM ET
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it's going to crash as soon as news is out, market is just being manipulated
Brad Albright
Brad Albright Jul 06, 2022 1:40PM ET
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Ooops.
DEBJANI RAUT
DEBJANI RAUT Jul 06, 2022 1:40PM ET
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100% true. World Markets are being Manipulated by respective central banks and few fund houses. Blood bath will come very soon.
Shanta Robinson
Shanta Robinson Jul 06, 2022 1:37PM ET
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Investors are anticipating 75bps hike language in the minutes, markets will rally because investors will be right for a change.
First Last
First Last Jul 06, 2022 1:37PM ET
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Historically, the Fed Reserve has largely done what the market expects.
Ma Lu
Ma Lu Jul 06, 2022 1:16PM ET
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At this point of time I wonder what the FED really can do? I believe they should resign as it won't be possible to fight inflation anymore. Also they won't avoid recession.
Show previous replies (5)
First Last
First Last Jul 06, 2022 1:16PM ET
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cqjhm poufc   Not sure why you think my post is pro-Trump.
First Last
First Last Jul 06, 2022 1:16PM ET
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cqjhm poufc   Under Trump we had a multi-year trumpet/megaphone pattern in the market.
First Last
First Last Jul 06, 2022 1:16PM ET
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cqjhm poufc   Biden winning the election broke that pattern to the upside.
Co Gonz
Co Gonz Jul 06, 2022 1:16PM ET
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First Last i bet you thought inflation was transitory and has been created by russia-ukraine war.. inflation was close to 7.5-7.8 before ukraine
First Last
First Last Jul 06, 2022 1:16PM ET
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Co Gonz    Russia's war on Ukraine is still on-going.  If Russia stops aggression and weaponizing its role as a commodities supplier and inflation still remains elevated, then you may have a point.   US inflation was around 5.5% in mid-2021 before Russia starting massing troops along Ukraine's border.
 
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