Updated at 4:15 pm EST
Stocks ended lower on Wednesday, while Treasury yields fell and the dollar fell against global peers, following the release of the Federal Reserve’s July monetary policy meeting minutes, which suggested that it is likely to use incoming data, rather than a preferred policy path, to determine the size of future rate hikes.
On Wall Street, the S&P 500 ended down 0.72%, while the Dow Jones Industrial Average fell 172 points, or 0.50%, to 33,980. The tech-focused Nasdaq lost 1.25%.
Meanwhile, benchmark 10-year Treasury yields were little changed at 2.891%, while 2-year notes were pegged at 3.276%. The US dollar index, which tracks the greenback against a basket of six global currency pairs, rose 0.14% to 106.64.
Stocks finished higher again yesterday after better-than-expected second-quarter earnings from Walmart (WMT) and Home Depot (High Definition) coupled with what appears to be a solid rebound in GDP growth prospects, it lifted the Dow above the 34,000-point mark for the first time since May.
The gains, which followed a huge jobs figure in July that included 528,000 new hires along with 5.2% wage growth, also added to concerns that inflation readings could pick up again in coming months.
An overnight rate hike by the Bank of New Zealand, the fourth in a row, as well as a searing 10.1% reading for July inflation in Britain, the highest in forty years, cemented those concerns, raising the odds of another huge Fed rate hike in September to around 48.5% overnight, according to CME Group’s FedWatch.
The Fed’s July policy minutes hinted at smaller rate hikes through the second half of the year, with Chairman Jerome Powell and his colleagues content to focus on a lot of data ahead of their next decision in September.
The July minutes, released at 2:00 p.m. ET, will detail the thinking behind the Fed’s second consecutive 75 basis point rate hike, which brought the benchmark fed funds rate into a range of between 2.25% and 2.5%. Powell said at the time that the Fed “would not hesitate” to execute another big rate hike if the Open Markets Committee deemed it appropriate.
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The US Treasury curve remains heavily inverted, a condition that has preceded nearly every recession over the past 25 years, even as the Atlanta Fed’s GDPNow forecasting tool suggests the economy is growing at a pace of 2.5%.
Retail sales also came back into the spotlight on Wednesday after the Commerce Department released official data for July ahead of the start of trading that illustrated the impact of falling domestic gas prices.
July retail sales were essentially unchanged from the previous month at a total of $682.8 billion, the Commerce Department said, just shy of Street’s consensus forecast of a 0.1% gain. June’s total was revised down to a 0.8% gain, the Commerce Department report showed, from the original estimate of a 1% gain.
Excluding the auto sector, June retail sales also rose 0.4%, the report noted, while stand-alone gasoline sales fell 1.8% as prices retreated from a record $5,017 a gallon reached during the month of June.
Goal (TGT) shares fell 2.7% after it posted much weaker-than-expected second-quarter earnings as deep discounts put in place to shift excess inventory weighed on the big retailer’s results.
Bed, bath and beyond (bbby) Stocks, meanwhile, were up 11.7% again on Wednesday, as the meme-stock darling extended gains following a bullish GameStop options bet. (GME) President Ryan Cohen.
In overseas markets, European stocks were also lower, with the Stoxx 600 down 0.95% at the close of trading in Frankfurt, while overnight in Asia the MCSI regional index excluding Japan gained 0.16% and the Nikkei 225 rose 1.23% to re-take the 27,000-point level for the first time in seven months.
Elsewhere, oil prices reversed their recent decline, although US crude is in sight of a six-month low, ahead of weekly data from the Department of Energy on domestic crude stocks at 10 p.m. :30 a.m. Eastern time.
The EIA said stockpiles fell by 7.1 million barrels last week as crude exports accelerated to around 5 million barrels per day, as well as another 5.7 million barrels in refined crude products. .
WTI crude futures for September delivery rose $1.18 to $87.71 a barrel, while October Brent contracts, the global benchmark, rose 94 cents to $93.28 a barrel.