US stocks remained lower after meeting minutes from the Federal Reserve as traders parsed the commentary to try and gauge what action the central bank will take later this month.
(Bloomberg) — US stocks remained lower after meeting minutes from the Federal Reserve as traders parsed the commentary to try and gauge what action the central bank will take later this month.
The S&P 500 was down 0.2% following the release of the minutes of the Fed’s last policy meeting. The June gathering threw Wall Street for a loop as officials paused their rate-hiking cycle after 10 consecutive increases. Among Wednesday’s notable movers, United Parcel Service Inc. dropped as employees moved closer to a strike over pay while the cryptocurrency exchange Coinbase Global Inc., fell after a downgrade.
The yield on policy-sensitive two-year Treasuries was little changed at 4.94%, while the 10-year advanced to 3.94%. That inverted yield curve is often read as a sign of a coming economic slump. The Fed has forecast two additional rate increases this year which could further weigh on economic growth and corporate profits. The Fed’s next rate decision is due in three weeks.
“I am the most bearish I have ever been on the economy without being in a recession, and it’s because of the yield curve, the contraction of money and QT at the same time they are hiking rates,” Ed Hyman, founder and chairman of Evercore ISI, said on Bloomberg Television.
Swaps traders are factoring in another quarter-point hike by September as bets on the Fed easing up on its tightening policy are pushed further out. Wednesday’s minutes showed division among members of the Federal Open Market Committee where some would have preferred another hike in June amid a tight labor market.
“This adds to the high probability the Fed hikes again on July 26,” Ian Lyngen, a strategist with BMO Capital Markets wrote. “The FOMC minutes deliberately left investors with the impression that June’s pause was a close call and that a July hike is the committee’s base case scenario.”
Investors will be closely watching Friday’s June employment report will for signs of a cooling labor market.
“Our view is that the recession won’t strike until next year,” said Benjamin Kirby, co-head of investments at Thornburg Investment Management. “The path of least resistance for risk markets is higher because inflation is falling, the job market and consumer spending are robust, and most professional money managers remain underweight risk.”
A gauge of the dollar rose against all of its Group-of-10 peers while gold slid. Crude touched $72 a barrel after Saudi Arabian and Russian output cuts earlier this week.
Key Events This Week:
- OPEC International Seminar, speakers including OPEC+ oil ministers, kicks off in Vienna, Wednesday
- FOMC issues minutes on June policy meeting, Wednesday
- New York Fed President John Williams in “fireside chat” at meeting of the Central Bank Research Association at the New York Fed, Wednesday
- US initial jobless claims, trade, ISM services, job openings, Thursday
- Dallas Fed President Lorie Logan speaks on a panel about the policy challenges for central banks at CEBRA meeting, Thursday
- US unemployment rate, nonfarm payrolls, Friday
- ECB’s Christine Lagarde addresses an event in France, Friday
Some of the main moves in markets today:
Stocks
- The S&P 500 fell 0.3% as of 2:27 p.m. New York time
- The Nasdaq 100 fell 0.1%
- The Dow Jones Industrial Average fell 0.4%
- The MSCI World index fell 0.5%
Currencies
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro fell 0.2% to $1.0855
- The British pound fell 0.1% to $1.2697
- The Japanese yen fell 0.1% to 144.62 per dollar
Cryptocurrencies
- Bitcoin fell 1% to $30,486.5
- Ether fell 1.6% to $1,910.57
Bonds
- The yield on 10-year Treasuries advanced eight basis points to 3.94%
- Germany’s 10-year yield advanced two basis points to 2.48%
- Britain’s 10-year yield advanced eight basis points to 4.49%
Commodities
- West Texas Intermediate crude rose 3% to $71.86 a barrel
- Gold futures fell 0.2% to $1,925.10 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Richard Henderson, Ksenia Galouchko, Tassia Sipahutar and Robert Brand.
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