U.S. Stocks Move Back To The Upside As Fed Minutes Add To Rate Cut Optimism

(RTTNews) - Following the modest pullback seen in the previous session, stocks moved back to the upside during trading on Wednesday. The major averages fluctuated over the course of the trading day but managed to close in positive territory.

The Nasdaq and the S&P 500 closed higher for the ninth time in the past ten sessions. The Nasdaq climbed 102.05 points or 0.6 percent to 17,918.99 and the S&P 500 rose 23.73 points or 0.4 percent to 5,620.85, while the narrower Dow inched up 55.52 points or 0.1 percent to 40,890.49.

The higher close on Wall Street came after the Federal Reserve released the minutes of its latest monetary policy meeting, which seemingly provided additional support for expectations of an interest rate cut in September.

The minutes of the Fed's late July meeting revealed that the "vast majority" of participants believed it would "likely be appropriate" to lower rates at the next meeting if inflation data continued to come in "about as expected."

Reports released by the Labor Department last week showed the annual rates of consumer and producer price growth slowed in line or slightly more than economists had forecast in July.

Fed officials unanimously agreed to leave interest rates unchanged at the meeting, although the minutes noted several participants observed that the progress on inflation and increases in the unemployment rate had provided a plausible case for reducing the target range by 25 basis points at the July meeting.

On the heels of the minutes, the Fed is widely seen as likely to lower interest rates next month, with CME Group's FedWatch Tool indicating a 61.5 percent of a quarter point rate cut next month and a 38.5 percent chance of a half point rate cut.

"The Fed minutes removed all doubt about a September rate cut," said Jamie Cox, Managing Partner for Harris Financial Group. "The Fed's communication strategy is to make its meetings less of a market moving event, and they are following the script to the letter."

Stocks saw considerable volatility early in the session after the Bureau of Labor Statistics released revised data showing job growth in the U.S. was weaker than previously reported in the twelve months ended March 2024.

The BLS said the U.S. economy added 818,000 fewer jobs from March 2023 to March 2024 than initially reported, reflecting 0.5 percent weaker job growth.

While the data added to recent optimism about an interest rate cut next month, the slower than previously reported job growth also rekindled concerns about the strength of the labor market.

Sector News

Housing stocks saw substantial strength on the day amid optimism about lower interest rates, resulting in a 2.7 percent surge by the Philadelphia Housing Sector Index.

Toll Brothers (TOL) helped lead the sector higher, with the homebuilder spiking by 5.6 percent after reporting better than expected fiscal third quarter results and raising its full-year guidance.

Significant strength was also visible among steel stocks, as reflected by the 2.5 percent jump by the NYSE Arca Steel Index.

Semiconductor, retail and computer hardware stocks also saw notable strength on the day, while networking stocks gave back ground after moving sharply higher in recent sessions.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region once again ended mixed on Wednesday. Japan's Nikkei 225 Index and China's Shanghai Composite Index fell by 0.3 percent and 0.4 percent, respectively, while South Korea's Kospi and Australia's S&P/ASX 2000 Index both rose by 0.2 percent.

Meanwhile, the major European markets all moved to the upside on the day. While the U.K.'s FTSE 100 Index inched up by 0.1 percent, the German DAX Index and the French CAC 40 Index both climbed by 0.5 percent.

In the bond market, treasuries moved higher over the course of the session after showing a lack of direction in early trading. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell 4.0 basis points to 3.778 percent.

Looking Ahead

Trading on Thursday may be impacted by reaction to reports on weekly jobless claims and existing home sales as well as remarks by Fed officials at the Jackson Hole Economic Symposium.