Stocks End Lower, But Off Session Low After Fed minutes
2:46 pm Wednesday, August 17th, 2022
Stocks fell on Wednesday as the rally on Wall Street that has pushed prices higher since mid-June appeared to lose steam as traders assessed the latest retail data and minutes from the Fed.
The FOMC’s July policy meeting minutes which showed that all participants agreed that it was appropriate to raise the target range for the federal funds rate 75 basis points.
Notably, some participants indicated that, once the policy rate had reached a sufficiently restrictive level, it likely would be appropriate to maintain that level for some time to ensure that inflation was firmly on a path back to 2 percent.
Participants judged that, as the stance of monetary policy tightened further, it likely would become appropriate at some point to slow the pace of policy rate increases while assessing the effects of cumulative policy adjustments on economic activity and inflation. Participants agreed that there was little evidence to date that inflation pressures were subsiding.
The selling efforts are bringing down many stocks with semiconductors notably lagging the broader market. The PHLX Semiconductor Index is down 3.0% after Analog Devices’ (ADI) disappointing commentary accompanying its earnings report. Also, weakness seen here is weighing on the information technology sector (-0.9%).
Another specific area of weakness is the retailers, trading down in solidarity with Target (TGT) after it disappointed with quarterly results. The SPDR S&P Retail ETF (XRT) is down 3.0%. Retailers are weighing on the consumer discretionary sector (-1.3%) despite earnings-driven gains in peers Lowe’s (LOW) and TJX (TJX).
The energy sector (+0.9%) is the lone holdout in positive territory amid fluctuating oil prices. WTI crude oil futures are up 1.1% currently to $87.47/bbl but fell as low as $85.88/bbl earlier.
Treasury yields have made sizable upside moves. The 2-yr note yield is up eight basis points to 3.32% while the 10-yr note yield is up seven basis points to 2.89%. These moves are partly due to the UK reporting a 40-year high consumer inflation rate in July (+10.1% year-over-year) ahead of the open.
