By William Watts and Isabel Wang
U.S. stock indexes fell but ended off session lows Wednesday, after minutes of the Federal Reserve’s July meeting indicated policy makers were prepared to keep lifting rates but were wary of overdoing it.
How are stocks trading
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.11% snapped a five-day winning streak, falling 171.69 points, or 0.5%, to end at 33,980.32, after declining 324 points at its session low.
The S&P 500 /zigman2/quotes/210599714/realtime SPX -0.54% dropped 31.16 points, or 0.7%, to close at 4,274.04
The Nasdaq Composite /zigman2/quotes/210598365/realtime COMP -0.84% declined 164.43 points, or 1.3%, finishing at 12,938.12.
On Tuesday, the Dow rose 240 points, or 0.7%, while the S&P 500 advanced 0.2% to close at its highest since late April, while the Nasdaq slipped 0.2%.
What’s driving markets?
Minutes of the July meeting, at which policy makers delivered a 75 basis point rise, said that Fed officials worried about the “significant risk” that elevated inflation could become entrenched if the public began to question the Fed’s resolve to hike rates by a sufficient amount to rein in inflation.
On the other hand, “many” Fed officials said they were worried about the risk that the Fed could tighten the stance of monetary policy by more than was necessary, the minutes said.
“The minutes to the July FOMC meeting suggest the Fed will remain on a tightening path, but there are signs some officials are getting a little nervous that they could end up going too hard and may need to reverse course eventually,” said James Knightley, chief international economist at ING, in a note.
The minutes may not have sounded as dovish as some investors had hoped, said Chris Larkin, managing director of trading at E-Trade from Morgan Stanley, in emailed comments.
“Keep in the mind that the minutes are from before July’s big payroll beat and data that showed inflation slowed. Data over the next month may determine how long the rally can extend as investors try to get a sense of what the Fed will decide in September,” Larkin said.
Ahead of the minutes, the appetite for additional risky bets was seen waning as investors took time out to assess the strong summer surge that powered the stock market to three-month high.
Hopes that inflation may have peaked and that the Fed thus may be able to avoid delivering a hard economic landing has pushed the S&P 500 up 17.4% from its mid-June low. The benchmark on Tuesday challenged its 200-day moving average for the first time since April, but was unable to overcome it after hitting stiff resistance.
Earlier, investors received more clues as to the health of the U.S. consumer. Following better-than-expected results on Tuesday from Walmart /zigman2/quotes/207374728/composite WMT -0.03% and Home Depot /zigman2/quotes/208081807/composite HD +1.38% , it was the turn of retailing peers Target /zigman2/quotes/207799045/composite TGT -0.79% and Lowe’s /zigman2/quotes/205563664/composite LOW +1.78% to deliver earnings. Target’s numbers disappointed , after higher markdowns led to lower margins, but Lowe’s figures were well-received .
“In the wake of Walmart and Home Depot, I think Wall Street had much higher expectations for Target,” Navellier said in an interview.