The Nasdaq and S&P 500 finished higher while the Dow industrials closed fractionally lower Wednesday as Federal Reserve policy meeting minutes indicated a reduction in the central bank’s economy-boosting balance sheet could begin soon, and technology stocks rallied amid a disappointing manufacturing report and a tumble in crude futures.
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -1.78% finished down 1.10 points, or less than 0.1%, at 21,478.17, following a session that alternated between slight losses and gains. A slide in shares of Nike Inc. /zigman2/quotes/203439053/composite NKE -1.96% , Walt Disney Co. /zigman2/quotes/203410047/composite DIS -0.44% , Chevron Corp. /zigman2/quotes/205871374/composite CVX -3.25% and Exxon Mobil Corp. /zigman2/quotes/204455864/composite XOM -3.50% negated gains in Boeing Co . /zigman2/quotes/208579720/composite BA -2.69% , Intel Corp. /zigman2/quotes/203649727/composite INTC -1.13% and Microsoft Corp . /zigman2/quotes/207732364/composite MSFT -0.24% .
The S&P 500 index /zigman2/quotes/210599714/realtime SPX -1.40% closed up 3.53 points, or 0.2%, at 2,432.54, aided by a 1% rally in technology shares, and firm gains in health care and financials.
The Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP -0.72% rose 40.80 points, or 0.7%, to finish at 6,150.86.
In minutes released from the Fed’s June meeting, several members showed they’re in favor of starting a reduction of the central bank’s $4.5 trillion balance sheet. Holding those assets were part of the policy portfolio that the central bank had taken on while holding interest rates at historic lows. The minutes also showed that officials are divided on unemployment figures.
On the whole, the Fed minutes included a “whole lot of nothing,” according to Ian Winer, head of the equities division at Wedbush Securities, accounting for the muted response from stocks.
“People are still expecting some sort of rate hike and there was no real clarity on the balance sheet,” Winer said. “Ultimately, there’s not a big consensus, nothing incremental [from the Fed] from the June meeting.”
Also, U.S. factory orders in May fell 0.8%, compared with an expected decline of 0.7% from a survey of economists polled by MarketWatch, and a 0.2% decline in the prior period.
Quincy Krosby, chief market strategist at Prudential Financial, said investors are seeing opportunities to scoop up tech names at relatively discounted prices, given a recent slump that has taken the large-capitalization Nasdaq-100 index /zigman2/quotes/210598364/realtime NDX -0.46% , and the tech-focused Technology Select Sector SPDR ETF /zigman2/quotes/207444675/composite XLK -0.71% lower in the past three sessions, as Wall Street has fretted that the high-flying sector has climbed too far, too fast.
“New money is coming into the [tech] market. The new money that you typically see at a new quarter and that provides perhaps more interesting valuations, or a discount to what they were selling for at the beginning of their run,” Krosby said.
Still, Wednesday’s trading in tech and the broader market has been marked by swings in and out of positive territory.
“We’re seeing the reversal of the trade taking place on Monday,” said Wedbush Securities’s Winer, who noted trading volume is light and mostly algorithm-driven. “We’re seeing vicious rotations in certain sectors: Oil’s getting killed and there’s a rotation into biotech and semiconductors.”
“What we have been seeing is the market is fitful: Two steps forward and one step back,” said Doug Cote, chief market strategist at Voya Investment Management. “But I would buy that all day long,” he said, citing strong expected corporate earnings, particularly in the technology sector.
However, economic data has been mixed amid questions about the strength of the U.S.’s economic recovery as the Federal Reserve attempts to normalize interest-rate policy.
“The market is watching every morsel of economic data to see if inflation is moving in the direction that the Fed wants,” Krosby said. She said investors will be focused on Friday’s labor-market report after recent data have shown inflation slipping below the Fed’s 2% target, despite growth in wages.