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April 7, 2021, 4:28 p.m. EDT

S&P 500 ekes out record close after Fed minutes show no hurry to tighten monetary policy

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By Andrea Riquier and Joy Wiltermuth

U.S. stocks closed nearly unchanged Wednesday in lackluster action, after the release of minutes from the Federal Reserve’s March policy meeting showed that central bank staffers were in no hurry to tighten monetary support amid the coronavirus pandemic.

How did stock benchmarks trade?

  • The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.66% rose 16.02 points, or 0.1%, to close at 33,446.26, its second-highest finish ever.

  • The S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.74% added 6.01 points, or 0.2%, enough to finish at a record 4,079.95, its 18th of the year.

  • The Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +0.88% index shed 9.54 points, or 0.1%, ending at 13,688.84, while booking a second day in a row of losses.

  • The Russell 2000 /zigman2/quotes/210598147/delayed RUT +1.35% of small-cap stocks slumped 1.6% to close at 2,223.05

On Tuesday , the Dow finished down 96.95 points, or 0.3%, to end at 33,430.24, the S&P 500 index fell 3.97 points, or 0.1%, to finish at 4,073.94, after carving out an intraday record at 4,081.37, while the Nasdaq Composite slipped 7.21 points, or less than 0.1%, to close at 13,698.38, ending a streak of three consecutive gains.

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What drove the market?

Stocks were listless as the Federal Reserve released its March policy meeting minutes , which pointed to continued support for financial markets until the economy has more fully healed from the pandemic.

Despite an improving U.S. economy and labor market, Fed officials said they expect it will be “some time” before any tapering of the central bank’s monthly asset purchases program takes place, or before benchmark interest rates are lifted from today’s near zero levels, according to Fed minutes released Wednesday.

“I don’t think you’re going to see any indication of changes this year in terms of the Fed’s buying patterns and support for the market,” said Eric Schiffer, chief executive officer of the Patriarch Organization, adding that with fiscal support from Washington, “the market likely still has room to run.”

“April is a good month for markets historically, and as the earnings season unfolds, I think you’ll see a greater level of increases across the board in terms of future earnings projections,” Schiffer said.

Optimism about the outlook for the business climate has been growing as more Americans get vaccine doses and as Congress aims to provide additional spending measures to help facilitate a fuller recovery from the coronavirus pandemic. The CDC’s vaccine tracker shows that 32.6% of the U.S. population have had at least one vaccine dose and President Joe Biden on Tuesday announced that the vaccine program would be open to all American adults by April 19, ahead of an earlier timetable of May 1.

So far this year, investors have favored assets that do better at the start of the economic cycle, marking a so-called value rotation.

“We haven’t seen this kind of value rally since 2016,” said Diane Jaffee, senior portfolio manager at TCW. “Just like there are super growth cycles, I do believe there are super value cycles. It didn’t come to pass in 2016 but I think we are in one now.”

“I think investors are starting to realized that there will be a short-term rise in inflation, but it’s not going to be sustained,” Jaffee told MarketWatch. “Still, if the yield curve turns more positive or the 10-year yield rises, but it’s because of economic growth, that’s a good thing. That’s what we’ve been waiting for these past 10 years!”

While most investors are aware that a big boost in infrastructure spending will help sectors like materials /zigman2/quotes/204467551/composite XLB +0.99% and industrials /zigman2/quotes/202026558/composite XLI +1.06% , Jaffee also thinks banks /zigman2/quotes/202026558/composite XLI +1.06% have a lot of things going in their favor, including some technical factors that will boost earnings, and some regulatory relief.

Andrew Slimmon, lead senior portfolio manager at Morgan Stanley Investment Management, thinks it’s never been a better time to invest in value stocks, given the high level of investor distrust of the Fed’s commitment to keeping monetary policy supportive.

“The Fed seriously isn’t changing policy any time soon,” Slimmon wrote in emailed commentary. “Janet Yellen even admits that the Fed made policy error by adjusting policy too quickly post-recession. Yet, investors continue to ignore her and Powell’s statements.”

/zigman2/quotes/210598065/realtime
US : Dow Jones Global
34,777.76
+229.23 +0.66%
Volume: 311.63M
May 7, 2021 5:15p
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/zigman2/quotes/210599714/realtime
US : S&P US
4,232.60
+30.98 +0.74%
Volume: 2.05B
May 7, 2021 5:15p
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/zigman2/quotes/210598365/realtime
US : Nasdaq
13,752.24
+119.39 +0.88%
Volume: 3.97M
May 7, 2021 5:16p
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/zigman2/quotes/210598147/delayed
US : US Composite
2,271.63
+30.21 +1.35%
Volume: 0.00
May 7, 2021 7:01p
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/zigman2/quotes/204467551/composite
US : U.S.: NYSE Arca
$ 87.87
+0.86 +0.99%
Volume: 7.54M
May 7, 2021 4:00p
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/zigman2/quotes/202026558/composite
US : U.S.: NYSE Arca
$ 105.35
+1.10 +1.06%
Volume: 19.34M
May 7, 2021 4:00p
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/zigman2/quotes/202026558/composite
US : U.S.: NYSE Arca
$ 105.35
+1.10 +1.06%
Volume: 19.34M
May 7, 2021 4:00p
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