Stocks rise after Fed minutes signal a slowdown in rate hikes

Stocks rose on Wednesday after minutes of the Federal Reserve’s last monetary policy meeting signaled a likely slowdown in the pace of the central bank’s rate hikes next month.

When the closing bell rang on Wall Street, all three major indices were in the green, with the S&P 500 up 0.6%, the Dow 0.3% and the Nasdaq 1%.

Wednesday marked the last full trading session of the week for US investors. US markets close on Thanksgiving, and markets are only open half a day on Black Friday.

The biggest market move came from energy markets on Wednesday, with WTI crude oil prices falling 4.3% to settle at $77.47 a barrel. Crude oil prices fell as low as $77.10 on the day, closer to yearly lows.

Markets reacted to comments from the Fed on Wednesday afternoon, which suggested that a “number of participants” said it was “appropriate to slow the pace of increase from the target federal funds rate range.”

Last month, the Fed raised the target range for its benchmark interest rate by 0.75% for the fourth straight meeting. Markets expect a 0.50% gain in this range at next month’s Fed meeting.

Elsewhere on the calendar, Wednesday was a busy day for economic data, with readings for jobs, housing and manufacturing all falling early Wednesday.

The latest weekly jobless claims data showed 240,000 new jobless claims were filed last week, the most since mid-August. Economists were expecting a total of 225,000 initial claims for the week ended Nov. 19.

October durable goods orders were also released early Wednesday, showing orders rising 1% over the last month, bucking expectations for a 0.4% rise, according to data from Bloomberg.

S&P Global’s preliminary business activity data for November showed a continued slowdown in economic output, with the company’s manufacturing PMI falling to a 30-month low, while service sector activity hit a three-month low. S&P Global Market Intelligence chief economist Chris Williamson said on Wednesday those reports are consistent with an economy shrinking at an annualized rate of 1%.

University of Michigan consumer sentiment data showed consumers remained pessimistic about their outlook, with the index falling 5% to 56.8 from 59.9 in October. “In addition to the ongoing impact of inflation, consumer attitudes have also been weighed down by rising borrowing costs, declining assets and weakening job market expectations,” said Joanne Hsu, director of the consumer survey.

On the housing front, new home sales unexpectedly rose 7.5% in October to an annualized rate of 632k, much faster than the annualized rate of 570k expected by economists. Mortgage rates also fell slightly this week, remaining below recent highs.

Recent stock momentum continues

After the S&P 500 closed above 4,000 for the first time in two months on Tuesday and the Dow closed at a three-month high, investors continued to see that positive momentum building on Wednesday.

Over the past month, the Dow is up almost 10%, while the S&P 500 is up more than 6.5%. The tech-heavy Nasdaq continues to lag, up less than 3% over the period, as higher interest rates and the collapse of crypto markets weigh on the broader tech industry.

Still, recent market moves have caused some strategists to turn more optimistic towards the end of the year, even as top-flight teams from Morgan Stanley and Goldman Sachs gave a more cautious outlook for the stock market this week.

“The market is like a spiral spring,” said Brian Belski, chief investment strategist at BMO Capital Markets Yahoo Finance Live said on Tuesday. “I think the market will keep going… higher. I really think there’s a good chance we’ll be well over 4,000 [on the S&P 500] at the end of the year.”

Belski has a year-end price target of 4,300 for the S&P 500, which means the index could gain about another 8% by the end of this year.

In the crypto markets, the fallout from FTX’s collapse continues to resonate through the industry, although Bitcoin’s price rose a few percentage points on Wednesday, trading near $16,500. Late Wednesday afternoon, the FTX founder and former CEO shamed Sam Bankman-Fried said he would appear at the New York Times Dealbook conference next Wednesday, his first public appearance since the company went bankrupt earlier this month.

On Tuesday, Digital Currency Group, parent company of ailing exchange Genesis Global, emerged as the latest major crypto player, assuring investors that a bankruptcy filing is not imminent.

In a memo to DCG employees, CEO Barry Silbert said the decision to halt repayments and new activity at Genesis last week was due to a “liquidity and duration mismatch in Genesis’ loan book.”

Silbert revealed that intercompany loans were made between DCG and Genesis, but argued that those loans were made “in the same manner as hundreds of crypto investment firms.”

On the earnings side, Wednesday morning’s results from Deere & Co. (DE) pushed shares up 5%, with the agribusiness giant reporting earnings that beat expectations.

John Deere tractor is named during a tractor race "Traktoryja"  organized as part of the traditional Dozhinki harvest festival.  Gieraltowice, Wadowice County in Poland on August 28, 2022. The participants drove in five different classes depending on the engine power of a tractor.  For the first time women took part in the race.  (Photo by Beata Zawrzel/NurPhoto via Getty Images)

John Deere tractor is seen during a tractor race called “Traktoryja” organized as part of the traditional Dozhinki harvest festival. Gieraltowice, Wadowice County in Poland on August 28, 2022. (Photo by Beata Zawrzel/NurPhoto via Getty Images)

Other gainers early Wednesday included names that released earnings after Tuesday’s close, including HP (HPQ), Nordstrom (JWN) and Autodesk (ADSK).

HP shares rose 1.8% on Wednesday after the company announced plans to reduce its workforce by up to 12%, or 6,000 jobs, by the end of fiscal 2025 in response to a slowdown in the PC market.

Nordstrom shares fell 4% on Wednesday after reporting a decline in sales in the most recent quarter and forecasting lower full-year earnings.

Autodesk shares fell over 5.5% after the company lowered its billing and cash flow projections this year, citing “less demand for multi-year upfront payments and more demand for annual contracts than we anticipated.”

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