Dow gains 140 points as Fed minutes show smaller rate hikes ahead

Markets will not see an 'all clear' signal during the first half of 2023, says Kevin Simpson

U.S. stocks rose Wednesday, as meeting minutes from the Federal Reserve showed that the central bank is looking to hand out smaller rate hikes in the coming months as inflation cools off.

The Dow Jones Industrial Average rose 130 points, or 0.38%. The S&P 500 gained 0.70% and the Nasdaq Composite increased 1.10%.

Shares of Nordstrom fell more than 3% after the department store chain reaffirmed its forecast. However, Nordstrom beat profit and sales expectations in its latest results, according to consensus expectations on Refinitiv. Tesla rose more than 5% after Citi upgraded shares to neutral from sell. Deere surged nearly 7% on an earnings beat.

Meeting minutes from the Fed’s November meeting signaled that the central bank is seeing progress in its fight against high inflation and is looking to slow the pace of rate hikes, meaning smaller ones through the end of this year and into 2023.

“A substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate,” the minutes stated. “The uncertain lags and magnitudes associated with the effects of monetary policy actions on economic activity and inflation were among the reasons cited regarding why such an assessment was important.”

Earlier in November, the central bank approved a fourth consecutive 0.75 percentage point hike that brought rates to their highest level since 2008.

“In the market’s interpretation this is positive given that the Fed wants to see a rebalancing in the labor market whereby businesses begin to hold leverage over the demand for higher wages,” said Quincy Krosby, chief global strategist for LPL Financial. “Higher wages have been consistently passed along as higher prices leading to rising inflationary pressures.” 

Jobless claims data came in higher than expected at 240,000 for the week ending Nov. 19 where economist expected 225,000, signaling that the labor market may be weakening. At the same time, however, durable goods orders for October were stronger than anticipated, coming in at 1%, more than the 0.5% expected.

Wall Street is coming off an upbeat session, with the Dow Jones Industrial Average surging nearly 400 points Tuesday as traders shrugged off fears of further lockdowns in China and looked to strong earnings. The S&P 500 rose 1.36%, closing above the 4,000 level for the first time since September. Meanwhile, the Nasdaq Composite jumped 1.36%.

Markets will be closed on Thursday for the Thanksgiving holiday and will close early on Friday.

Correction: A previous version of this story was corrected to reflect that Nordstrom reaffirmed its forecast.

Read More: Dow gains 140 points as Fed minutes show smaller rate hikes ahead

2022-11-23 11:10:00

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