After the minutes from the most recent Federal Reserve meeting revealed that policymakers believed they needed to retain a more stringent policy stance, U.S. markets concluded a volatile session on Wednesday marginally lower.
The minutes from the September meeting also revealed that many Fed officials emphasised the price of not doing enough to reduce inflation.
Recent market weakness has been partially attributed to investors’ growing concerns that the Fed’s aggressive rate hikes could send the world’s leading economy into a recession.
Real estate (.SPLRCR) lost 1.4% and rate-sensitive utilities (.SPLRCU) fell 3.4%. They were the S&P sectors with the most daily percentage drops.
Quincy Krosby, the chief global strategist at Charlotte-based LPL Financial, said Fed officials have recently spoken out in unanimity on the Fed’s commitment to containing inflation and maintaining the status quo.
There is now agreement that the Fed will continue. Where the change from 75 basis points to a ballpark of 50 and 25 happens is the market’s question. The market is concentrated on that.
In an effort to bring inflation under control from 40-year highs, Fed officials hiked interest rates by 0.75% for the third consecutive meeting in September.
The S&P 500 (.SPX) dropped 11.81 points, or 0.33%, to 3,577.03, the Nasdaq Composite (.IXIC) lost 9.09 points, or 0.09%, to 10,417.10, and the Dow Jones Industrial Average (.DJI) dropped 28.34 points, or 0.1%, to 29,210.85.
Investors have been eagerly awaiting Thursday’s news on U.S. consumer costs as well as the beginning of third-quarter U.S. profits, which begin on Friday with reports from some of the major U.S. banks.
The financial sector S&P 500 index (.SPSY) finished 0.3% lower.
The soft drink manufacturer PepsiCo Inc (PEP.O) increased its annual profit and revenue predictions due to strong demand for its beverages and snacks despite several price increases, leading gainers with a 4.2% gain.
Jumping 5.3% was Alcoa Corp (AA.N). According to a person briefed on the discussions, the Biden administration is considering limiting imports of Russian aluminium as it considers potential reactions to Moscow’s military aggression in Ukraine.
On the NYSE, declining issues outnumbered rising ones by a ratio of 1.64 to 1; on the Nasdaq, the ratio was 1.15 to 1.
The Nasdaq Composite registered 20 new peaks and 433 new lows while the S&P 500 had no new 52-week peaks and 78 new lows.
10.01 billion shares were traded on U.S. exchanges, compared to the 11.68 billion averages for the entire session for the previous 20 trading days.
To summarise the final call:
We’ve gathered that a last month’s policy meeting revealed on Wednesday that Federal Reserve policymakers concurred that raising interest rates to a more constrained level—and then maintaining them there for some time—was necessary to achieve their goal of reducing widespread and intolerably high inflation.
The minutes of the meeting from September 20–21 stated that several U.S. central bank officials emphasised the importance of continuing the fight against inflation even as the labour market slowed and that the costs of taking too little action to do so likely outweighed the costs of taking too much action.
In an effort to lower inflation from 40-year highs, Fed officials hiked interest rates by 0.75% at their meeting last month. Fed Chair Jerome Powell promised afterwards that they would continue raising rates until they are certain the task is complete.
However, the minutes also carried a hint of a slowdown in the rate of future monetary compression, with several officials stating that it would be critical to gauge the speed of additional rate hikes in order to lower the danger of having materially negative impacts on the economy.
The conclusive result of this turn of events will be revealed in the next meetings which would decide the situation based on their results.