Fed Signals Rate Hike, S&P 500 and Nasdaq Hit Record Highs

Fed Signals Rate Hike, S&P 500 and Nasdaq Hit Record Highs

US stocks ended up slightly on Wednesday, with the S&P 500 hitting a record high close, after minutes of the Federal Reserve's latest meeting showed policymakers view a rate hike coming soon. The Nasdaq 100 Index also closed at a record. But, according to the May 2-3 meeting minutes, the Fed also agreed they should hold off on raising interest rates until they knew a recent US economic slowdown was temporary.

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Stocks were volatile following the minutes' release, but eventually added to small earlier gains. The S&P financial index which fell right after the minutes came out, rebounded to end down just 0.04 percent. Banks tend to benefit from higher borrowing rates.

It would appear that absent a material slowdown in the economy, Federal Reserve officials are acknowledging support from strengthening global growth, and appear poised to stay on track toward interest rate normalization.

Prior to the release of the minutes, markets were largely in a holding pattern, with US equities little changed near record levels and the dollar flat. Investors quickly moved on after Moody’s action on China briefly rattled Asian markets.

The Dow Jones Industrial Average was up 74.51 points, or 0.36 percent, to 21,012.42, the S&P 500 gained 5.97 points, or 0.25 percent, to 2,404.39 and the Nasdaq Composite added 24.31 points, or 0.40 percent, to 6,163.02.

It was also a fifth straight day of gains for the S&P 500. About 6.1 billion shares changed hands on US exchanges, below the 6.8 billion daily average for the past 20 trading days, according to Thomson Reuters data.

Following the Fed minutes' release, traders scaled back bets on two more rate increases by the end of 2017. Federal funds futures implied traders saw about a 46 percent chance the US central bank would raise rates twice more by year-end, down from roughly 50 percent late on Tuesday, according to CME Group's FedWatch program.

Fed policymakers also discussed at length the reasons for the first-quarter slowdown. While recent economic data has been mixed, with signs of a dip in consumer sentiment and spending, the job market continues to strengthen.

Among the day's gainers, Intuit jumped 6.7 percent after the tax-preparation software maker posted a profit topped estimates and also raised its revenue forecast.

 


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