US stocks rose on Wednesday after a back-and-forth trade as investors weighed a suite of economic data and minutes from the Federal Reserve’s December meeting.
The S&P 500 (^GSPC) gained 0.8% in a volatile session, while the Dow Jones Industrial Average (^DJI) gained 130 points, or 0.4%. The tech-heavy Nasdaq Composite (^IXIC) gained 0.7%.
A reading of discussions from the December Federal Reserve meeting suggested Fed officials were cautious that “unwarranted” easing in financial conditions could set back their efforts to restore price stability, while acknowledging the need for greater policy flexibility recognize.
“Participants noted that unwarranted relaxation of financial conditions, particularly if caused by a misperception of the public’s perception of the Committee’s responsiveness role, would complicate the Committee’s efforts to restore price stability, given that monetary policy functions essentially through financial markets.” , according to the minutes of the Fed meeting of 13-14. indicated in December.
Policymakers will meet again on January 31-February 1 and expect to come up with the first rate hike of 2023 and the eighth of the current rate hike cycle at the end of the discussions. Last month, the Fed hiked interest rates by 50 basis points, bringing the benchmark rate to 4.25% for 2022 as a whole.
“The Fed minutes are a good reminder for investors to expect interest rates to remain high throughout 2023,” said Mike Loewengart, head of model portfolio construction at Morgan Stanley’s Global Investment Office, in an emailed statement comments. “The bottom line is that the market headwinds from last year remain, even though we have flipped the calendar.”
Earlier in the day, the latest Job Openings and Labor Turnover Survey (JOLTS) showed 10.5 million job vacancies in November – more than forecast – suggesting continued labor market momentum despite monetary tightening by the Federal Reserve. Meanwhile, the ISM manufacturing purchasing managers’ index fell for the second straight month to 48.4 in December from 49 in November, the biggest drop since May 2020.
The story goes on
Wednesday’s moves follow a dismal start to trading in 2023 as many of last year’s stresses follow investors into the new year. On Tuesday, all three major moving averages closed lower.
Meanwhile, on certain market moves, Microsoft (MSFT) shares fell 4.4% to their lowest level since November after UBS downgraded the stock to neutral from a buy and lowered its price target by $50 to $250. because she had concerns about the company’s cloud computing business, a key driver of revenue.
All eyes were back on Tesla (TSLA) on Wednesday after shares fell 12% on the first day of trading in 2023 on Tuesday. It marked Tesla’s biggest drop in more than two years, erasing any recovery gains made over the last three sessions of 2022 last week. Shares rose 5.1% on Wednesday.
The electric-car maker earlier this week reported fourth-quarter vehicle production and deliveries numbers that disappointed Wall Street, adding further woe to investors already concerned about production at Tesla’s Chinese plant and CEO Elon Musk’s leadership of Twitter .
Alibaba Group (BABA) shares rose 13.1% after billionaire co-founder Jack Ma received approval from Chinese regulators to spend 10.5 billion yuan — or $1.5 billion — on subsidiary Ant’s consumer finance business group. Other US-listed Chinese stocks also rose.
Salesforce (CRM) on Wednesday announced restructuring plans that included cutting about 10% of its workforce and closing some of its offices, joining a growing list of tech companies laying off employees to cut costs after failing during the boom overhired during the 2021 pandemic. Stocks up 3.6%.
Elsewhere, US Treasury yields fell, with the benchmark 10-year bond down 11 basis points to around 3.68%, while the 2-year yield fell around 5 basis points to 4.36%.
The US dollar index also fell. And oil prices continued to slide, with West Texas Intermediate (WTI) crude oil futures — the US benchmark — falling nearly 5% to around $73 a barrel.
NEW YORK – JANUARY 3: An exterior view of the New York Stock Exchange on Wall Street during the first trading day of 2023 on the NYSE in New York City, January 3, 2023. (Photo by Kena Betancur/VIEW press)
Investors can expect a busy week of economic data in this shortened first trading week of the year. December FOMC meeting minutes are due at 2pm ET. The data likely reflects the thinking behind the central bank’s “slower but higher” regime after Fed Chair Powell signaled last month that he and his colleagues will move to smaller rate hikes but likely a higher terminal rate.
Financial markets on Friday capped their worst year since 2008, when aggressive moves by central banks to quell inflation and war in Eastern Europe hurt stocks and bonds. Even as investors turn the page into 2022, much of Wall Street expects more pain to come.
“What we’ve gleaned from our modeling is that there is some regime change happening beneath the surface, and what we mean by that, 2022 was all about the Fed as they tightened financial conditions to fight inflation.” Huw Roberts , head of analytics at Quant Insight, told Yahoo Finance Live on Tuesday.
“But what we’re noticing now is a greater sensitivity to the real economy — greater sensitivity to growth, inflation expectations, base metals and the credit cycle — and that’s telling us that markets are going to issue the early 2023 really nervous about a hard landing.”
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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