US stocks rose on Wednesday after a back-and-forth trade as investors weighed in on a batch of economic data and minutes from the Federal Reserve’s December policy meeting.
The S&P 500 (^GSPC) gained 0.8% in volatile trading, while the Dow Jones Industrial Average (^DJI) added 130 points, or 0.4%. The tech-heavy Nasdaq Composite (^IXIC) rose 0.7%.
A reading of the discussions at the US central bank meeting in December indicated that Fed officials were wary that “unwarranted” easing of financial conditions could reverse their efforts to restore stability. prices, while acknowledging the need for greater policy flexibility.
“Participants pointed out that, because monetary policy worked importantly through financial markets, an unwarranted loosening of financial conditions, especially if driven by a public misperception of the committee’s reaction role , would complicate the committee’s effort to restore price stability,” minutes from the December 13-14 Fed meeting were noted.
Policymakers will meet again from January 31 to February 1 and expected to deliver the first rate hike of 2023 and the eighth of the current hike cycle at the conclusion of the discussions. Last month, the Fed raised interest rates by 50 basis points, bringing total increases in its benchmark policy rate to 4.25% in 2022.
“The Fed minutes are a good reminder for investors to expect rates to stay high throughout 2023,” Mike Loewengart, head of model portfolio construction at Morgan Stanley’s Office of Global Investments, said in emailed comments. electronic. “The bottom line is that even though we changed the calendar, the market headwinds from last year remain.”
Earlier in the day, the latest Job Vacancy and Job Turnover Survey, or JOLTS, showed 10.5 million job openings in November, more than expected, pointing to continued labor market momentum despite monetary tightening. from the Federal Reserve. Meanwhile, the ISM manufacturing PMI fell for the second straight month to 48.4 in December from 49 in November, the biggest drop since May 2020.
Wednesday’s moves follow a dismal start to 2023 trading as many of the pressures from last year follow investors into the new year. On Tuesday, the three main averages closed lower.
Meanwhile, in specific market moves, shares of Microsoft (MSFT) fell 4.4% to the lowest level since November after UBS downgraded the stock to Neutral from Buy and lowered its price target by $50. to $250 for concerns about the company’s cloud computing business, a key factor. revenue driver.
All eyes were on Tesla (TSLA) again on Wednesday after shares fell 12% on the first trading day of 2023 on Tuesday. It marked Tesla’s biggest drop in more than two years and erased all recovery gains made in the last three sessions of 2022 last week. The shares rose 5.1% on Wednesday.
The electric carmaker earlier this week reported fourth-quarter vehicle production and delivery figures that disappointed Wall Street, raising yet another problem for investors already weighing concerns about production at Tesla’s plant in China and CEO Elon Musk’s management of Twitter.
Alibaba Group (BABA) shares soared 13.1% after billionaire co-founder Jack Ma won approval from Chinese regulators to raise 10.5 billion yuan, or $1.5 billion, for the company’s consumer finance business. Ant Group subsidiary. Other US-listed Chinese stocks also gained.
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 workers to cut costs after overhiring during the boom. post-pandemic in 2021. It advanced 3.6%.
Elsewhere, US Treasury yields fell, with the benchmark 10-year note slipping 11 basis points to yield around 3.68%, while the 2-year yield was down about 5 basis points to yield. 4.36%.
The US dollar index also fell. And oil prices continued to fall, with West Texas Intermediate (WTI) crude futures, the US benchmark, falling nearly 5% to around $73 a barrel.
Investors are in for a busy week of economic data in this abbreviated first trading week of the year. The minutes of the December FOMC meeting will be released at 2 pm ET. The reading is likely to show the thinking behind the central bank’s “slower but higher” regime after Fed Chairman Powell signaled last month that he and his colleagues will switch to smaller rate hikes, but probably at a higher terminal rate.
Financial markets ended their worst year since 2008 on Friday, as aggressive moves by the central bank to quell inflation and the war in Eastern Europe hit stocks and bonds. Even as investors turn the page in 2022, much of Wall Street expects more pain ahead.
“What we’ve picked up from our model is that there’s a little bit of regime change going on under the surface, and what we mean by that is that 2022 was all about the Federal Reserve as it tightened financial conditions to combat inflation.” , Huw Roberts, head of analysis at Quant Insight, told Yahoo Finance Live on Tuesday.
“But what we’re seeing now is increased sensitivity to the real economy, increased sensitivity to growth, inflation expectations, industrial metals, and the credit cycle, and what that tells us is that markets will spend early. 2023 really nervous about a crash landing.”
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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