MW U.S. stocks wobble after Fed minutes point to another big rate hike on tap, rising recession worries
By Joy Wiltermuth and Frances Yue
U.S. stocks traded lower Wednesday in choppy trade, after minutes of the Federal Reserve's June policy meeting signaled another big interest rate-hike is likely later this month despite the risk of slowing economic growth.
How stock indexes are trading
On Tuesday, the Dow fell 129 points, or 0.4%, while the S&P 500 notched a 0.1% rise and the Nasdaq Composite jumped 1.7%.
What's driving markets
Stocks were little changed after minutes of the Federal Reserve's June meeting released on Wednesday reiterated a resolve by Fed officials to act aggressively through interest rate hikes given growing concerns about the possibility of inflation becoming entrenched in the economy.
Fed officials "recognized that policy firming could slow the pace of economic growth for a time, but they saw the return of inflation to 2% as critical to achieving maximum employment on a sustained basis," the minutes said. They also indicated another large rate hike, of 50 basis points or 75 basis points likely would be approved later this month.
Read: Fed officials in June resolute in tightening into 'restrictive' territory despite risk of slower growth
Meanwhile, evidence has been mounting that U.S. economic growth already has begun to slow as the Federal Reserve embarks on a path to higher interest rates to fortify its battle against high inflation.
An ISM barometer of business conditions at service-oriented companies, such as restaurants, hotels and retailers fell slightly to 55.3% in June and hit the lowest level in two years. A reading above 50% indicates an expansion in activity.
"Talk matters," said Gaurav Mallik, chief investment strategist at State Street Global Advisors, about the impact of tougher tones lately from Fed officials and other central bankers about the need for tighter monetary policies to tamp down high costs of living around the world.
"Our expectation is that demand destruction is already on the way," Mallik said, by phone. While he views higher interest rates as necessary to help bring inflation back down to the Fed's 2% target, he also worries that a "global tsunami" of monetary tightening could risk triggering a deeper U.S. recession.
Treasury bonds yields inverted again Wednesday afternoon, though the 2-year yield trading above the 10-year yield.
"Recently a lot of the discussion has really been around this recession narrative, especially with the yield curve inverting for the third time this year," said Lindsey Bell, chief markets and money strategist at Ally, by phone. "The market just remains on edge because there's just a significant amount of uncertainty."
Earlier, Asia delivered a somewhat curmudgeonly response to Wall Street's overnight recovery. Japan's Nikkei 225 lost 1.2% and China's Shanghai Composite shed 1.4% after it emerged Beijing was once again tacking COVID-19 outbreaks in several regions of the country. But European stocks rallied, with the STOXX Europe 600 Index closing 1.7% higher and London's FTSE 100 Index gaining 1.2%.
Companies in focus
Other markets
--Jamie Chisholm contributed reporting to this article
-Joy Wiltermuth
$(END)$ Dow Jones Newswires
July 06, 2022 14:21 ET (18:21 GMT)
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