The Wall Street stock index closed positively on Wednesday, in the wake of the publication of the US Federal Reserve (Fed), which showed its determination to proceed with higher interest rates than the market expects, if this is judged that is necessary.
Especially on the dashboard, the industrial Dow Jones closed at 32,120.28 points with an increase of 0.6% or 191.66 points, the expanded S&P 500 strengthened by 0.95% or 37.52 points to 3,979 points, while the technologically weighted Nasdaq added 170.29 points or 1.51% to 11,434.74 points.
Of the 30 Dow shares, 23 closed in the “green” and the rest recorded losses. In particular, the shares of American Express, Boeing and Home Depot led the gains with an increase of 3.46%, 2.19% and 2% respectively. On the other hand, the shares of Procter & Gamble, Johnson & Johnson and Merch & Co. led the losses. with a decrease of 1.65%, 1.01% and 0.79% respectively.
After Snapchat’s brutal dive of 43% yesterday, which brought new pressure to the troubled tech industry and pushed the Nasdaq into a new sell-off of 2.4%, the market today was moving cautiously upwards with investors waiting for the Fed minutes to choose direction more convincingly.
And the determination shown by the bank officials immediately strengthened the investment mood of the day.
In particular, as they showed the minutes of the May meeting, US Federal Reserve officials have confirmed their intention to raise interest rates by 50 basis points. in the next two meetings as expected, but left open the margin for further corresponding moves in the meetings that will follow if deemed necessary.
“Most participants felt that increases by 50 basis points would probably be appropriate in the next two meetings,” the minutes said. In addition, members of the Commission stated that “a restrictive policy stance may well be appropriate given the evolution of the economic outlook and the risks involved”.
It is noted that the markets are currently pricing that the Fed will move to an interest rate around 2.5% -2.75% by the end of the year, something that many central bankers characterize as a neutral interest rate. The statements in the minutes, however, show that the Commission is ready to go beyond that.
It is noteworthy that the word inflation is mentioned 60 times in the minutes, with Fed members expressing concern about rising prices despite optimism that the bank’s moves and other conditions, such as the easing of supply chain bottlenecks, will help the situation.
As Saxo Bank analysts have previously pointed out, “while the search for any reference to a possible 75-point interest rate hike seems futile, a key issue remains the 50-bp increases that will follow.”
“However, investors are increasingly analyzing the Fed’s discussions looking for signs of stagnation or economic slowdown, and that is what really drives market sentiment right now.”
In the meantime, the U.S. Congressional Budget Office (CBO) on Wednesday published economic outlook, which states that high inflation will continue next year.
The CBO expects the consumer price index to rise by 6.1% this year and by 3.1% in 2023. This forecast suggests that inflation will slow from current annual levels of 8.3%, but will still be dramatically above the long-term key level of 2.3%.
On the other hand, the publication of financial results continued, with the title of Dick’s Sporting Goods holding an impressive rally after the strongly negative opening.
In particular, its share started trading with a fall of more than 6% against the background of the fact that it downgraded the outlook for the whole year due to inflation and complications of the supply chain, however in the end it “jumped” more than 9% as it exceeded estimates of the market in its quarterly figures.
Nordstrom also jumped 13.5% after surpassing its quarterly sales estimates.
Retailers in general have been in the spotlight as investors want to see how they deal with the spike in inflation.
Analysts say there is a shift in consumer demand for services rather than goods, with some saying the shares may be “severely punished” for their effects.
The Toll Brothers construction company also gave a further impetus to the market today, which strengthened by 7.5% after exceeding the analysts’ estimates in the quarterly results published today.
End, in the macro news of the daydurable goods orders in the US rose in April, an encouraging development that shows that demand for equipment and goods remains strong despite the rally of inflation.
In particular, orders for durable goods rose 0.4% in April after a 0.6% rise in March, according to the Commerce Department.
The value of orders for basic capital goods, an indication of the course of investments in equipment, climbed 0.3% after an increase of 1.1% in the previous month.
It is noted that the average estimates of analysts in a Bloomberg poll spoke of a 0.6% increase in orders for total durable goods and 0.5% for basic capital goods.