Market Snapshot: U.S. stocks end higher after two days of losses though Fed officials expect no interest rate cuts this year

by | Jan 4, 2023 | Stock Market

U.S. stocks ended another choppy session slightly higher on Wednesday after the Federal Reserve’s meeting minutes showed none of the 19 top central bank officials think it will be appropriate to cut interest rates this year, while economic data suggested economic growth was slowing. How stock indexes traded
The Dow Jones Industrial Average
DJIA,
+0.40%
gained 133.40 points, or 0.4%, to finish at 33,269.77, though it wavered between gains and losses after the release of minutes from December’s Fed meeting.

The S&P 500
SPX,
+0.75%
added 28.83 points, or 0.7%, to end at 3,852.97.

The Nasdaq Composite
COMP,
+10.36%
climbed 71.78 points, or 0.7%, ending at 10,458.76.

On Tuesday, stocks ended lower to kick off 2023 after suffering their worst yearly performance since 2008.

What drove markets All three benchmark indexes snapped two days of losses, but not before briefly slipping into the red after the Federal Reserve released the minutes from its Dec. 13-14 meeting, which showed none of the policymakers expect any interest rate cuts in 2023, as they awaited more evidence that inflation was on a sustained downward path. Fed officials also said that if markets start to ease financial conditions, especially if driven by a misperception of how the Fed was responding to the data that “would complicate” the FOMC’s effort to restore price stability. “It appears that officials remain hawkish and are especially concerned about the tight labor market,” said Nigel Green, CEO of asset management firm, deVere Group. “With the labor market not cooling as fast, there seems to be a considerable turnaround in tone from the more dovish minutes in November. These minutes dash yet more hopes for an economic soft landing.” Traders currently price in a 70.7% likelihood of a 25 basis point hike to the Fed funds target rate at its next policy meeting, which concludes February 1, according to CME’s FedWatch tool. “Fed funds futures interpreted the minutes as more hawkish than those from the November meeting, nudging their estimate of the terminal fed funds rate higher to 5%,” wrote Ryan Sweet, chief US economist at Oxford Economics, in emailed comments. “Unlike the Fed, financial markets anticipate the Fed cutting interest rates later this year.” See: 2022 was the ‘biggest outlier year’ in markets history as stocks and bonds both plunged, Deutsche Bank say …

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