September 26, 2022

Wall Street capped off another choppy day of trading Wednesday with modest gains for the major stock indexes, after investors combed the minutes from the Federal Reserve’s most recent interest rate policy meeting for clues about what the central bank may do next to fight inflation.

The S&P 500 rose 14 points to 3,845, or 0.4%, its third consecutive gain after spending much of the day wavering between small gains and losses. The Dow Jones Industrial Average was up 0.2% and the Nasdaq increased 0.4%.

Small company stocks remained in a slump, however, a sign that investors are worried about economic growth. The Russell 2000 gave up 0.8%.

Investors continue to worry about inflation, rising interest rates and a potential recession.

The minutes from the Fed’s two-day meeting last month show that the central bank’s policymakers concluded higher interest rates could be needed to restrain what they saw as a worrying trend: consumers starting to anticipate higher inflation. The policymakers also acknowledged that more rate hikes could weaken the economy.

The Fed’s minutes offered no major surprises for Wall Street, said Tom Martin, senior portfolio manager with Globalt Investments.

“What’s going to be much more interesting is what the Fed says in July,” Martin said.

Technology companies gained ground and helped check losses from energy companies. Chipmaker Nvidia rose 1% and Exxon Mobil fell 2% as crude oil prices eased.

Bond yields rose significantly. The yield on the 10-year Treasury, which helps set mortgage rates, jumped to 2.93% from 2.81% late Tuesday.

The broader market, though, is still mired in a deep slump that has dragged the S&P 500 into a bear market, over 20% below its most recent high.

Wall Street’s key concern centers around the Federal Reserve’s effort to rein in inflation, and the risk its plan could send the economy into a recession.

Inflation has squeezed businesses and consumers throughout the year. Price increases accelerated after Russia invaded Ukraine in February and China locked down several key cities to contain rising COVID-19 cases, which worsened supply chain problems.

Surging oil prices worsened inflation by sending gasoline prices in the U.S. to record highs. U.S. crude oil prices are still up 27% for the year, but have been slipping throughout the week in a welcome sign for the market hoping for any signal that inflation could be easing.

U.S. crude oil prices fell 3.2%. Prices on Tuesday settled below $100 a barrel for the first time since early May.

Central banks have been raising interest rates in an attempt to temper inflation. The Fed has been particularly aggressive in its shift from historically low interest rates at the height of the pandemic to unusually big rate increases now. That has raised concerns that the central bank could go too far, hitting the brakes too hard on economic growth and bringing on a recession.

Energy prices easing now could mean lower gas prices in a few weeks and could signal that inflation is peaking, along with a cooling housing market.

“This takes the pressure off the Fed,” said Katie Nixon, chief investment officer for Northern Trust Wealth Management. “If we can see gas prices go down, that will pull through to consumer sentiment and that could give the Fed the ability to at least take some of the pressure off.”


Why some experts say fears of a recession could lead to one

07:46

Investors continue to closely monitoring economic data for clues about inflation’s impact, its trajectory, and what that means for the Fed’s position moving forward. A government report on job openings in May beat economists’ expectations in a sign that the employment market remains healthy. A report on the U.S. services industry showed that the sector’s growth slowed less than expected in June.

Wall Street will be closely watching the U.S. government’s release of employment data for June on Friday.

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