Stocks traded sharply higher — maintaining most of the early gains for the session — after minutes from Federal Reserve’s July 30-31 meeting offered few surprises and suggested that the central bank wanted to remain flexible in implementing policy changes.
How are the major benchmarks faring?
The Dow Jones Industrial Average DJIA, +0.88% rose 238 points, or 0.9%, to 26,198, the S&P 500 index SPX, +0.75% climbed 22 points, or 0.7%, to 2,922, while the Nasdaq Composite Index COMP, +0.82% climbed 67 points, or 0.8%, to 8,015.
On Tuesday, the The Dow declined 173.35 points, or 0.7%, at 25,962.44, the S&P 500 index lost 23.14 points, or 0.8% to 2,900.51, while the Nasdaq Composite Index gave up 54.25 points, or 0.7%, to 7,948.56.
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What’s driving the market?
Minutes showed that Federal Reserve members believed that “it was important to maintain optionality in setting policy.” The rate-setting Federal Open Market Committee voted 8 to 2 to lower its target for short-term interest rates by 25 basis points to 2%-2.25%, marking its first such rate reduction in more than a decade.
Most Fed members who supported the rate cut agreed with Fed Chairman Jerome Powell’s assessment that it was a “mid-cycle adjustment” and thus not the start of an aggressive monetary easing campaign.
Wall Street is pricing in a near-certain interest rate cut on Sept. 18 when the Federal Open Market Committee’s policy gathering concludes, based on federal funds futures from the CME Group.
The Fed minutes come a day before the start of the central bank’s annual symposium in Jackson Hole, Wyo., which may provide more clarity to a market that appears convinced that policy makers will cut interest rates again.
“With hopes for Fed stimulus as the biggest driver of stocks’ buoyancy in the face of trade tensions and weakening global growth, today’s relatively dovish Fed minutes were about in line with investors’ high expectations,” said Alec Young, managing director of global markets research at FTSE Russell, in a note after minutes were released.
Stocks were up before the Fed minutes after results from retail giants buoyed investor sentiment. Target Corp.’s shares set a record following the discount retailer’s report of fiscal second-quarter earnings and sales that beat expectations. Target’s stock soared more than 19% in Thursday trading after its earnings provided analysts with further evidence that a combination of store and online sales is valuable. Similarly home-improvement retailerLowe’s Cos. LOW, +10.36% said its second-quarter net income rose to $1.68 billion, or $2.14 a share, from $1.52 billion, or $1.86 a share, with sales up 0.5% to $20.99 billion.
The results from the likes of Target and Lowe’s and Home Depot Inc. HD, +1.70% on Tuesday, helped to quell, at least temporarily, worries that the domestic economy, buffeted by a China-U.S. trade policy clash, may soon see a recession.
Separately, President Donald Trump on Wednesday backtracked on a comment he had made about fiscal stimulus, saying he no longer thought cutting payroll taxes was a good idea.
On the economic data front, U.S. existing home sales rose by 2.5% to an annual rate of 5.42 million in July, the National Association of Realtors said Wednesday, above the median forecast of 5.40 million, according to a MarketWatch poll of economists.
Abroad, investors were focused on political developments in Italy after the emergence of a potential center-left coalition government appeared to lower the chances of a snap election following the resignation of Prime Minister Giuseppe Conte Tuesday. The yield on 10-year Italian government debt TMBMKIT-10Y, -0.70% fell 2 basis points to 1.333%
Which stocks are in focus?
Shares of Target TGT, +19.17% rose 19.4% Wednesday after issuing quarterly results, and were trading at around $102, above its previous record high close of $89.26 and all-time intraday high of $90.39.
Lowe’s Cos’s LOW, +10.36% stock surged more than 10.4% Wednesday.
Shares of Analog Devices Inc. ADI, -1.14% fell 0.8%, after the semiconductor firm reported a fiscal third-quarter profit and revenue that beat expectations, but provided a mixed fourth-quarter outlook.
How are other markets trading?
The yield on the 10-year U.S. Treasury note rose less than a basis point to 1.570%.
Stocks in Asia traded mixed overnight, as China’s CSI 300 000300, -0.16% fell 0.2%, Hong Kong’s Hang Seng Index HSI, +0.15% gained 0.2% and Japan’s Nikkei 225 NIK, -0.28% shed 0.3%.
In Europe, stocks closed higher, with the Stoxx Europe 600 SXXP, +1.21% climbed 1.2%. Italy’s FTSE MIB Index I945, +1.77% rose 1.8% on Wednesday.
In commodities markets, the price of U.S. crude oil CLV19, -0.82% retreated, while gold prices GCZ19, -0.36% traded little changed. The U.S. dollar DXY, +0.12% also was flat relative to its major trading partners.