Wall Street closed higher on Wednesday following the release of Fed’s July FOMC minutes. The minutes points to a likely cut in the benchmark intertest rate in September. A downwardly revised nonfarm payrolls data also boosted market participants confidence on rate cut. All three major stock indexes ended in positive territory.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) was up 0.1% to close at 40,890.49. Notably, 21 components of the 30-stock index ended in positive territory while 9 in negative zone. The blue-chip index ended in green in six out of last seven days.
The tech-heavy Nasdaq Composite finished at 17,918.99, rising 0.6% or 102.05 points due to strong performance by technology giants. The tech-laden index finished in positive territory in nine out of last 10 days. Major gainer of the index was however the retail bigwig Ross Stores Inc. ROST. The stock price of this retailer surged 4.2%. Ross Stores currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The S&P 500 gained 0.4% to finish at 5,620.85. Wall Street’s key benchmark ended in positive zone in nine out of last 10 days. 10 of the 11 broad sectors of the broad-market index ended in positive territory, while one in negative zone. The Consumer Discretionary Select Sector SPDR (XLY), the Materials Select Sector SPDR (XLB) and the Utilities Select Sector SPDR (XLU) advanced 1.3%, 1.2% and 0.7%, respectively.
The fear-gauge CBOE Volatility Index (VIX) was up 0.3% to 16.31. A total of 9.86 billion shares were traded on Wednesday, lower than the last 20-session average of 12.06 billion. Advancers outnumbered decliners on the NYSE by a 3.61-to-1 ratio. On Nasdaq, a 2.52-to-1 ratio favored advancing issues.
Fed’s July FOMC Minutes
In July, Federal Reserve officials have overwhelmingly indicated a likely rate cut in September. “The vast majority” of participants at the July FOMC meeting observed that, if the data continued to come in about as expected, it would likely be appropriate to ease policy at the next meeting.” the minutes stated. Notably, the benchmark lending rate is currently at its 23-year high in the range of 5.25-5.5%.
If September rate cut materialism, it will be the first rate cut by the Fed since March 2020, at the advent of the COVID-19 pandemic. At present, the CME FedWatch shows a 100% probability that the Fed will reduce the benchmark lending rate by 25 basis points in September. The interest rate derivative tool also shows nearly 61% chance that the Fed will cut interest rate by another 25 basis points in November.
The minutes stated that “several [meeting participants] observed that the recent progress on inflation and increases in the unemployment rate had provided a plausible case for reducing the target range 25 basis points at this meeting or that they could have supported such a decision.”
Economic Data
The Department of Labor reported that the U.S. economy added 818,000 fewer jobs that the total amount of 2.9 million jobs added during April 2023 to March 2024. The downward revision to the total payrolls level of nearly 30% is the largest since 2009.
At the sector level, professional and business services faced the maximum brunt, where job growth was 358,000 lower than initial reporting figure. Other areas revised lower included leisure and hospitality (-150,000), manufacturing (-115,000), and trade, transportation and utilities (-104,000). On the other hand, a few sectors saw upward revisions, including private education and health services (87,000), transportation and warehousing (56,400), and other services (21,000).
For the week ended Aug 16, U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 4.6 million barrels from the previous week.
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