The S&P 500 increased 0.1% on Wednesday, as the market reacted positively to the FOMC Minutes from the January meeting. Earlier in the day, the benchmark index was down as much as 0.9% amid negative-sounding Russia-Ukraine headlines.
The Nasdaq Composite lost 0.1% after being down 1.5% intraday. The Dow Jones Industrial Average lost 0.2% after being down 1.0% intraday. The Russell 2000 gained 0.1% after being down 0.8% intraday.
It was a tale of two sessions, as investors first held back risk appetite after Ukraine President Zelensky said he hadn’t seen a withdrawal of Russian troops and NATO officials claimed that Russia was building up forces near Ukraine. Stocks fell to session lows after The Wall Street Journal reported that U.S. and Russian aircraft flew dangerously close to each other in three separate incidents over the weekend.
Ten of the 11 S&P 500 sectors were trading lower with the exception being energy (+0.8%) amid higher oil prices ($93.83, +1.76, +1.9%). Growth stocks were struggling amid disappointing earnings reactions in Shopify ( SHOP 746.85, -142.65, -16.0%) and Roblox ( RBLX 53.87, -19.43, -26.5%), as well as plans from Google to build more private advertising solutions.
Then, the January FOMC Minutes were released at 2:00 p.m. ET, and the dynamics of the market were flipped despite there being nothing terribly surprising in the minutes. Participants agreed the Fed should be more assertive in removing policy accommodation since, compared to the last normalization period, there is a much stronger outlook for economic growth, substantially higher inflation, and a notably tighter labor market.
Nine of the 11 S&P 500 sectors ended the session in positive territory, with materials (+0.7%) finishing in second place behind energy. The information technology (-0.2%) and communication services (-0.2%) sectors closed slightly lower.
Notwithstanding the dated nature of the minutes, investors might have liked that they weren’t as hawkish as feared. More insightful, however, was the reaction in the Treasury market, which suggested that the Fed’s hawkish policy shift has been priced in. The 2-yr yield declined five basis points to 1.52%.
The 10-yr yield, meanwhile, was unchanged at 2.05% as the geopolitical factor offset hot import/export prices for January and better-than-expected retail sales data for January. The U.S. Dollar Index declined 0.2% to 95.78. Oil prices turned negative post-settlement.
Reviewing Wednesday’s economic data, which featured Retail Sales for January:
-
Total retail sales for January increased 3.8% month-over-month (Briefing.com consensus 1.9%) following a downwardly revised 2.5% decline (from -1.9%) in December. Excluding autos, retail sales were up 3.3% month-over-month following a downwardly revised 2.8% decline (from -2.3%) in December.
- Retail sales are not adjusted for price changes, so higher prices likely played a part in the strong increase; nonetheless, the key takeaway from the report is that it speaks to a consumer that is still willing and able to spend in spite of the inflation.
-
Total industrial production increased 1.4% month-over-month in January (Briefing.com consensus 0.4%) following an unrevised 0.1% decline in December. The capacity utilization rate jumped to 77.6% (Briefing.com consensus 76.8%) from an upwardly revised 76.6% (from 76.5%) in December.
- The key takeaway from the report is that the increase was driven predominately by the output of utilities, which saw its largest increase (9.9%) in the history of the index, which dates back to 1972.
-
Import prices rose 2.0% in January after decreasing 0.4% in December. Excluding oil, import prices rose 1.4% after increasing 0.5% in December. Export prices rose 2.9% after decreasing 1.6% in December. Excluding agriculture, export prices rose 2.9% after decreasing 1.9% in December.
-
The NAHB Housing Market Index for February decreased to 82 (Briefing.com consensus 83) from 83 in January.
-
Business inventories increased 2.1% m/m in December (Briefing.com consensus 2.1%) following a revised 1.5% increase (from 1.3%) in November.
-
The weekly MBA Mortgage Applications Index fell 5.4% following an 8.1% decline in the prior week.
Looking ahead, investors will receive Housing Starts and Building Permits for January, weekly Initial and Continuing Claims, and the Philadelphia Fed Index for February on Thursday.
- Dow Jones Industrial Average -3.9% YTD
- S&P 500 -6.1% YTD
- Russell 2000 -7.4% YTD
- Nasdaq Composite -9.7% YTD
Overseas:
- Europe: DAX -0.3%, FTSE -0.1%, CAC -0.2%
- Asia: Nikkei +2.2%, Hang Seng +1.5%, Shanghai +0.6%
Commodities:
- Crude Oil +1.62 @ 93.67
- Nat Gas +0.37 @ 4.69
- Gold +18.20 @ 1873.50
- Silver +0.27 @ 23.62
- Copper +0.01 @ 4.54