Stocks climb as Fed minutes show resolve on rates | Economic news

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By DAMIAN J. TROISE and ALEX VEIGA, AP Business Writers

NEW YORK (AP) — Stocks ended broadly higher on Wall Street on Wednesday after minutes from the Federal Reserve’s latest meeting signaled the central bank intended to move “quickly” to raise interest rates. interest at more neutral levels in its fight to control inflation.

The S&P 500 rose 0.9%, while the Dow Jones Industrial Average rose 0.6%. The Nasdaq climbed 1.5%. The indexes, which rallied after being in the red early on, are on course for a weekly gain, despite trading higher and lower this week.

Minutes from the Fed’s meeting earlier this month show most officials agreed that half-point increases in the Fed’s benchmark short-term rate “would probably be appropriate” over the next two central bank meetings in June and July. Such an increase would be double the usual increase.

The central bank has started raising interest rates in a bid to stamp out the highest inflation in four decades, so traders are keen to get a fresh look at the thinking of Fed officials. Still, the Fed minutes revealed no major surprises.

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“The market is showing a relatively muted reaction to what was already embedded in the public sphere,” said Bill Northey, chief investment officer at US Bank Wealth Management.

The S&P 500 rose 37.25 points to 3,978.73. The Dow gained 191.66 points to 32,120.28. The Nasdaq gained 170.29 points to 11,434.74.

Shares of small companies rose much more than the rest of the market, a sign of bullishness in the economy. The Russell 2000 gained 34.34 points, or 2%, to 1,799.16.

The 10-year Treasury yield, which helps set mortgage rates, slipped to 2.75% from 2.76% on Tuesday night.

The market as a whole remains volatile, with investors nervous about rising inflation and its impact on businesses and consumers. Investors are also concerned about the Fed’s aggressive plan to raise interest rates to fight inflation and hope the Fed won’t act so aggressively to slow the economy to the point of triggering a recession. .

Russia’s invasion of Ukraine in February added even more pressure to already rising energy costs, worsening inflation for both businesses and consumers. Supply chains have tightened further over the past month as China locked down several major cities to combat rising COVID-19 cases.

“The overriding theme, particularly in recent weeks, is that investors are increasingly cautious about economic growth and prospects,” said Jason Draho, head of asset allocation for the Americas at UBS Global Wealth. Management. “That’s one of the main reasons you see the stock market’s inability to get any momentum.”

At the May 3-4 meeting, the Fed raised its key rate by half a percentage point, its most aggressive move since 2000. It also announced further significant rate hikes to come. To control inflation, the Fed wants to curb spending and economic growth by making borrowing more expensive for individuals and businesses.

The minutes revealed that many policymakers agreed that after a rapid series of rate hikes in the coming months, they could “assess the effects” of their rate hikes and, depending on the health of the economy, adjust their policies.

The economy has shown more signs of improvement and financial markets have fallen sharply since the Fed meeting.

The S&P 500 gained ground on Monday, but slipped again on Tuesday, led by further losses in the technology sector. The S&P 500 is coming off a seven-week losing streak that nearly ended the equity bull market that began in March 2020.

Retailers recorded some of the biggest gains after being battered in recent days on fears that soaring inflation could eat away at their profits. Some of those concerns eased after upscale department store operator Nordstrom announced an increase in sales and raised its profit forecast. Its stock jumped 14%.

Tech stocks also helped boost the market. Microsoft rose 1.1%.

Several companies made solid gains after posting strong financial results and giving investors solid guidance, despite battling persistently rising inflation.

Software maker TurboTax Intuit rose 8.2% after raising its profit and revenue forecast for the year. Caleres, owner of Famous Footwear, jumped 29.9% after also raising its profit forecast for the year.

Homebuilder Toll Brothers rose 8% after reporting strong profits just a day after the sector stumbled amid a disappointing government report on sales of newly built homes.

Wendy’s jumped 9.8% after Trian Fund Management, which already owns 19% of the company, said it was considering buying the rest of the company.

European markets were up and Asian markets closed mostly higher.

Veiga reported from Los Angeles.

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