With No Help from Fed Minutes, NASDAQ Struggling to Stay Positive

The major U.S. stock indexes are showing a mixed initial response to the release of the U.S. Federal Reserve meeting minutes. Shortly before the minutes were revealed at 19:00 GMT, shares were edging higher. Prices fell back into negative territory, but are now inching higher for the session.

The price action suggests the Fed minutes contained no new surprises and that perhaps investors have priced in the widely expected three rate hikes in March, May and June.

Perhaps clarity is another factor helping to underpin stock prices. Investors can deal with the risk, but the lack of clarity from the Fed prevents them from hedging away the risk. So if there is anything positive to come out of hawkish Fed minutes, it’s that at least investors now know where the central bank stands.

At 19:12 GMT, the blue chip Dow Jones Industrial Average is trading 33129.40, down $0.19 or -0.00%. The benchmark S&P 500 Index is at 4000.34, up 3.00 or +0.08% and the tech-weighted NASDAQ Composite is at 11525.30, up 33.00 or +0.29%.

Treasury Yields Steady After Fed Minutes

The good news is Treasury yields are slightly lower on Wednesday. This is probably underpinning stocks. The bad news is they are off their lows for the session, which could be putting a lid on the major stock indexes.

Turning higher for the session is likely to put pressure on stock prices, but taking out yesterday’s high could trigger a steep break in the equity market into the close.

It’s no coincidence that the U.S. stock market posted its worse performance of the year on Tuesday, the same day that U.S. Treasury yields reached levels not seen in three months as traders continued to fret over the prospects of higher Federal Reserve rates.

Fed Minutes Reveal Nothing New

The minutes showed inflation remained “well above” the Fed’s 2% target, adding that the labor market is still “very tight, contributing to continuing upward pressure on wages and prices.”

Fed officials also noted that “inflation data received over the past three months showed a welcome reduction in the monthly pace of price increases but stressed that substantially more evidence of progress across a broader range of price would be required to be confident that inflation was on a sustained downward path,” the minutes said.

 Short-Term Assessment

The Fed minutes were too broad for stock market investors to get a firm grasp on how long the Fed will lift rates and at what level they will stop. Keep in mind also when the Fed meeting on Jan. 31 – Feb. 1 was taking place, Fed Chairman Jerome Powell was still taking up disinflation. Since then the narrative has changed. The jobs market has surged. Inflation came in higher than expected. Retail Sales were strong and yesterday’s Services PMI report highlighted the economy’s resilience.

The Fed minutes said nothing “too bearish, or nothing “too bullish” so investors are going to remain data dependent and react to each major report accordingly. On Thursday, the key report will be US GDP, but the major report that could move the market will be Friday’s Core PCE Index and Consumer Spending reports.