U.S. stock indexes trim losses after Fed minutes reiterate support for faster rate hikes and significant balance sheet cuts

CNBC TV Interview 2/16/22
February 16, 2022
Spartan Capital Securities is Pleased to Announce the Hiring of Amalia Chin as Chief Compliance Officer
February 17, 2022

U.S. stock indexes trim losses after Fed minutes reiterate support for faster rate hikes and significant balance sheet cuts

U.S. stock benchmarks significantly trimmed their morning losses Wednesday, after the release of the minutes of the Federal Reserve’s January meeting reiterated support for a faster pace of interest rate hikes and a significant reduction of the central bank’s near $9 trillion balance sheet.

The minutes were largely in keeping with Fed Chairman Jerome Powell’s more hawkish message at his press conference following the last meeting.

How are stock indexes trading?
  • The S&P 500 SPX, 0.21% fell 3 points, or 0.1%, to 4,467, after briefly flipping positive in afternoon trade, dragged lower by a decline in information technology SP500.45, -0.05% and communication services SP500.50, -0.19%.
  • The Dow Jones Industrial Average DJIA, -0.03% declined 103 points, or 0.3%, to around 34,885.
  • The Nasdaq Composite Index COMP, 0.03% declined 0.4%, or 49 points, to around 14,090.

On Tuesday, the Dow industrials surged 422.67 points, or 1.2%, to close at 34,988.84, while the S&P 500 index rose 1.6% to 4,471.07. The Nasdaq Composite climbed 2.5% to 14,139.07.

Read: With a tiger and Jamie Dimon, JPMorgan enters the metaverse

And: Here’s why three inflation-fueled rotations may still be in their early stages

What’s driving the markets?

Stocks were lower, but well off the session’s worst levels, after the release of Federal Reserve minutes of its last policy reiterated central bank support for a faster pace of rate increases and significantly reduction of its balance sheet to help tame inflation.

As expected, the minutes showed interest rate hikes were likely soon, followed by potentially aggressive moves to reduce the central bank’s near $9 trillion balance as inflation sits near 40-year highs.

The hawkish tone of the Fed minutes were largely what Wall Street has come to expect from the U.S. central bank as it works to tamp down high costs of living before they threaten to derail the economy.

Tensions between Russia and the U.S. over Ukraine also were in focus, after a brief lull a day earlier that boosted stocks.

“Investors are rethinking the rally that was prompted by Putin saying some Russian troops had returned to base,” said Peter Cardillo, chief market economist at Spartan Capital Securities, in a phone interview. “I think it’s a rethinking of the geopolitical situation.”

On Tuesday, Russian President Vladimir Putin said some troops had withdrawn from the boarder with Ukraine, indicating that he might be persuaded not to invade Ukraine and signaling that Moscow was ready to talk with NATO.

Those hopes appeared to fade, however, Wednesday, after NATO Secretary-General Jens Stoltenberg told reporters that “we have not seen any withdrawal” of those Russian forces. “What we see is that they have increased the number of troops and more troops are on their way,” he said. President Joe Biden urged Moscow to “choose diplomacy” on Tuesday, warning that a Russian move into Ukraine was still possible, and reports of some Russian units returning home couldn’t be verified.

The slump this week on Wall Street comes despite some upbeat U.S. economic data. Sales for U.S. retailers jumped 3.8% in January, the largest since last March, when Americans spent a good chunk of their stimulus money from the government. Economists polled by The Wall Street Journal had forecast after retail sales fell a revised 2.5% in December. Households bought more goods in early 2022 after paring back in the final month of last year.

“Omicron and inflation were not enough to deter US consumers from spending in January as retail sales sprung back to life with a 3.8% surge, the strongest gain since March 2021 when stimulus checks reached households’ bank accounts, wrote Lydia Boussour and Kathy Bostjancic, economists at Oxford Economics.

“The rebound was nearly twice stronger than consensus expectations and led by buoyant vehicle sales and online shopping as virus fear kept consumers away from restaurants,” the economists wrote.

Separately, import prices for January rose 2% and 1.4%, excluding fuel costs and a reading of industrial capacity in use rose 77.6% in January, compared with 76.6% in December.

The National Association of Home Builder’s latest confidence index slipped a point to 82 in February from a month ago. Even so, any reading above 50 indicates improving confidence.

Late-morning Wednesday, Philadelphia Federal Reserve President Patrick Harker said he wants a small interest rate hike in March and then methodical moves that don’t upset the economy’s strong performance.

“I am very supportive of starting a process of raising the fed-funds rate, which is our primary tool of monetary policy, starting to raise that, and I would support as early as March a 25 basis point increase in that rate,” he said, in an interview with the WHYY radio station program “Radio Times.”

Earnings news will continue to roll in on Wednesday, with Nvidia Corp. NVDA, -0.05%, Cisco Systems Inc. CSCO, -0.01%, Applied Materials Inc. AMAT, 0.79%, Tripadvisor Inc. TRIP, -2.19% among the highlights after the close.

Earnings preview: The Arm deal is dead, but Nvidia is not expected to slow down

What companies are in focus?
  • Roblox Corp. RBLX, -26.81% shares sank almost 27% after the social-gaming platform reported disappointing quarterly results.
  • Stock in Upstart Holdings Inc. UPST, 33.50% soared 32% after the fintech company blew past earnings expectations and announced buybacks.
  • Ericsson AB’s ERIC, -11.51% U.S.-listed shares slid almost 13%, tracking losses in Stockholm, after the Swedish telecommunications provider said a probe over Iraq dealings revealed it may have made payments to Islamic State terrorist group.
  • Shares of ViacomCBS VIAC, -18.91% fell 19% after the media group reported earnings that fell short of Wall Street expectations. The company announced a name change to Paramount Global, after reporting a record surge in streaming-service business.
  • Shopify Inc. shares SHOP, -17.04% fell 17%, even after the e-commerce company topped earnings and revenue expectations.
  • Alaska Air Group Inc. ALK announced the launch of Flight Pass on Wednesday, a subscription service that offers 6, 12 or 24 round-trip flights for a fixed price. Subscriptions start at $49 a month. Shares were up 0.1%.
  • Google plans to adopt new privacy restrictions to curtail tracking across apps on Android smartphones. Shares of Google parent Alphabet Inc.’s Class A GOOGL, 0.93% and C shares GOOG, 1.03% were up 0.4%.
How are other assets trading?
  • The yield on the 10-year Treasury note  TMUBMUSD10Y, 2.032%  was higher at 2.05%, after reaching a 52-week high of 2.044% on Tuesday, according to Dow Jones Market Data. Yields and debt prices move opposite each other.
  • The ICE U.S. Dollar Index  DXY, -0.27%,  which tracks the currency against a basket of six major rivals, declined 0.3%.
  • West Texas Intermediate crude for March delivery  CLH22, -0.70%  climbed 1.7% to settle at  $93.66 a barrel. That’s even as the Energy Information Administration reported on Wednesday that U.S. crude inventories rose by 1.1 million barrels for the week ended Feb. 11. On average, analysts had forecast a decline of 200,000 barrels, according to a poll conducted by S&P Global Platts.
  • Gold futures closed at an 8-month high, with the April contract GCJ22, 0.88% settling at $1,871.50 an ounce, up 0.8%.
  • The Stoxx Europe 600 SXXP SXXP, +0.04% closed virtually unchanged but in positive territory, while London’s FTSE 100  UKX, -0.07% slipped less than 0.1%.
  • The Shanghai Composite  SHCOMP, +0.57%  ended 0.5% higher, while the Hang Seng Index  HSI, +1.49%  rose 1.4% in Hong Kong and Japan’s Nikkei 225  NIK, +2.22% surged 2.2%.

Source: https://www.marketwatch.com/story/u-s-stock-futures-slip-ahead-of-retail-sales-data-and-fed-minutes-as-investors-eye-russia-ukraine-headlines-11645011574?mod=search_headline