US Stocks Mixed as Traders Digest Fed Minutes and Adjust Rate Outlook
U.S. stocks closed mixed on Wednesday as investors analyzed the Federal Reserve’s latest meeting minutes and recalibrated their expectations for interest rate cuts. The S&P 500 edged up 0.2% to 5,918.25, while the Dow Jones Industrial Average gained 0.3%, adding 107 points to close at 42,635.20. The tech-heavy Nasdaq Composite slipped 0.1% to 19,478.88.
The minutes from the Fed’s December Federal Open Market Committee (FOMC) meeting revealed that central bankers identified upside risks to inflation forecasts, particularly linked to former President Trump’s trade policies. Policymakers noted that potential tariffs could maintain inflation levels similar to last year, expressing uncertainty about their baseline inflation projections.
Investors are now forecasting one to two rate cuts over the next year, according to the CME FedWatch tool. Markets predict a near-100% chance the Fed will pause its rate-cutting cycle in January, with a 61% probability of a pause in February.
Bond yields spiked following reports that Trump is considering invoking emergency powers for tariffs, further complicating the inflation outlook. The 10-year Treasury yield decreased by one basis point to 4.673%.
Attention now turns to Friday’s jobs report, a critical data point for future Fed rate decisions. Industry data suggests softer hiring trends across the economy, which could influence market volatility and Fed policy.
In commodities, West Texas Intermediate crude oil decreased 1.10% to $73.44 a barrel, while Brent crude rose 0.16% to $76.28 a barrel. Gold increased 0.5% to $2,662 an ounce.
The cryptocurrency market saw Bitcoin drop 2.28% to $93,994.
As markets digest these developments, investors remain cautious about potential bond market volatility and its impact on stocks. Corporate bankruptcies reached a 14-year high in 2024, attributed to high interest rates and record debt levels. Meanwhile, quantum computing stocks fell after Nvidia’s CEO suggested the technology is still two decades away from practical implementation.
