Stocks Turn Positive In Reaction To Fed Minutes - U.S. Commentary

(RTTNews) - Stocks showed a notable turnaround over the course of the trading day on Wednesday after coming under pressure early in the session. The major averages climbed into positive territory following the release of the minutes of the latest Federal Reserve meeting.

The major averages ended the day just off their highs of the session. The Dow edged up 52.40 points or 0.2 percent to 24,886.81, the Nasdaq climbed 47.50 points or 0.6 percent to 7,425.96 and the S&P 500 rose 8.85 points or 0.3 percent to 2,733.29.

The upward move seen late in the session came as the minutes of the Fed's monetary policy meeting earlier this month were seen as dovish.

The minutes showed some uncertainty about the outlook for inflation, with some questioning whether the rate of inflation will be sustained at the Fed's 2 percent target.

Others noted a temporary period of inflation modestly above 2 percent would be consistent with the Fed's symmetric inflation objective.

"While the economy is generally viewed as being strong by just about everyone, there remains uncertainty about inflation and therefore the path of interest rates," said Joel L. Naroff, President and Chief Economist at Naroff Economic Advisors.

"The inflation hawks on the Fed seem to be outnumbered, at least right now, by the doves," he added. "That does not mean there will not be a rate hike in June."

The minutes said participants generally agreed with the assessment that continuing to raise interest rates gradually would likely be appropriate if the economy evolves about as expected.

"So, expect a hike in June," Naroff said. "And if inflation continues to accelerate as the economy grows more strongly, additional increases this year are likely."

On the U.S. economic front, the Commerce Department released a report showing a pullback in new home sales in the month of April.

The report said new home sales fell by 1.5 percent to an annual rate of 662,000 in April after jumping by 2 percent to a revised rate of 672,000 in March.

Economists had expected new home sales to drop to a rate of 679,000 from the 694,000 originally reported for the previous month.

The weakness seen earlier in the session partly reflected a negative reaction to earnings news from retail giant Target (TGT).

Shares of Target are slumped by 5.7 percent after the company reported first quarter results that missed analyst estimates on both the top and bottom lines.

Sector News

Gold stocks moved notably higher over the course of the session, driving the NYSE Arca Gold Bugs Index up by 1.5 percent. The index rebounded after ending the previous session at its lowest closing level in well over a month.

The strength among gold stocks came as the price of the precious metal turned positive in electronic trading after closing down $2.40 at $1,289.60 an ounce.

Considerable strength also emerged among retail stocks, as reflected by the 1.2 percent gain posted by the Dow Jones Retail Index. With the gain, the index reached its best closing level in well over three months.

Tobacco, real estate, and utilities stocks also moved to the upside, while significant weakness remained visible among steel and telecom stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Wednesday. Japan's Nikkei 225 Index tumbled by 1.2 percent, while Hong Kong's Hang Seng Index plunged by 1.8 percent.

The major European markets also showed significant moves to the downside on the day. While the U.K.'s FTSE 100 Index slumped by 1.1 percent, the French CAC 40 Index and the German DAX Index plummeted by 1.3 percent and 1.5 percent, respectively.

In the bond market, treasuries moved notably higher after closing roughly flat for two straight days. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, slid by 6.2 basis points to 3.003 percent.

Looking Ahead

Trading on Thursday may be impacted by reaction to U.S. economic reports on weekly jobless claims and existing home sales in April.

On the earnings front, L Brands (LB), NetApp (NTAP), and Williams-Sonoma (WSM) are among the companies releasing their quarterly results after the close of today's trading.

Best Buy (BBY), Hormel Foods (HRL), and Medtronic (MDT) are also among the companies due to report their results before the start of trading on Thursday.