U.S. Stocks Recover From Worst Levels To Close Little Changed

Stocks showed a notable move to the downside in morning trading on Wednesday but staged a significant recovery attempt in afternoon trading. The major averages bounced well off their lows of the session, with the S&P 500 managing to close in positive territory.

The major averages finished the day narrowly mixed. While the S&P 500 inched up 3.94 points or 0.1 percent to 4,475.01, the Dow dipped 54.57 points or 0.2 percent to 34,934.27 and the Nasdaq edged down 15.66 points or 0.1 percent to 14,124.10.

The rebound in afternoon trading came as the minutes of the Federal Reserve’s January monetary policy meeting reiterated the view that it would “soon be appropriate” to begin raising interest rate but were not as hawkish as some had feared.

“While the minutes of the late-January FOMC meeting pre-date the release of the stronger-than-expected labor market and inflation data covering last month, officials didn’t appear to be seriously considering either a 50bp rate hike to start the tightening cycle or a hike at each of the remaining seven policy meetings this year,” said Paul Ashworth, Chief U.S. Economist at Capital Economics

The minutes showed most participants agreed it would be appropriate to remove policy accommodation at a faster pace than currently anticipated if inflation does not move down as expected.

Ashworth said this suggestion is “arguably a little more hawkish” but added, “Still, nothing in the minutes suggests Jim Bullard’s ultra-hawkishness is shared by the majority on the FOMC.”

St. Louis Fed President James Bullard recently indicated he supports raising interest rates by a full percentage point by the start of July and told CNBC he favors front-loading planned rate increases.

Earlier in the day, traders were weighing lingering concerns about ongoing tensions between Russia and Ukraine against some better than economic data.

While Russian claims they are pulling some troops back from the Ukrainian border contributed to weakness among treasuries on Tuesday, Western leaders have subsequently said they have not verified the moves.

Cyberattacks on the websites of Ukraine’s defense ministry as well as two major Ukrainian banks have also led to worries Russia could still be poised to invade.

Meanwhile, a report from the Commerce Department showed a substantial rebound in U.S. retail sales in the month of January.

The Commerce Department said retail sales soared by 3.8 percent in January after plunging by a revised 2.5 percent in December.

Economists had expected retail sales to jump by 2.0 percent compared to the 1.9 percent slump originally reported for the previous month.

Excluding a sharp increase in motor vehicle and parts sales, retail sales still spiked by 3.3 percent in January following a 2.8 percent nosedive in December. Ex-auto sales were expected to increase by 0.8 percent.

The Labor Department also released a separate report showing U.S. import prices increased by much more than expected in the month of January.

The report said import prices surged up by 2.0 percent in January after falling by a revised 0.4 percent in December. The spike in import prices reflected the biggest monthly increase since April of 2011.

Economists had expected import prices to jump by 1.0 percent compared to the 0.2 percent dip originally reported for the previous month.

In other economic news, the Federal Reserve released a report showing production rebounded by much more than anticipated in the month of January.

The Fed said industrial production jumped by 1.4 percent in January after edging down by 0.1 percent in December. Economists had expected industrial production to rise by 0.4 percent.

Sector News

Gold stocks moved sharply higher over the course of the session, driving the NYSE Arca Gold Bugs Index up by 3.3 percent to its best closing level in three months.

The rally by gold stocks came amid an increase by the price of the precious metal, with gold for April delivery climbing $15.30 to $1,871.50 an ounce.

A significant rebound by the price of crude oil also contributed to substantial strength among oil service stocks, as reflected by the 2.1 percent jump by the Philadelphia Oil Service Index.

After plummeting $3.39 to $92.07 a barrel in the previous session, crude for March delivery surged $1.59 to $93.66 a barrel.

Computer hardware and tobacco stocks also moved notably higher as the day progressed, while most of the other major sectors ended the day showing only modest moves.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Wednesday. Japan’s Nikkei 225 Index shot up by 2.2 percent, while China’s Shanghai Composite Index climbed by 0.6 percent.

Meanwhile, the major European markets showed modest moves to the downside on the day. While the French CAC 40 Index dipped by 0.2 percent, the German DAX Index and the U.K.’s FTSE 100 Index both edged down by 0.1 percent.

In the bond market, treasuries showed a lack of direction over the course of the session before closing roughly flat. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by less than a basis point to 2.047 percent.

Looking Ahead

Trading on Thursday may be impacted by reaction to reports on weekly jobless claims and housing starts, while traders are also likely to keep an eye on any developments in Ukraine.

On the earnings front, retail giant Walmart (WMT) is among the companies due to report their quarterly results before the start of trading on Thursday.

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