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Markets Open As Fed Plans Another Rate Hike

Michael M. Santiago/Getty Images News

U.S. major market indices pulled back from earlier gains on Wednesday as Wall Street awaits the release of the minutes of the Federal Reserve’s November meeting. Investors will scour the document for clues on the future pace of interest rate hikes.

Volume is traditionally low as market participants get a jump on holiday travel ahead of Thanksgiving. The market will be closed on Thursday and open for a half day on Friday.

The Nasdaq Composite (COMP.IND) jumped 0.57% and S&P 500 (SP500) rose 0.26%. But the Dow (DJI) dipped 0.01% in choppy trade.

The 10-year Treasury yield (US10Y) slipped 2 bps to 3.74% and the 2-year yield (US2Y) was down 2 bps at 4.50%.

The minutes of the last Fed meeting, where policymakers hiked rates by another 75 bps, will be released this afternoon.

“The (potential) dovish pivot has been the focus in recent weeks, with Fed commentary since not exactly clearing anything up. Investors may be on the hunt for clues that they’ve acted prematurely, or there’s actually more support for such a slowdown in tightening and less for a higher terminal rate than previously thought,” said Craig Erlam, senior market analyst, OANDA.

Of the 11 S&P 500 sectors, eight were trading in the green. Consumer discretionary stocks led gains, with Tesla topping the list after positive analyst commentary, potential South Korea investment and Cybertruck developments. Energy stocks led losses amid lower oil prices.

Meanwhile, S&P 500 (SP500) gains were capped by Autodesk, which led losses after it provided disappointing guidance.

On the economic data front, durable goods orders jumped more than expected in October and U.S. PMI Composite Flash slid deeper into contraction in November.

In response to durable goods data, Pantheon Macroeconomics said, “We expect substantial further gains over the next year as the backlog of demand, which has built up over the past couple years, finally can be met.”

Weekly initial jobless claims rose to a three-month high to 240K, more than forecast. “Initial and continuing claims are rising off of historically low levels. They can increase a lot before they’re at levels that suggest the labor market is really deteriorating. We expect this will eventually happen, but it will be a gradual process that plays out over months,” said Jefferies economist Thomas Simons.

New home sales unexpectedly rose in October and median sales price of new houses also increased. Also, mortgage applications rose 2.2% amid lower interest rates.

Meanwhile, Michigan Consumer Sentiment figures for November also came in higher than expected. “The improvement is encouraging, but the index is still only marginally above the record-low reached in June, 50,” Jefferies’ Simons noted.


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