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S&P ends lower, dollar loses ground after Fed minutes

Published 10/11/2022, 09:28 PM
Updated 10/12/2022, 04:55 PM
© Reuters. FILE PHOTO: A pedestrian walks past a giant display showing a stock graph, in Shanghai, China August 3, 2022. REUTERS/Aly Song
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By Sinéad Carew and Elizabeth Howcroft

NEW YORK/LONDON (Reuters) - Wall Street's equity indexes ended Wednesday's volatile session in the red and the dollar made little progress while bond yields fell as investors digested minutes from the latest Federal Reserve meeting and waited for a key U.S. inflation reading.

The dollar pared gains after earlier climbing to a fresh 24-year peak versus the yen, holding above levels that prompted intervention by Japan last month. Sterling regained ground after a sharp fall the previous day as investors eyed the Bank of England's next steps.

Wall Street indexes struggled to find direction after the minutes of the Sept. 20-21 meeting showed many Fed officials "emphasized the cost of taking too little action to bring down inflation likely outweighed the cost of taking too much action."

But the minutes also showed some dovish undertones with some participants noting the importance of calibrating the pace of tightening to mitigate risks to the economy.

"Maybe there is a bit of hope within the minutes that basically officials are weighing the risk of going too hard or going too high on hiking," said Juan Perez, director of trading at Monex USA in Washington. "That's not the number one concern right now. Number one concern continues to be inflation."

While the Fed has said it is willing to risk a recession in order to tame inflation "it's possible that as the recession risks increase they may lose their nerve a little bit," and slow their tightening, said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte, North Carolina.

The Dow Jones Industrial Average fell 28.34 points, or 0.1%, to 29,210.85, the S&P 500 lost 11.81 points, or 0.33%, to 3,577.03 and the Nasdaq Composite dropped 9.09 points, or 0.09%, to 10,417.10.

The pan-European STOXX 600 index had lost 0.53% while the MSCI's gauge of stocks across the globe shed 0.31%.

Global equity markets have been volatile in recent sessions as investors have worried about the impact that aggressive rate hikes by central banks would have on slowing economies.

On Tuesday, Wall Street stocks had quickly flipped from green to red after BoE Governor Andrew Bailey said pension funds hit by a spike in UK gilt yields had three days to fix their problems before the BoE ends its emergency bond-buying scheme.

The BoE has also signaled privately to lenders that it is prepared to extend support beyond Friday's deadline if necessary, the Financial Times reported.

Wednesday's U.S. inflation reading, the Producers Price Index (PPI), left expectations for the Fed's November rate hike intact. Still, investors were laser-focused on Thursday's Consumer Price Index (CPI).

"The market is looking ahead to the CPI release tomorrow," said Zaccarelli with some bulls hoping that if inflation slows it will give the Fed reason to "slow down or pause."

In currencies, sterling was last trading at $1.1091, up 1.17% on the day after going as low as $1.0925 earlier.

The euro fell 0.04% against the dollar to $0.9699 while the Japanese yen weakened 0.67% versus the greenback to 146.84 per dollar. (FRX)

In U.S. Treasuries, the recent sell-off eased a bit. Benchmark 10-year note yields were down 4.1 basis points to 3.898%, from 3.939% late on Tuesday. [US/]

Oil futures fell for a third straight day fueled by worries about weaker demand and expectations for continued interest rate hikes by central banks around the world. [O/R]

U.S. crude futures settled down 2.3% at $87.27 per barrel and Brent settled at $92.27, down 2% on the day.

© Reuters. FILE PHOTO: Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., October 7, 2022. REUTERS/Brendan McDermid/File Photo

Gold eked out gains on Wednesday after five sessions of losses, although an uptick in the dollar kept prices in check as investors waited for the Fed minutes.

Spot gold added 0.5% to $1,673.76 an ounce. U.S. gold futures fell 0.54% to $1,670.30 an ounce.

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