Month: January 2024

© Reuters.

Investing.com — U.S. stocks retreated Wednesday, continuing the slow start to the new year ahead of the release of the minutes from the December Federal Reserve meeting.

By 06:35 ET (11:35 GMT), the Dow Jones Industrial Average was down 130 points, or 0.3%, S&P 500 traded 20 points, or 0.4%, lower and NASDAQ Composite dropped 95 points, or 0.7%.

The benchmark S&P 500 and tech-heavy Nasdaq Composite both lost ground on Tuesday, the first day of trading of 2024, weighed down in part by ebbing hopes that the Fed will roll out interest rate cuts early this year. 

The 30-stock Dow Jones Industrial Average gained just under 0.1%.

Fed meeting minutes in focus

These stock benchmarks enjoyed a stunning 2023, as the S&P 500 surged more than 24% and the Nasdaq jumped 43% for its best year since 2020, as easing inflation boosted expectations that this new year would mark the start of a global easing cycle.

However, investors have started to rein in these expectations, as typified by the yield on the benchmark 10-year Treasury note — a key gauge of long-term estimates for borrowing costs — climbing to an over two-week high.

Attention is now turning to the minutes from the Fed’s December gathering, due later Wednesday, when the policymakers signaled interest rate cuts of 75 basis points this year.

Investors are now fretting that the minutes will offer up an outlook that is not as dovish as these projections suggested.

Tesla posts jump in Chinese sales

In the corporate sector, Tesla (NASDAQ:TSLA) stock fell 2.2% despite the electric vehicle manufacturer’s sales in China surging by 68.7% on a yearly basis last month, new data from the China Passenger Car Association showed on Wednesday.

Tesla faces intense competition in the country, with the latest CPCA numbers showing China’s BYD (SZ:002594) unseated Tesla as the world’s biggest EV maker earlier this week. 

Bloomin Brands (NASDAQ:BLMN) stock rose 1.2% after the restaurant holding company added two new members to its board, in accordance with an agreement it had reached with activist investor Starboard Value.

Crude rises ahead of U.S. stockpiles

Oil prices rose Wednesday amid rising tensions in the Red Sea, ahead of the release of crucial weekly inventories data from the U.S., the world’s largest consumer.

By 09:35 ET, the U.S. crude futures traded 1.5% higher at $71.47 a barrel, while the Brent contract traded 1.6% higher at $77.14 a barrel.

U.S. crude stockpiles from the American Petroleum Institute industry group are due later Wednesday, a day later than usual due to Monday’s New Year’s holiday, ahead of the official data on Thursday.

The crude benchmarks had posted strong gains earlier in the week as attacks on vessels in the Red Sea by Houthi rebels over the weekend had raised concerns of potential supply disruptions through this key region.  

Additionally, gold futures fell 1.6% to $2,040.35/oz, while EUR/USD traded 0.3% lower at 1.0915.

(Oliver Gray contributed to this article.) 

© Reuters Traders may end up disappointed with today’s FOMC minutes says strategist

(Updated – January 3, 2024 8:45 AM EST)

Wall Street strategists express caution, noting that despite market optimism, immediate rate cuts are not likely.

The optimism hinges on the idea of a US “soft landing” leading to a “new growth era,” drawing parallels with the 1994-1995 period, Macquarie strategists said in a note today.

However, Macquarie is wary of overstating this analogy, highlighting significant differences in macro conditions between 2023-2024 and 1994-1995.

“The Fed has tightened much more in the recent cycle, leading indicators are chronically weak, and there’s no ‘peace dividend’ to enjoy, among other big differences with the roaring 90s,” the strategists said.

“The Bottom Line is that while the Fed did successfully engineer a soft landing in 1994-1995, and a new growth era was ushered in on the heels of an ongoing disinflation that followed, we’ll remind readers that the structural, cyclical, and liquidity backdrops behind that ‘soft landing’ were radically different than they are now.”

The FOMC minutes will be released later today and the strategists anticipate investors focusing on the depth of discussions about policy rate cuts.

While Jay Powell hinted at a robust discussion on cutting rates in December, other Fed speakers have since indicated that rate cuts are not imminent.

Richmond Federal Reserve President Thomas Barkin said today that “the potential for additional rate hikes remains on the table.”

“We tend to believe that rate cuts aren’t imminent too. The Fed has first to move to a neutral policy bias, then to an easing bias, before cutting the policy rate,” the strategists added.

“Traders may thus feel a bit of disappointment with today’s Minutes, therefore,” the strategists concluded.

Citi economists, including Andrew Hollenhorst, agree that minutes “will likely make some attempt to follow post-FOMC speakers in “pushing back” against markets pricing very near-term rate cuts.”

However, he doubts that the Fed officials will be “all that convincingly hawkish.”

“That’s because Fed policymakers are laying the groundwork for cuts later this year (if not quite as early as markets are pricing) and because Fed officials would prefer looser financial conditions to a rapid tightening.”

Federal Open Market Committee (FOMC) Meeting Minutes are due on Wednesday, at 19:00 GMT (14:00 EDT).