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S&P 500 Closes Flat as Fed Minutes Trigger Comeback


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By Yasin Ebrahim — The S&P 500 cut losses to close flat Wednesday, following an intraday turnaround as the release of the Fed minutes eased fears of aggressive rate hikes ahead, though ongoing Russian-Ukraine tensions kept a lid on gains. 

The S&P 500 rose 0.1%, the Dow Jones Industrial Average slipped 0.16%, or 5 points, the Nasdaq Composite fell 0.1%.

Federal Reserve officials were in favor of increasing interest rates and initiating a “significant” reduction in the size of balance sheet that could begin later this year, the Fed’s January meeting minutes showed Wednesday.

The minutes also showed that members would only favor faster rate hikes if the pace of inflation doesn’t subside, cooling expectations somewhat of aggressive Fed action. The minutes, however, were somewhat stale as they preceded recent economic data showing a stronger labor market, and inflation that remains at multi-decade highs.      

The two-year U.S. Treasury yields, which is sensitive to expectations Fed rate hikes, eased slightly. 

“The reason the market reacted positively after the minutes is that there wasn’t really wasn’t anything negative in the release that spooked the market,” Eric Green, Chief Investment Officer of Equity at Penn Capital told on Wednesday. “There wasn’t anything in the minutes showing that other Fed officials were more hawkish or that the Fed was changing course.”

The Fed minutes boosted sentiment on stocks offsetting fresh geopolitical tensions. 

U.S. Secretary of State Antony Blinken said there weren’t any signs of a “meaningful pullback” of Russian forces from the border with Ukraine. That cooled expectations for de-escalation in Ukraine-Russia tensions after Russia on Tuesday claimed that it had pulled some of its troops from the Ukraine border.

Cyclicals sectors including materials, industrials and energy led the rebound broader higher, on data signaling economic strength as U.S. retail sales rose by a more than expected 3.8%, the strongest monthly pace since March, 

Tech moved off session lows, though social media stocks were under pressure after Alphabet (NASDAQ:GOOGL)’s Google said it would limit ad-tracking on android powered smartphones.

Meta Platforms (NASDAQ:FB), which earlier this month flagged slowing user growth due to Apple’s privacy changes, fell more than 2%. Snap (NYSE:SNAP) and Twitter (NYSE:TWTR) were also down more than 2%.

NVIDIA (NASDAQ:NVDA) pared losses to end flat as it announced a partnership with Jaguar Land Rover to build automated driving systems.

Tech or growth corners of the market, which tend to have long duration cash flows, will likely continue face headwinds.  

“Just like with bonds, the present value of these [high valuation] growth stocks with long duration cash flows will be lower in a rising interest rate environment.” Green said. 

“We’re in a cycle in which the more value-oriented industries such as financials, energy, materials and industrials perform a lot better than some of the growth sectors,” Green added.

S&P 500 Closes Flat as Fed Minutes Trigger Comeback

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