Stocks fell on Wednesday as the rally on Wall Street that has pushed prices higher since mid-June appeared to lose steam as traders assessed the latest retail data and minutes from the Fed.
The Dow Jones Industrial Average fell 171 points, or 0.5%, while the S&P 500 and Nasdaq Composite slid 0.69% and 1.15%, respectively.
Stocks were volatile as traders assessed the latest minutes, which showed that the Federal Reserve would continue its aggressive hiking campaign until it can tame inflation.
“Participants continued to anticipate that ongoing increases in the target range for the federal funds rate would be appropriate to achieve the Committee’s objectives,” the minutes stated. “With inflation remaining well above the Committee’s objective, participants judged that moving to a restrictive stance of policy was required to meet the Committee’s legislative mandate to promote maximum employment and price stability.”
At the same time, the central back also indicated that it could soon slow the speed of its tightening, while also acknowledging the dire state of the economy and risk to the downside for GDP growth.
“Participants judged that, as the stance of monetary policy tightened further, it likely would become appropriate at some point to slow the pace of policy rate increases while assessing the effects of cumulative policy adjustments on economic activity and inflation,” the minutes said.
Meanwhile, traders continued to comb through corporate earnings from the retail sector that kicked off with Walmart and Home Depot on Tuesday. Target shares slipped after the retailer posted earnings that widely missed expectations as it grapples with excess inventory, while Lowe’s traded higher despite a mixed quarter.
Retail sales data released Wednesday remain unchanged in July amid declines in auto sales and gasoline prices, although consumers did increase spending online.
“No surprise to see the market take a breather from the summer rally it’s been riding,” said Chris Larkin, managing director of trading at E-Trade Financial. ” … The market is looking for any sign that a slowdown in rate hikes, which has seemingly fueled the recent rise, is coming. Investors should remain nimble and continue to expect volatility as we may not be out the woods just yet.”
Bond yields also rose on Wednesday, with the 10-year Treasury note last up more than 6 basis points at 2.88%, as recessionary fears and uncertainty regarding the Fed’s rate-hiking path persisted. The move dragged down growth stocks like tech.
Wednesday’s moves came after the Dow notched its fifth straight day of gains.