Nasdaq, S&P, Dow gain as minutes indicate Fed may slow pace of rate hikes

Michael M. Santiago/Getty Images News U.S. major market indices extended gains slightly on Wednesday after the minutes of the Federal Reserve’s November meeting showed that policymakers agreed that a slower pace of rate hikes could happen soon. Fed officials said continued high inflation meant that the federal funds rate may have to go higher than expected, but noted that the policy rate has moved into restrictive territory. “A substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate,” the minutes said. The Fed is widely expected to raise the benchmark rate by 50 bps in its meeting next month after four consecutive 75-bp hikes. The Nasdaq Composite (COMP.IND) rose 1.11%, S&P 500 (SP500) gained 0.64% and Dow (DJI) inched 0.37% higher. 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. Broader gains were capped by energy stocks as oil prices fell on reports that the European Union is weighing a price cap on Russian seaborne oil. The 10-year Treasury yield (US10Y) slipped 4 bps to 3.71% and the 2-year yield (US2Y) was down 3 bps at 4.49%. Of the 11 S&P 500 sectors, nine 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. Autodesk was the top loser on the S&P 500 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.