Federal Reserve Chairwoman Janet Yellen
The Nasdaq and S&P 500 finished higher while the Dow industrials closed fractionally lower Wednesday as Federal Reserve policy meeting minutes indicated a reduction in the central bank’s economy-boosting balance sheet could begin soon, and technology stocks rallied amid a disappointing manufacturing report and a tumble in crude futures.
The Dow Jones Industrial Average DJIA, -0.01% finished down 1.10 points, or less than 0.1%, at 21,478.17, following a session that alternated between slight losses and gains. A slide in shares of Nike Inc. NKE, -0.14% Walt Disney Co. DIS, -1.70%Chevron Corp. CVX, -1.58% and Exxon Mobil Corp. XOM, -1.52% negated gains in Boeing Co. BA, +1.62% Intel Corp. INTC, +2.63% and Microsoft Corp.MSFT, +1.33%
The S&P 500 index SPX, +0.15% closed up 3.53 points, or 0.2%, at 2,432.54, aided by a 1% rally in technology shares, and firm gains in health care and financials.
The Nasdaq Composite Index COMP, +0.67% rose 40.80 points, or 0.7%, to finish at 6,150.86.
In minutes released from the Fed’s June meeting, several members showed they’re in favor of starting a reduction of the central bank’s $4.5 trillion balance sheet. Holding those assets were part of the policy portfolio that the central bank had taken on while holding interest rates at historic lows. The minutes also showed that officials are divided on unemployment figures.
On the whole, the Fed minutes included a “whole lot of nothing,” according to Ian Winer, head of the equities division at Wedbush Securities, accounting for the muted response from stocks.
“People are still expecting some sort of rate hike and there was no real clarity on the balance sheet,” Winer said. “Ultimately, there’s not a big consensus, nothing incremental [from the Fed] from the June meeting.”
Also, U.S. factory orders in May fell 0.8%, compared with an expected decline of 0.7% from a survey of economists polled by MarketWatch, and a 0.2% decline in the prior period.
Quincy Krosby, chief market strategist at Prudential Financial, said investors are seeing opportunities to scoop up tech names at relatively discounted prices, given a recent slump that has taken the large-capitalization Nasdaq-100 index NDX, +0.93%and the tech-focused Technology Select Sector SPDR ETF XLK, +0.99% lower in the past three sessions, as Wall Street has fretted that the high-flying sector has climbed too far, too fast.
“New money is coming into the [tech] market. The new money that you typically see at a new quarter and that provides perhaps more interesting valuations, or a discount to what they were selling for at the beginning of their run,” Krosby said.
Still, Wednesday’s trading in tech and the broader market has been marked by swings in and out of positive territory.
“We’re seeing the reversal of the trade taking place on Monday,” said Wedbush Securities’s Winer, who noted trading volume is light and mostly algorithm-driven. “We’re seeing vicious rotations in certain sectors: Oil’s getting killed and there’s a rotation into biotech and semiconductors.”
“What we have been seeing is the market is fitful: Two steps forward and one step back,” said Doug Cote, chief market strategist at Voya Investment Management. “But I would buy that all day long,” he said, citing strong expected corporate earnings, particularly in the technology sector.
However, economic data has been mixed amid questions about the strength of the U.S.’s economic recovery as the Federal Reserve attempts to normalize interest-rate policy.
“The market is watching every morsel of economic data to see if inflation is moving in the direction that the Fed wants,” Krosby said. She said investors will be focused on Friday’s labor-market report after recent data have shown inflation slipping below the Fed’s 2% target, despite growth in wages.
Cote discounted Wednesday’s weak factory report because of its tendency to be volatile, and pointed to growing signs that growth is picking up as evidenced by healthy economic reports abroad, which has led some global central bankers to talk of ending, or abating, easy-money policies that have persisted for nearly a decade.
On the energy front, a slump in crude futures capped the market’s advance as oil prices took a sudden tumble on heightened doubts about the industry’s ability to limit oil production. West Texas Intermediate oil CLQ7, +1.42% shed $1.94, or 4.1%, to settle at $45.13 a barrel, for its first loss in nine sessions.
Meanwhile, investors also focused on geopolitical tensions escalating ahead of the Group of 20 summit in Germany later this week. On Tuesday, North Korea successfully launched its first ballistic missile capable of reaching the continental U.S.
Read: Opinion: The oldest stock-market indicator sends a fresh ‘buy’ signal
Secretary of State Rex Tillerson said the U.S. “strongly condemns” North Korea for its action. The U.S. and South Korean armies on Wednesday conducted a joint exercise, firing surface-to-surface missiles into the waters off South Korea.
See: Central banks have set investors up for a long, hard road back to ‘normal’
The ADP private-payrolls data, seen as a precursor to the top-tier nonfarm jobs report, has been pushed back to Thursday because of the July 4 holiday. The figures are usually released Wednesday.
The ICE Dollar Index DXY, -0.07% was down less than 0.1% at 96.26. Gold prices GCQ7, +0.16% settled up 0.2% at $1,221.70 an ounce.
Stocks to watch: Shares of auto-parts retailers dropped after O’Reilly Automotive Inc. ORLY, -18.89% reported disappointing sales for the second quarter. O’Reilly shares fell 19%. Shares of Advance Auto Parts Inc. AAP, -11.15% dropped 11%, AutoZone Inc. AZO, -9.60% shares dropped 9.6%, and Genuine Parts Co.GPC, -4.80% shares declined 4.8%.
Shares of Vantiv Inc. VNTV, -2.38% finished 2.4% lower, after being halted, as the company announced a deal to acquire rival payments processor Worldpay Group PLC WPG, -2.61% after J.P. Morgan Chase & Co. JPM, +1.00% said it wasn’t going to make a formal bid for the Worldpay.
Shares of Bristol-Myers Squibb Co. BMY, +0.84% rose 0.8% after the drugmaker reported positive results for a trial with its Opdivo drug for treatment of patients with melanoma.
Cara Therapeutics Inc. CARA, -6.88% slumped 6.9%, but the reasons for the biotech company’s decline weren’t immediately clear.
Shares of Tesla Inc. TSLA, -2.15% finished down 7.2% into correction territory — defined as of a drop of at least 10% from a recent peak — Wednesday, in the wake of downbeat deliveries data.
Energy companies were lower, tracking the sharp loss for oil prices after Russia ruled out any proposals to deepen production cuts led by the Organization of the Petroleum Exporting Countries. Shares of Chesapeake Energy Corp. CHK, -6.64%fell 6.6% and Transocean Ltd. RIG, -4.50% shares fell 4.5%.
Read: Oil to rally 20% before year’s end — the case from a UBS analyst
Amazon.com Inc. AMZN, -0.30% Apple Inc. AAPL, -0.62% Microsoft Corp.MSFT, +1.33% and eBay Inc. EBAY, +0.35% shares finished higher, while Mattel Inc. MAT, -0.10% shares closed lower Wednesday. Those were among the companies affected by a glitch Monday evening that showed their shares erroneously making major moves on popular finance sites such as Google Finance and Yahoo Finance.[“Source-marketwatch”]