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S&P 500 Extends Losses as Market Digests Uncertain Fed Meeting Minutes

S&P 500 Extends Losses as Market Digests Uncertain Fed Meeting Minutes

Midweek Updates from FunderPro

Key Takeaways

  • Federal Reserve meeting minutes squash early rate-cut hopes
  • Jobs data to be released Friday to offer insight into a potential soft-landing

The Fed Effect

The S&P 500 declined for its third day in a row by Wednesday’s closing bell, fluttering 0.8% lower as investors absorbed recently released Federal Reserve meeting minutes. The broad-based index was not the only casualty, with the Dow Jones Industrial Average falling 0.76%. The tech-heavy Nasdaq emerged worse for wear by the end of session, slipping 1.18% in its fourth consecutive loss. 

The Federal Reserve released meeting minutes on Wednesday from their December gathering, where the central bank maintained its key interest rate at 5.25% – 5.50%. The notes were not exactly what the market had anticipated, pushing aside expectations of rate cuts in early 2024. 

The post-gathering minutes revealed that policymakers still stand by the “restrictive stance” they’ve taken in their efforts to quell inflation to a sustainable level. Although economists had placed their bets on the Fed slashing rates in three quarter-point iterations starting in March, it looks as though the rate-setters are pushing ahead with their “higher-for-longer” narrative before entertaining the idea of easing up in mid or late 2024.

In all, it’s clear that the Fed is still strongly committed to reducing inflation to its 2% target – even if it means higher borrowing costs, in turn making it not only more difficult for firms to borrow to fund innovation, but also less appealing.The ripple effect this causes in market conditions is clear, as we watch the major indexes struggle to maintain their balance.

Jobs Central

Coming in hot, the jobs report, released by the US Bureau of Labor Statistics on Wednesday, revealed that job openings fell to 8.8 million in November, mirroring pandemic levels. The transportation sector bore the brunt of the decline, while wholesale businesses saw the largest increase. 

Looking ahead, the focus is on December’s job data, set for release on Friday. Market analysts predict 170,000 jobs to have been added. The Fed will keep a close eye on the number, as it acts as a key indicator for a potential (and hoped for) soft-landing.

In a nutshell, the Federal Reserve is not backing down in its fight to wrestle inflation to 2% – and the market is taking notes. The effect on market sentiment is palpable, and traders will need to stay ahead of market-moving news or events to stay profitable. Adapting to news and flowing alongside the markets, instead of against the current, is key to success.