S&P 500, Dow Fall After Minutes Fed Signal Continued Rate Hikes

US stocks closed mixed after choppy trading on Wednesday as investors sifted through the minutes of the Federal Reserve’s last meeting earlier this month for clues as to what to do next.

The latest reading from the meeting of the US central bank from January 31 to February 1 indicated officials planned to continue with “continuous increases” but is open to reaching an end point later this year.

The S&P 500 (^GSPC) fell 0.2%, while the Dow Jones Industrial Average (^DJI) fell about 80 points, or 0.3%. The tech-heavy Nasdaq Composite (^IXIC) was an outlier, with an increase of 0.1%.

“Participants agreed that the Federal Open Market Committee had made significant progress over the past year toward sufficiently restrictive monetary policy,” the minutes said.

Nevertheless, participants agreed that while there were signs that the cumulative effect of the Committee’s monetary policy tightening had begun to moderate inflationary pressures, inflation remained well above the Committee’s long-term target of 2% and the labor market stayed very tight.”

The discussions also showed that most members favored the smaller 0.25% increase achieved during the last policy decision, but that some in the group favored raising rates by 50 basis points.

Loretta Mester, president of the Cleveland Fed admitted in a speech last week she would have favored the bigger increase, but officials didn’t want to surprise markets, which priced in 0.25%.

“The worst inflation may be in the rear view, but it remains well above the Fed’s target,” Mike Loewengart, chief model portfolio construction at Morgan Stanley’s Global Investment Office, said in a note. “The bottom line is that many market headwinds are not going to go away and investors should expect volatility to continue as they analyze impact rates will be high for longer.”

Earlier in the day, St. Louis Fed President James Bullard entered a television interview with CNBC said the US central bank needs to push the federal funds rate to a range of 5.25% to 5.5% to bring inflation back to its target of 2%.

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Wall Street banks have recently revise their expectations for upcoming rate hikes by the Federal Reserve. Teams from Goldman Sachs and Bank of America said last week they estimate three more rate hikes this year. Prior to the February rate hike, some market participants had seen that this move may have marked the end of the Fed’s rate hike cycle.

Coin base (MINT) was one of the movers on Wednesday, falling 1.4% even after the cryptocurrency exchange reported fourth quarter results that were better Wall Street’s full-year estimates and losses were smaller than feared.

Elsewhere in specific names, Palo Alto Networks’ (PANW) stock jumped 12.5% ​​after the The cybersecurity company raised its annual profit forecast and said it was working on controlling costs.

Chinese search engine Baidu (GET STARTED) reported better than expected fourth quarter results, boosted by strength in its cloud, advertising and artificial intelligence segments. Equities ended the session up 2.6% after reversing gains from earlier in the day.

Meme stock treasure AMC Entertainment (AMC) then stood guard the Allegheny County Employees Retirement System filed a class action lawsuit in Delaware alleged that the movie theater company had created preferred stock without their consent. The stock rose 2.4%.

In the bond market, government bond yields were stable to start the day after rising sharply on Tuesday to their highest levels since November.

The moves follow a steep sell-off on Tuesday that saw the S&P 500 plunge 2% below 4,000, wipe out the Dow 700 points and the Nasdaq plummet 2.5%.

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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