The S&P 500 held steady on Wednesday, finishing just a tick below its flat line, in what was a range-bound day of trading. Investors had several headlines to work through, including criminal convictions of two former advisers to President Trump and the resumption of trade talks between the U.S. and China.
As for the other major averages, the blue-chip Dow Jones Industrial Average slid 0.3%, and the tech-heavy Nasdaq Composite climbed 0.4%, notching its fifth straight advance. Meanwhile, the small-cap Russell 2000 ticked up 0.3%, closing at a new record high for the second day in a row.
Futures were lower ahead of Wednesday's open after President Trump's former campaign manager, Paul Manafort, was convicted of tax and bank fraud on Tuesday evening, and after the president's longtime lawyer, Michael Cohen, pleaded guilty to a range of charges, adding that Mr. Trump directed him to pay two women hush money.
However, the bearish bias soon faded after the opening bell, with energy shares getting a notable boost.
The energy sector was Wednesday's top-performing group with a gain of 1.2%, helped by a sharp rise in crude prices, with WTI crude futures rallying 3.1% to $67.87/bbl. The crude rally was strengthened by the weekly EIA inventory report, which showed that U.S. crude stockpiles declined by 5.8 million barrels last week.
Meanwhile, the top-weighted technology sector (+0.5%) rebounded after lagging for the past week, and the consumer discretionary sector (+0.1%) finished slightly higher, helped by Lowe's (LOW 105.52, +5.78) and Target (TGT 85.94, +2.67), which added 5.8% and 3.2%, respectively, after reporting above-consensus earnings.
On the downside, seven of eleven groups finished in the red, with the lightly-weighted telecom services space (-2.0%) at the back of the pack. The trade-sensitive industrial group (-0.9%) also struggled as the U.S. and China kicked off the latest round of trade talks in Washington.
As of Wednesday's close, there wasn't any new news regarding the discussions, which mark the first negotiations since a breakdown in the process nearly three months ago. The White House doesn't believe much will come out of the negotiations and still expects the next tranche of tariffs to go into effect at midnight.
On the Fed front, the U.S. central bank released the minutes from the July/August FOMC meeting on Wednesday afternoon, revealing little to no new information.
In short, the Fed appears to be on track to hike rates at its September meeting, with many participants saying it would likely "soon" be appropriate to raise rates. Also of note, officials pointed to ongoing global trade tensions as the biggest threat to an otherwise strong U.S. economy.
Reviewing Wednesday's economic data, which was limited to July Existing Home Sales and the weekly MBA Mortgage Applications Index:
- Existing home sales decreased 0.7% in July to an annualized rate of 5.34 million units (Briefing.com consensus 5.40 million). The June reading was left unrevised at 5.38 million.
- The key takeaway from the report is that supply constraints continue acting as a drag on overall sales. The lower inventory -- and high prices on available inventory -- is crimping affordability, especially for first-time buyers. All prospective buyers are facing affordability pressures resulting from home prices increasing at a faster pace than income.
- The weekly MBA Mortgage Applications Index increased 4.2% to follow last week's drop of 2.0%.
On Thursday, investors will receive weekly Initial Claims, the FHFA Housing Price Index for June, and July New Home Sales.
- Nasdaq Composite +14.3% YTD
- Russell 2000 +12.2% YTD
- S&P 500 +7.0% YTD
- Dow Jones Industrial Average +4.1% YTD