Day Traders Diary

4/6/22

The major averages went on a roller coaster ride ahead and after the release of the Federal Reserve minutes regarding a tightening of monetary policy to fight inflation, raising concerns it may slow the economy. The Dow Jones Industrial Average fell 144 points or 0.42% after falling more than 300 points following the release of minutes from the Federal Reserve's recent meeting. The S&P 500 slid 43 points or 1%, while the Nasdaq Composite dropped 315 points or 2.2%.

The Fed's release of its meeting minutes indicated on Wednesday afternoon that officials "generally agreed" it should shrink its balance sheet by $95 billion per month. The minutes also showed the central bank was considering larger rate hikes than its usual 25-basis-point, or quarter-point, increments.

The 10-year Treasury yield jumped above 2.65% to a three-year high on Wednesday and remained near that high following the release of the Fed meeting minutes. The rate ended Monday at 2.40%. The minutes were from the Fed's March meeting when it raised rates by a quarter point and indicated six more hikes of that magnitude were coming this year.

Tech shares fell again on Wednesday following Tuesday's losses, as investors rotated out of the group and braced for higher rates to slow the economy. Apple, Microsoft, Amazon and Tesla contributed to the sector's decline and the Nasdaq's fall. Chipmakers Nvidia and Marvell Technology also continued their descent, falling about 6% and 2.6%, respectively.

Investors continued to search for stocks with stable profits, shying away from those offering future growth. That includes the utilities, health care and consumer staples sectors — which continued to climb Wednesday, with Amgen and Johnson & Johnson rising about 2% each. Consumer staples such as Walmart, Coca-Cola and Procter & Gamble also inched slightly higher.

Stocks dipped to session lows after the release of the minutes but bounced back slightly. Officials in recent days have tried to warn investors even faster policy tightening could be ahead. The findings, coupled with recent remarks from Fed Governor Lael Brainard and others, seemed to signal that sentiment.

Earlier Wednesday, Philadelphia Federal Reserve President Patrick Harker said that he is "acutely concerned" about rising inflation, noting that he expects "a series of deliberate, methodical hikes as the year continues and the data evolve."

His comments come less than a day after Brainard indicated support for higher interest rates and said a "rapid" reduction of the central bank's balance sheet could come as soon as May. The remarks pushed stocks lower in the previous session.