Day Traders Diary

7/6/22

 

The major averages closed higher on Wednesday as investors pored over the latest minutes from the Federal Reserve. The Dow Jones Industrial Average gained 69 points, or 0.2%. The S&P 500 rose 13 points while the Nasdaq Composite rose 39 points or 0.35%.

Stocks moved higher after the Federal Reserve released the minutes from its June meeting, showing that the central bank was committed to bringing down inflation. Fed members said the July meeting likely also would see another 50- or 75-basis point move, the minutes showed. A basis point is one one-hundredth of 1 percentage point.

Defensive plays and well-established tech stocks were some of the best performers on Wednesday. Shares of Northrop Grumman jumped more than 4%, while UnitedHealth Group added more than 2%. Apple and Cisco Systems gained 1.3% and 2.2%, respectively.

Bond yields extended their gains for the day after the release of the Fed minutes, suggesting that investors may be pricing in a more aggressive central bank. That would be reassuring to some equity investors, who want the central bank to slow inflation so the economy can normalize more quickly.

Energy stocks were some of the worst performers, as oil prices continued their recent slide. Shares of Chevron and Diamondback Energy each fell about 3%.

Investors continued to worry about whether the economy is falling into a recession after the benchmark 10-year U.S. Treasury yield fell below the 2-year yield. The so-called yield curve inversion historically has been a warning sign that the economy may be falling or has already fallen into recession.

Some Wall Street analysts say a recession could be mild. On Tuesday Credit Suisse said it sees the U.S. dodging a recession as it slashed its year-end S&P 500 target to reflect the effect of higher capital cost on stock valuations.

Mortgage demand fell week over week even as rates declined, according to the Mortgage Bankers Association. The Institute for Supply Management services PMI data came in better than expected, but did show a slight slowdown in growth. Job openings also came in higher than expected, at more than 11 million.

Wednesday's moves follow an intraday reversal in the previous session. The S&P 500 rallied back from a 2% loss in the final hours of trading on Tuesday and finished the day up 0.2%. The tech-heavy Nasdaq Composite outperformed, jumping 1.75%. The Dow lost 129 points, but was down more than 700 points at one point.

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