Day Traders Diary

8/17/22

The major averages fell on Wednesday as the rally that has pushed prices higher since mid-June appeared to lose steam. Traders also assessed the latest retail data and minutes from the Federal Reserve. The Dow Jones Industrial Average shed 171.69 points, or 0.5%, to close at 33,980.32. The S&P 500 slid 0.72% to close at 4,274.04, while the Nasdaq Composite tumbled 1.25% to 12,938.12. The 30-stock index snapped its 5-day win streak but finished the session slightly positive week to date. The S&P 500 and Nasdaq have slipped 0.14% and 0.84%, respectively, since the start of the week.

Stocks were volatile as traders assessed the latest Fed meeting minutes, which showed that the central bank would continue its aggressive hiking campaign until it can tame inflation. At the same time, the Fed also indicated that it could soon slow the speed of its tightening, while also acknowledging the state of the economy and risk to the downside for gross domestic product growth.

"Participants judged that, as the stance of monetary policy tightened further, it likely would become appropriate at some point to slow the pace of policy rate increases while assessing the effects of cumulative policy adjustments on economic activity and inflation," the minutes said.

Meanwhile, traders continued to comb through corporate earnings from the retail sector. Target shares slipped 2.6% after posting earnings that widely missed expectations as it grapples with excess inventory. Lowe's ended the session marginally higher despite a mixed quarter. Retail sales data released Wednesday were flat in July, although consumers did increase spending online.

"No surprise to see the market take a breather from the summer rally it's been riding," said Chris Larkin, managing director of trading at E-Trade Financial. " … The market is looking for any sign that a slowdown in rate hikes, which has seemingly fueled the recent rise, is coming. Investors should remain nimble and continue to expect volatility as we may not be out the woods just yet."

Bond yields also rose, with the 10-year Treasury note up about 7 basis points at 2.9% as recessionary fears and uncertainty regarding the Fed's rate-hiking path persisted. The move dragged down growth stocks like tech.