Day Traders Diary

1/4/23

The major averages closed higher Wednesday after a choppy session as investors looked past Federal Reserve meeting minutes that showed the central bank will remain aggressive in its policy to tame high inflation.

The Dow Jones Industrial Average rose 133 points, or 0.40%, to close at 33,269.77. The S&P 500 climbed 0.75% to 3,825.97 and the Nasdaq Composite gained 0.69% to close at 10,458.76. Bond yields were lower, even as the Fed reiterated that rates would move higher this year.

All three indexes notched their first positive close of the year, breaking two consecutive days of losses, after rallying from negative territory in the afternoon.

Stocks opened in positive territory Wednesday following Tuesday's rough start to the year, but briefly dipped in the morning following two key economic releases.

The November Job Openings and Labor Turnover report, or JOLTS, came in slightly better than anticipated, signaling continued labor market strength amid the central bank's rate hikes to tame inflation. The ISM manufacturing index, on the flip side, showed a contraction in the sector after 30 months of expansion, signaling that interest rate increases may be working to slow the economy.

U.S. stocks rose as investors digested the reports but pared gains when minutes from the Federal Reserve's December meeting showed hawkish sentiment from the central bank even as it delivered a half-percentage point rate hike, smaller than previous increases. The report also showed the Fed intends to hold higher rates until there's sufficient data proving inflation has cooled.

"The Fed is juggling a lot of balls here in the sense they want to slow the pace of rate increases but they don't want the market to start a party, which would then ease financial conditions," said Peter Boockvar of Bleakley Financial Group. "They want to tighten, to crush inflation, but they don't want to cause a recession."

Next, investors will be looking to Friday's jobs report for further information about how the economy is faring amid the Fed's rate hikes. Consumer companies Walgreens Boots Alliance and Constellation Brands are scheduled to report quarterly earnings before market open on Thursday.

"This is very much wait and see mode," said Art Hogan, chief market strategist at B. Riley Financial. "After wrapping up a year that was pretty terrible on all fronts, there's always going to be trepidation by investors to put money to work and we're seeing that in real time at least in the first two trading days."