Minor gains at Wall Street

Utilities and financial stocks lead gains

U.S. stocks closed slightly higher on Wednesday, 17 AUgust 2016 after sharply paring earlier losses as minutes from the Federal Reserve's July meeting showed policy makers remained divided on prospects for a near-term rate increase. Stocks bounced off session lows after St. Louis Fed President James Bullard said that with U.S. growth trending below 2%, interest rates can stay low.

The Dow Jones Industrial Average rose 21.92 points, or 0.1%, to close at 18,573.94, after being down as many as 83 points earlier in session. The Nasdaq Composite Index finished up 1.55 points at 5,228.66, after being down about 30 points earlier. The S&P 500 index rose 4.07 points, or 0.2%, to close at 2,182.22 overcoming an earlier 10-point deficit.

Seven out of 10 sectors closed higher, led by gains in utilities and financial stocks. Tech, consumer-discretionary, and materials stocks closed lower.

Meanwhile, Cisco Systems shares dragged on the average, down 1.5%. Shares of 3M and Pfizer led gains.

Stocks ended the midweek affair on a flat note as market participants walked back recently-adjusted rate hike expectations for the year. The change in thinking followed some dovish remarks from St. Louis Fed President Bullard (an FOMC voter) and less hawkish-than-feared minutes from the FOMC's July meeting. Later, following a small pullback following the release of the Fed minutes, stocks had fluctuated between slight gains and losses after the minutes revealed that Fed officials were largely unchanged in their debate over interest rate hikes. The Fed minutes for July also helped to brush away lingering rate hike angst. The minutes indicated that the Federal Open Market Committee was split on whether or not an interest rate hike would be appropriate in the coming months. The committee agreed that economic data and labor markets had improved, but the sustainability of hiring and inflation continuing to run below the two percent objective worried some members. Several members said they preferred to defer another increase in the fed funds rate until they were more confident that inflation was moving closer to two percent on a sustained basis.

The market shifted gears shortly after midday as reports indicated that German Chancellor Merkel signaled that there would be some scope for tax cuts in the Germany's next legislative session. That headline seemed to stoke some risk appetite as investors eyed potential fiscal stimulus measures, which have been lacking in the midst of very aggressive monetary policy accommodations.

With no significant changes in economic activity, some risks from the U.K.'s vote to leave the European Union, and low inflation, the Fed is still very much divided over the subject of raising interest rates while leaving the door open for a possible rate hike this year.

Wednesday's stock moves come after the three main benchmarks closed lower on Tuesday, amid warnings that an interest-rate rise could come as soon as September, which helped drag stocks off their all-time highs. Today's economic data included the weekly MBA Mortgage Index: The MBA Mortgage Index showed that mortgage applications fell 4.0% in the week ending August 13 after a 7.1% increase in the prior week.

The dollar rose after those remarks and climbed early Wednesday, but shifted lower after the Fed minutes. The ICE U.S. Dollar Index was down fractionally at 94.78.

Oil prices settled 0.5% higher at $46.79 a barrel after the Fed minutes even as hopes for a production-freeze agreement started to fade.

Gold futures slipped from their two-week high, settling 0.6% lower at $1,348.80 an ounce.

Treasuries ended the day on a higher note, enjoying a decent bid across the complex. The yield on the 10-yr note slipped two basis points to 1.55%.

Today's participation was below the recent average as fewer than 766 million shares changed hands at the NYSE floor.

Tomorrow's economic data will include weekly initial claims (consensus 265k) and the Philadelphia Fed Survey for August (consensus 0.5), which will each be released at 8:30 a.m. ET. The Leading Indicators report for July (consensus 0.4%) will conclude the day's data, crossing the wires at 10:00 a.m. ET.

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