Eight sectors ended in the green led by industrial sector
U.S. stocks closed higher on Wednesday, 20 August 2014 shaking off a dip that came after Federal Reserve minutes indicated that policy makers talked at their last meeting about a sooner-than-anticipated hike to interest rates. Equity indices began the day in the red, but wasted no time regaining their flat lines. Upon returning into positive territory, the key indices were confined to narrow ranges until the minutes from the July FOMC meeting crossed the wires.
The Dow Jones Industrial Average tacked on 59.54 points, or nearly 0.4%, to finish at 16,979.13, while the Nasdaq Composite edged down by 1.03 points, or less than 0.1%, to 4,526.48. The S&P 500 rose 4.91 points, or less than 0.3%, to finish at 1,986.51
Eight sectors ended in the green with industrials spending the entire session in the lead. Dow components Boeing and General Electric were big gainers as the two added 1.4% and 1.2%, respectively.
The minutes revealed that many officials saw recent job gains as a potential reason to bring forward the first fed funds rate hike; however, most officials showed preference for waiting for more evidence before changing their outlook on rates.
The FOMC minutes report was the economic highlight of the day for the market place. The Fed officials' wording that the U.S. labor situation continues to improve fell into the camp of monetary policy hawks, as it hinted the U.S. central bank could move to raise interest rates sooner than many expected. Now, focus turns to later this week and the annual Kansas City Federal Reserve meeting in Jackson Hole, Wyoming, that begins on Thursday.
In overnight news, the German government auctioned its two-year note (the Schatz) at a zero percent yield, amid strong investor demand. This underscores the keener risk aversion still in the market place, especially in the European Union, where slow to negative economic growth and very low inflation are serious concerns. It was also reported that German producer prices fell 0.1% on the month and were down 0.8% on the year in July.
A feature in the market place recently has been a stronger U.S. dollar against the other major currencies of the world. The U.S. dollar index, which is a basket of six major currencies weighted against the greenback, hit an 11-month high overnight. There has been increased safe-haven demand for the dollar amid the recent heightened geopolitical tensions.
Apple scored a record close for the second day in a row. Lowe's rose 1.6%, while Target finished up 1.8%. Each retailer had dropped earlier Wednesday after cutting its guidance.
Economic data was limited to the weekly MBA Mortgage Index, which rose 1.4% to follow last week's 2.7% decline.
Bullion metals ended lower at Comex on Wednesday, 20 August 2014. Gold prices sold off moderately in the aftermath of FOMC minutes that revealed Fed officials believe the U.S. labor situation is moving closer to normal, and with other clues hinting the Fed could raise interest rates sooner than many expected. Gold prices retreated below $1,300 on Wednesday as traders prepared for the release of minutes from the last Federal Reserve policy meeting while keeping one eye on the end of the week, when Janet Yellen steps up in Jackson Hole. The stronger dollar is also a bearish underlying factor for the raw commodity sector, including the precious metals.
Gold for December delivery shed $1.50 to settle at $1,295.20 an ounce. September silver slipped 22 cents to $19.41 an ounce.
Crude-oil futures rose on Wednesday, 20 August 2014 on the back of data that confirmed a weekly decline in U.S. stockpiles. The move came after the U.S. Energy Information Administration reported that crude stockpiles fell more than expected. West Texas intermediate crude for delivery in September advanced $1.59, or 1.7%, to $96.07 a barrel in electronic trade.
As per EIA, crude oil inventories decreased by 4.5 million barrels in the last week. Market had expected crude-oil stocks to have fallen 1.6 million barrels.
Participation remained on the light side with just under 530 million shares changing hands at the NYSE.
Tomorrow, weekly initial claims will be reported at 8:30 ET (consensus 308K), while Existing Home Sales for July (consensus 5.00 million), August Philadelphia Fed Survey (consensus 15.5), and July Leading Indicators (expected 0.7%) will all be released at 10:00 ET.
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