Stocks Pare Losses After Fed Minutes
Oil prices climb as investors assess mixed information on whether Russia-Ukraine tensions will escalate
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Caitlin Ostroff Follow
and
Paul Vigna Follow
Updated Feb. 16, 2022 5:03 pm ET
U.S. stocks ended Wednesday’s session little changed, reversing an early selloff after the release of the minutes of the Federal Reserve’s most recent meeting.
The Dow Jones Industrial Average slipped 54.57 points, or 0.2%, to 34934.27, paring a morning loss of more than 300 points. The S&P 500 closed slightly higher, up 3.94 points, or 0.1%, to 4475.01, while the Nasdaq Composite fell 15.66 points, or 0.1%, to 14124.09. The technology-heavy index had been down more than 1% earlier in the session.
The indexes tumbled in morning trading after a spate of economic reports in the U.S. and U.K. painted a picture of persistent inflation pressures, and NATO officials said they didn’t have any evidence Russia was withdrawing its military from Ukraine’s border.
They reversed course following the release of the minutes from the Fed’s January policy meeting. Fed officials talked about stepping up their timetable for raising interest rates beginning with an anticipated increase in March amid greater discomfort with high inflation.
Although the minutes didn’t appear to differ from recent public comments from Fed officials, investors seemed to be relieved that they didn’t show an even more hawkish bent, some analysts said. The debate among investors was whether the Fed will raise short-term rates by 50 basis points in March, or only 25.
“Officials didn’t appear to be seriously considering either a 50 bp rate hike to start the tightening cycle or a hike at each of the remaining seven policy meetings this year,” said Paul Ashworth, the chief U.S. economist at Capital Economics.
The Fed minutes also helped shift the market’s attention away from the situation in Ukraine. Russia’s Defense Ministry said Wednesday it was withdrawing troops from Crimea following the completion of military drills, though the North Atlantic Treaty Organization’s secretary-general said Russia was continuing its military buildup around Ukraine.
“Every new statement, every tiny piece of news, could push markets in either direction,” said Carsten Brzeski, ING Groep’s global head of macro research.
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The latest inflation data also sent worrying signals to some investors. In the U.K., prices rose at their fastest pace in nearly 30 years in January. In the U.S., retail sales rose 3.8% in January from December, more than economists had expected. The figures are adjusted for seasonality but not inflation, and a number of analysts pointed out that the gains are mainly a result of rising prices.
What the reports reflect is that inflation may be about more than just monetary policy, said Hargreaves Lansdown analyst Susannah Streeter. Energy prices are rising, and supply-chain disruptions are still an issue, which is also forcing prices higher, she said. “I wonder whether inflation is going to be quite as transitory as thought,” she added.
The market’s volatility this week reflects a process that began months ago as investors react to rising inflation and shifting monetary policy, said Joseph Amato, the chief investment officer for equities at Neuberger Berman.
High-risk assets like cryptocurrencies and unprofitable tech companies were the first to come under pressure, he said.
This “repricing of risk” will be the biggest factor throughout the year, he said, and investors should be prepared to live with more volatility. “We haven’t even seen a single rate hike yet and the market is whipping itself into a bit of a frenzy,” he said.
Among individual stocks, ViacomCBS fell 18% to $29.58 and social-gaming company Roblox fell 27% to $53.87 after both companies posted earnings reports that missed analysts’ forecasts.
Shopify fell 16% to $746.85 after the company said it expects revenue growth will slow in 2022 from the year prior.
Cedar Fair shares declined 5.3% to $58.35 after SeaWorld Entertainment signaled it was unlikely to pursue a deal for the theme-park business after the company rejected its approach. SeaWorld rose 1.1% to $71.48.
Airbnb shares rose 3.7% to $186.64 after the company posted record revenue, while Kraft Heinz rose 5.6% to $36.62 after its profit and sales beat expectations.
Traders at the New York Stock Exchange on Tuesday.PHOTO: DAVID L. NEMEC/ASSOCIATED PRESS
“You’ve got this backdrop of inflation, lack of confidence in central banks in being ahead of the curve, a nonorderly recovery in the global economy and supply lines and consumer demand, and all that coming together is creating volatility,” said David Coombs, London-based head of multiasset investments at Rathbone Investment Management. Potential escalation between Russia and Ukraine is “the cherry on the top,” he added.
The threat is shaking up a fragile global oil market, which will likely add to inflationary pressures, Mr. Coombs said. U.S. crude oil rose 1.7% to $93.66 a barrel. U.S. natural-gas futures rose 9.5%.
In bond markets, the yield on the benchmark 10-year Treasury note settled at 2.044%, unchanged from Tuesday.
Overseas, the pan-continental Stoxx Europe 600 rose less than 0.1%. Major indexes in Asia closed higher. Japan’s Nikkei 225 jumped 2.2%, and South Korea’s Kospi gained 2%. Hong Kong’s Hang Seng added 1.5%, and mainland China’s Shanghai Composite rose 0.6%.
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