MARKET NEWS
At the open: Wall Street starts lower with Fed minutes in focus
Wall Street’s main indexes opened lower on Wednesday as investors stayed away from making big bets ahead of the release of minutes from the U.S Federal Reserve’s January meeting.
The Dow Jones Industrial Average fell 37.1 points, or 0.12%, at the open to 31485.61. The S&P 500 fell 14.1 points, or 0.36%, at the open to 3918.5, while the Nasdaq Composite dropped 135.9 points, or 0.97%, to 13911.649 at the opening bell.
In Toronto, the S&P/TSX composite index was down 146.64 points, or 0.79%, to 18,346.08 at open.
The Fed has pledged to pin interest rates near zero until inflation rises to 2% and looks set to exceed that goal, and until the economy also reaches full employment.
That super-easy stance, coupled with the Biden administration’s proposed $1.9 trillion spending bill for pandemic relief, has some analysts warning of a coming surge in inflation.
“While the new package may be large, it will add stimulus to an economy still below potential, and the spending will be spread out over a couple of years,” said Mark Haefele, chief investment officer, UBS Global Wealth Management in Zurich, Switzerland.
“So while a near-term rise in inflation is likely, we expect the Fed to look past that and keep rates on hold.”
Data showed U.S. retail sales rebounded sharply in January after households received additional pandemic relief money from the government, suggesting a pick-up in economic activity after being restrained by a fresh wave of COVID-19 infections late last year.
The Dow notched a record closing high on Tuesday led by gains in cyclical sectors, although concerns over rising interest rates kept the benchmark S&P 500 little changed.
“The reflation trade that has been good for stock markets as it’s driven by optimism around the recovery. But that will only continue to a point and if yields start rising at a rate considered too fast, sentiment will quickly change in stock markets,” said Craig Erlam, senior market analyst at OANDA.
Rising inflation expectations also pushed benchmark 10-year U.S. Treasury yields to their highest level in a year on Tuesday.
Oil prices rose on Wednesday, underpinned by a major supply disruption in the southern United States this week where a winter storm hit Texas.
Benchmark Brent crude gained $1.37, or 2.2%, to $64.72 a barrel.
U.S. West Texas Intermediate (WTI) crude rose $1.18, or 2%, to $61.23 a barrel.
Both contracts were at their highest level since January 2020.
“WTI clocked in at $60 a barrel this week, joining its transatlantic peer (Brent) above the psychological level for the first time since January 2020. At this price point, any oil production is profitable,” said Stephen Brennock of broker PVM.
Reuters
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