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S&P 500 Inches Ahead to Fresh Record

By Caitlin McCabe and Will Horner 

U.S. stocks wobbled Wednesday after notes from the Federal Reserve's last policy meeting showed that central bank officials reaffirmed their commitment to supporting the markets and the economy.

The S&P 500 edged up 0.1% to 4079.78 a fresh record. The technology-heavy Nasdaq Composite slipped 0.1%. The Dow Jones Industrial Average wobbled between gains and losses, recently gaining 16 points, less than 0.1%.

All three major indexes teetered throughout most of Wednesday ahead of the Fed's minutes release, as investors awaited clues about how officials were thinking about inflation expectations and the recent rise in government-bond yields. After the Fed's minutes release at 2 p.m. ET, indexes found direction and briefly turned higher before beginning to waver again.

Investors and analysts weren't expecting big surprises from the document, especially as Fed officials have reiterated that the central bank is committed to providing support for as long as it takes.

Still, some remained on the lookout for hints "around future expectations," said JJ Kinahan, chief market strategist at TD Ameritrade, as well as whether some bankers "are starting to splinter within the group."

Investors have been closely watching for clues from the central bank in recent months as concerns about inflation have swelled. Some have worried that continued economic growth, coupled with government spending, could prompt the Fed to pull back on its support of the economy and markets earlier than expected.

In the minutes, officials expressed that current guidance for the federal-funds rate and asset purchases was "serving the economy well," the document showed. The central bank has held interest rates near zero and has continued to purchase at least $120 billion of Treasury bonds and mortgage-backed securities monthly. The minutes showed that central bankers noted that "it would likely be some time until substantial further progress toward the Committee's maximum-employment and price-stability goals would be realized."

Signs of economic growth have proved to be a double-edged sword for markets lately. Despite fears that an overheated economy could eventually lead to tightening of monetary policy, investors have simultaneously cheered data that has shown that recovery from the Covid-19 pandemic is under way. On Monday, enthusiasm over the strong March jobs report propelled the S&P 500 and the Dow to fresh records.

In general, markets have kicked off the second quarter on a high note, helping widen the stock market's rally. Nearly 95% of companies in the S&P 500 are now trading above their 200-day moving average, according to Dow Jones Market Data, the highest figure since May 2013.

On Wednesday alone, stocks ranging from Amazon.com to Carnival to Hess all gained 2.2% or more.

"We had been expecting the data to improve about this time, and early signals are that the recovery is absolutely on track," said Hugh Gimber, global market strategist at J.P. Morgan Asset Management. "This is the period where the forecast of a strong recovery in growth is starting to look more like the fact of a strong recovery in growth."

U.S. stock investors have been encouraged lately by signs of stabilization in the government-bond market, as bond yields have ticked down after climbing sharply from the start of the year. The yield on the benchmark 10-year U.S. Treasury note fell on Wednesday to 1.652%, from 1.656% on Tuesday.

The recent slip in yields has provided some respite for technology stocks, which had come under pressure from the higher borrowing costs. But many investors continue to bet that it will be the economically sensitive sectors such as banks and energy that stand to benefit most from a reopening.

"The value play is still very much on the table as the economy expands," said Mr. Walsh. "For the last 10 years, everything was about growth stocks, and now we are seeing a changing of the guard."

In commodity markets, Brent crude, the international oil benchmark, gained 0.7% to close at $63.16 a barrel.

Overseas, the pan-continental Stoxx Europe 600 gauge ticked down 0.2%.

In Asia, most major stock indexes were mixed. Japan's Nikkei 225 edged 0.1% higher, while Hong Kong's Hang Seng fell 0.9%. In mainland China, the Shanghai Composite Index dropped 0.1%.

Write to Caitlin McCabe at caitlin.mccabe@wsj.com and Will Horner at William.Horner@wsj.com

 

(END) Dow Jones Newswires

April 07, 2021 16:19 ET (20:19 GMT)

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