Wall Street rallies as Fed minutes meet expectations

  • Fed minutes: Future 50bp rate hikes ‘likely’
  • Nordstrom climbs after raising its earnings outlook
  • Nvidia’s Q2 revenue forecast falls short of expectations
  • Indices up: Dow 0.60%, S&P 0.95%, Nasdaq 1.51%

NEW YORK, May 25 (Reuters) – Wall Street closed higher on Wednesday after minutes from the Federal Reserve’s latest monetary policy meeting showed policymakers unanimously believed the U.S. economy was very weak. strong as they struggled to control inflation without triggering a recession.

Minutes from the May meeting of the Federal Open Market Committee, which resulted in a 50 basis point hike in the target federal funds rate – the biggest jump in 22 years – showed that most Committee members felt that further rate hikes would be “probably appropriate” at its upcoming meetings in June and July. Read more

“Uniformity of opinion is a good thing,” said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky. “There is a lack of uncertainty about what needs to be done in the short term.”

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“By the time (the Fed) comes in September, they will have plenty of economic data to go from there, so they will continue to maintain optionality,” Mayfield added.

The three major US stock indexes swirled earlier in the day amid growing jitters over business and consumer surveys, economic data and corporate earnings reports suggesting a cooling US economy – so even as the Fed prepares to throw a bucket of cold water on it to weather decades-high inflation.

Fears that overly aggressive interest rate hikes by the Fed could tip the economy into recession despite evidence that inflation peaked in March fueled those worries.

“There’s some credence to the idea that inflation is doing (the Fed’s) work for them,” Mayfield said. “There is already a cooling occurring and financial conditions have tightened over the past month due to the strong dollar and weak stock market.”

On Thursday, the Commerce Department is due to release its second estimate of first-quarter GDP, which analysts said should slow a contraction slightly less steep than the 1.4% annualized quarterly decline originally reported.

The Personal Consumption Expenditure (PCE) report will follow on Friday, which will provide further clues regarding consumer spending and whether inflation peaked in March, as other indicators have suggested.

A person walks past the New York Stock Exchange (NYSE) in Manhattan, New York, U.S., May 19, 2022. REUTERS/Andrew Kelly

The Dow Jones Industrial Average (.DJI) rose 191.66 points, or 0.6%, to 32,120.28, the S&P 500 (.SPX) gained 37.25 points, or 0.95%, to 3,978.73 and the Nasdaq Composite (.IXIC) added 170.29 points, or 1.51%, to 11,434.74.

Nine of the 11 major S&P 500 sectors advanced, with consumer discretionary stocks (.SPLRCD) leading the pack with a 2.8% gain.

Amazon.com Inc (AMZN.O) and Tesla Inc (TSLA.O) provided the biggest boost to the S&P 500 and Nasdaq, up 2.6% and 4.9%, respectively.

Department store operator Nordstrom Inc (JWN.N) jumped 14.0% on the heels of its upbeat annual profit and revenue forecast. Read more

Fast food chain Wendy’s Co (WEN.O) jumped 9.8% after a regulatory filing revealed shareholder Nelson Peltz was considering a potential takeover bid for the company. Read more

Shares of Nvidia Corp fell more than 8% in after-hours trading after the company’s second-quarter revenue forecast missed expectations. Read more

Advancing issues outnumbered declining ones on the NYSE by a ratio of 3.56 to 1; on the Nasdaq, a ratio of 2.22 to 1 favored advancers.

The S&P 500 posted three new 52-week highs and 32 new lows; the Nasdaq Composite recorded 23 new highs and 255 new lows.

Volume on U.S. exchanges was 11.19 billion shares, compared to an average of 13.27 billion shares for the full session over the past 20 trading days.

(Story reclassified to change “estimates” to “expectations” in third chip title on Nvidia)

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Reporting by Stephen Culp; additional reporting by Anisha Sircar and Devik Jain in Bengaluru; edited by Jonathan Oatis

Our standards: The Thomson Reuters Trust Principles.

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