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On Wednesday, the S&P 500 closed at 5,918.2, up a modest 0.15% as traders weighed Federal Reserve minutes, which revealed that officials were considering interest rate cuts. The Dow Jones Industrial Average outpaced, gaining 105.8 points, or 0.19%, ending at 42,635.2, while the Nasdaq Composite fell marginally by 0.06% to 19,478.8. All three indexes are headed for a second week of losses.
Minutes from the Fed's December meeting also showed particularly persistent inflation, and just about all participants were worried about heightened risks to the inflation outlook. It tempered expectations for a major rate cut in 2025 after its officials said they would take a measured approach to slow the pace of easing policy.
The market was uncertain, with bond yields undergoing as many as three bouts of trading. Inflation fears resurfaced as President-elect Donald Trump proposed tariff and tax plans, pushing the yield on the benchmark 10-year Treasury note over a level not seen since April: 4.7%.
Instead, investors are lining up for Friday's final December payroll report that could shed light on the direction of the labour market. 'Uncertainty around Trump's economic policies is making it more and more uncertain to predict interest rates and inflation path,' said Jeffrey Roach, LPL Financial chief economist. "A big surprise in the jobs data could see markets very volatile."
The mood amongst traders is cautious of how far the story will go as economic data are still at the forefront, with some optimism around a slowdown in inflation and some wariness to the pace of monetary policy adjustments.
This article first appeared on GuruFocus.