Wall Street advances as bond yields fall, investors digest Fed minutes

The indexes all opened high, the Dow up almost 150 points. Then suddenly at 11 a.m. they all took a nosedive again not only losing the gains but the Dow going 130 points into the red until about 2 pm when the buying started again and everyone closed in the black after all. The Nasdaq did better, staying in the black most of the day.  Everyone was selling ahead of the Fed releasing its September minutes, and the news of continuing uncertainties supported the view of no more hikes, which caused another buying spree, particularly on the rate sensitive issues.  

The minutes also emphasized the risks of over-tightening which, along with CPI data coming Thursday, added more confidence, particularly with today’s producer prices increasing more than expected, but with inflation remaining moderate. Contrary to logic, the war is actually currently having a positive effect on the market in so far as it’s forcing down bond yields, now at a two-week low. Volume is gaining but remains a little below average at 10 billion. 

Wall Street advances as bond yields fall, investors digest Fed minutes

By Sinéad Carew and Shashwat Chauhan

Wed October 11, 2023 4:47 PM

DJ: 33,739.30  +134.65       NAS: 13,562.84  +78.61        S&P: 4,358.24  +22.58     10/10

DJ: 33,804.87  +65.57         NAS: 13,659.68  +96.83        S&P: 4,376.95  +18.71     10/11

Oct 11 (Reuters) - Wall Street's major indexes closed higher after Wednesday's choppy session with the release of minutes from the U.S. Federal Reserve's last meeting showing caution among policy makers that helped fuel investor hopes that rates would stay steady.  Fed officials pointed to uncertainties around the economy, oil prices and financial markets as supporting "the case for proceeding carefully in determining the extent of additional policy firming that may be appropriate," according to the minutes released on Wednesday from the Sept. 19-20 meeting.  Trading was choppy on Wednesday with all the indexes starting off the session with gains before turning lower ahead of the minutes and then regaining lost ground to push higher.  Along with recent moves in interest rates and dovish comments from Fed officials in the last few days, Angelo Kourkafas, senior investment strategist at Edward Jones, said the minutes appeared encouraging for investors.

"Today's release highlights the risk of over-tightening, and knowing what has happened over the past three weeks with interest rates, that provides some comfort to investors that we're not going to see another rate hike," said Kourkafas.  But he noted that upcoming Fed decisions will take into account consumer price index (CPI) readings for September, due out on Thursday before market open, as the Fed's "data dependence hasn't gone away."  Earlier on Wednesday, data showed that U.S. producer prices increased more than expected in September amid higher costs for energy products, but underlying inflation pressures at the factory gate continued to moderate.

The Dow Jones Industrial Average (.DJI) rose 65.57 points, or 0.19%, to 33,804.87, the S&P 500 (.SPX) gained 18.71 points, or 0.43%, to 4,376.95 and the Nasdaq Composite (.IXIC) added 96.83 points, or 0.71%, to 13,659.68. 

The energy (.SPNY) index fell 1.4% and was the weakest among the S&P's 11 major industry sectors. It was dragged down by a 3.6% slump in Exxon Mobil (XOM.N) shares after the oil and gas producer agreed to buy rival Pioneer Natural Resources (PXD.N) in an all-stock deal valued at $59.5 billion. Pioneer shares closed up 1.4%.  The biggest gainers were rate sensitive sectors, real estate (.SPLRCR), which added 2% and utilities (.SPLRCU) which finished up 1.6% as Treasury yields fell.  U.S. Treasury yields on benchmark 10-year notes fell to a roughly two-week low, as prices rose on safe-haven flows as a war in the Middle East still raged after a deadly weekend attack by Hamas on Israel. 

Israel continued to pound Gaza with retaliatory air strikes, which has killed scores of civilians, as it formed an emergency unity government on Wednesday and its army said it killed three Hamas militants.

Scuffing Wednesday's mood was the latest initial public offering (IPO). Birkenstock Holding (BIRK.N) shares closed down 12.6% at $40.20. In its first day trading on the New York Stock Exchange the German footwear company's shares never touched their IPO price of $46.  Drugmaker Eli Lilly (LLY.N) gained 4.5% following the early reported success of Danish rival Novo Nordisk's (NOVOb.CO) Ozempic in a trial to treat kidney failure, while dialysis firms DaVita (DVA.N) and Baxter International (BAX.N) slumped 16.7% and 12.3%, respectively. 

Advancing issues outnumbered declining ones on the NYSE by a 1.65-to-1 ratio; on Nasdaq, a 1.19-to-1 ratio favored decliners.  The S&P 500 posted 12 new 52-week highs and 10 new lows; the Nasdaq Composite recorded 44 new highs and 206 new lows.

On U.S. exchanges 10 billion shares changed hands compared with the 10.7 billion average for the last 20 sessions.