S&P 500 ends higher for second day, but Dow closes flat ahead of Thanksgiving holiday
By Joy Wiltermuth and Mark DeCambre
U.S. stock indexes mostly booked gains ahead of Thanksgiving, following the release of minutes of the Federal Reserve's November meeting showing some officials favored a faster pace of tapering of the central bank's monthly bond-buying program.
U.S. markets will be closed on Thanksgiving and will end early on the Friday after the holiday.
How did stocks perform?
On Tuesday, the Dow rose 195 points, or 0.55%, to 35814, the S&P 500 increased 8 points, or 0.17%, to 4691, while the Nasdaq Composite dropped 80 points, or 0.5%, to 15775.
What drove the market?
Stock indexes ended mostly higher Wednesday, as investors poured over minutes of the Fed's November meeting released late in the session and sifted through a mixed barrage of U.S. economic data.
The Fed minutes showed several central bank officials favored a more robust pace of cuts to its monthly bond buying program and staffers revised up their near-term outlook for inflation.
"It's in an ever more broader basket of goods and services that are running way too hot to have full monetary policy accommodation," said David Petrosinelli, senior trader at broker-dealer InspereX, about inflation, in a phone interview.
To that end, Petrosinelli anticipates the Fed may need to move faster on reducing its $120 billion in monthly bond purchases, than the $15 billion cut slotted in for November and December.
BlackRock's Bob Miller, head of Americas fundamental fixed income, had stronger words for the central bank. "[W]e view the 'emergency policy' settings put in place in the wake of the second quarter 2020 response to the Covid crisis to be wildly incongruent with the economic reality on the ground today," in emailed comments following the minutes.
However, Miller also said the nomination of Fed Chair Jerome Powell for a second, four-year term, could trigger "a more hawkish pivot to policy" if inflation pressures remain strong and labor markets continue to recover.
Earlier investors digested U.S. economic data showing first-time claims for unemployment benefits plunged by 71,000 to 199,000 last week, the lowest levels since 1969.
"Jobless claims blew it out of the water this week--a welcomed signal that the recovery is still strong despite some recent jitters around rising Treasury yields and COVID spikes," said Mike Loewengart, managing director investment strategy at E-Trade Financial.
In other data Wednesday, the pace of economic growth in the third quarter was raised to a 2.1% annualized rate versus an initial estimate of 2%. The U.S. trade deficit in goods narrowed sharply in October.
On the other hand, orders for U.S. durable goods--products meant to last at least three years--fell 0.5% in October, the government said Wednesday. Yet the decline stemmed entirely from fewer orders for passenger planes, a volatile category that often distorts the level of underlying demand in the economy.
Data also highlighted historically elevated levels of inflation, with a measure of the cost of goods and services jumping 0.6% in October, based on the personal consumption expenditure index or PCE, and rose 5% over the past year from 4.4% in September. That's the highest level since December 1990. The PCE index is the Federal Reserve's favored inflation indicators.
Separately, U.S. new home sales rose 0.4% to a seasonally adjusted annual rate of 745,000 in October from 742,000 in the prior month, the Commerce Department said Wednesday.
"The pace of sales, which is the highest since April, is largely in line with our forecast, though the downward revisions to previous months suggest that supply and labor constraints may be restricting sales more than previously thought," Mark Palim, deputy chief economist at Fannie Mae, wrote in emailed comments.
The University of Michigan's gauge of consumer sentiment rebounded to a final November reading of 67.4 from an initial reading of 66.8, but below the October reading of 71.7.
On the public health front, Michigan and Minnesota are leading the nation by new COVID-19 cases on a per capita basis and federal medical workers are traveling to Minnesota to support hospital staffing. Cases are up 25% in the last two weeks nationally, and up more than 40% in those states and 12 others. Overall, despite the arrival of vaccines in spring that can stop hospitalization and death, more Americans have died of COVID in 2021 than in 2020, the Times reported, as many unvaccinated people succumbed to the illness.
But one of the bigger picture stories of the last few days has been the rise in real, or inflation-adjusted, yields. The 10-year yield on Treasury-inflated-protected securities closed above -1% for the first time in three weeks on Wednesday.
"I suspect they'll stay negative for the rest of my career so while higher real yields are likely, I suspect that this is a trade rather than a structural long-term journey given likely long-term financial repression," said Jim Reid, head of thematic research at Deutsche Bank.
See: Falling real yields are a key to the stock-market rally: What investors need to know
Which companies were in focus?
How did other assets fare?
--Steve Goldstein contributed reporting
(END) Dow Jones Newswires
November 24, 2021 16:22 ET (21:22 GMT)
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