Minutes.

Minutes. U.S. stocks finished lower on Wednesday as the release of the Fed July meeting minutes drove concerns that rates may go higher for longer.???

?? DJIA -0.52%, S&P 500 -0.76%, NASDAQ -1.15%

Stocks were fairly choppy on Wednesday, with the tech-heavy Nasdaq leading in the red. The S&P 500 was relatively muted, while the Dow Jones fluctuated along the zero-line. All major indexes finished deeper into negative territory as selling pressures picked up in the final hours of trade.

Wall Street's attention was focused on the release of the minutes from the Fed's July 25-26 Federal Open Market Committee (FOMC) meeting. The minutes revealed that a majority of senior officials see “significant upside risks to inflation,” necessitating the need for “further tightening of monetary policy” to bring down inflation. It was also noted that some officials are concerned about an economic downturn despite the U.S. economy showing resilience.

U.S. Treasury yields advanced further after the release of the minutes. The 10-year yield drove over 4.258% from 4.22% to a 15-year high, and the fed-sensitive 2-year yield rose to 4.978%.

Fed funds futures traders continued to price-in a pause on hikes for the Fed’s September policy meeting. Meanwhile, expectations of a 25 bps hike at the November policy meeting increased again but are still in the minority. ???

Earlier on Wednesday, investors also weighed domestic and international economic data. In the United Kingdom, headline consumer inflation dropped to 6.8% YoY in July, down from 7.9% the month prior. Inflationary pressures remained as the core inflation figure was higher and wages grew faster.

Back in the U.S., industrial production was up 1% in July (-0.23%, YoY), above expectations, but revisions to June’s read were revised lower to -0.8% from an initial print of -0.5%. Elsewhere, new U.S. housing construction or housing starts, rose to an annualized pace of 1.45 million or +3.9% (MoM) in the same month.

In other markets, commodity prices came under pressure on Wednesday with U.S. crude oil futures dropping for a third day, settling down 2% at $79.38 a barrel and on the verge of its first weekly decline in eight weeks. Weekly U.S. EIA data was neutral as inventories were down sharply, domestic demand for gasoline and fuel is bearish, and domestic production rose to a post-pandemic high of 12.7 million barrels per day.

Natural gas prices also fell 2.5%, settling at $2.592/mmBtu after plummeting 5% on Tuesday. Finally, gold prices retreated for an eight consecutive session settling at their lowest levels since early July at $1,928.30, down 0.4%. Lastly, the U.S. dollar strengthened on Wednesday against other currencies.?

What can Data Do for Your Money?

Data Driven Portfolio Management & Financial Planning

? LEARN MORE

Looking Ahead

It’s all about the Fed! The future path of monetary policy was back at the forefront as July’s Fed meeting minutes significantly challenged the “the Fed is done” narrative. On Tuesday, investors had doubts about the Fed; today, they’re concerned that at least one more hike is coming—and with good reason.

Here’s an inventory of the situation:

• Inflation in the U.S. is likely to remain sticky as energy prices, housing/rents, a resilient consumer, and a strong labor market continue to apply pressure.
• China’s deflationary spiral could present a broader stagflationary global economic environment.
• Rising U.S. bond yields continue to put downward pressure on equity valuations.
• The Federal Reserve cutting rates is a long way off.

As of today’s close, all three major indexes have fallen for a second straight day, with the S&P 500 in the red for eight out of the last 11 sessions. By our assessment, the correction is well underway and we remain strategically defensive as there are serious concerns for financial markets going forward.?

?? Daily Resources

• Market Overview (TradingView)
• Economic Data/Calendar (TradingView)
• Newswires (FinancialJuice)

?? Important Developments

• [10:03 ET] WTO rejects China’s Trump-era 2018 tariffs against US exports.
• [09:31-09:30 ET] Deflationary pressures coming from China have only just begun to impact global consumer markets, discounting is likely to accelerate … Chinese economic weakness and falling prices likely to spill over into global markets, a near-term positive for western central banks fighting inflation – Pimco.
• [08:22 ET] US Senate Majority Leader Schumer: I met with House Speaker Mccarthy a few weeks back and we agreed to do a resolution to fund the government for a few months - MSNBC Interview.

OUR FIRM

MCF Capital Management, LLC is an independent, family-run, financial advisory firm that manages investment portfolios for individuals and businesses through Quantitative Market Data Analysis.

Contact Us | Our Team | Disclosures & Disclaimers

THIS ARTICLE IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT INVESTMENT ADVICE.?

???SOURCES:?Refinitiv, Dow Jones NewsPlus, MarketWatch, Wall Street Journal, Barron’s, FinancialJuice, Investing.com, CNBC, TradingView

PICTURE: Federal Reserve via Flickr, photo of?FOMC meeting September 20-21, 2022.?