Stocks sold off Wednesday after the release of the minutes of the Federal Reserve’s July meeting.
The Dow Jones Industrial Average dropped 383 points, or 1.1%, while the S&P 500 fell 1.1%. The Nasdaq Composite declined 0.9%. All three finished near their lows of the day.
Fed governors have been dropping hints in recent weeks that the beginning of the end of the central bank’s bond buying was nearing, and the minutes confirmed that tapering is at hand. “Most participants noted that …it could be appropriate to start reducing the pace of asset purchases this year,” the minutes read.
The assessment comes as the economy has recovered quickly, and reflects that the Fed is now focused on when—and how quickly—to remove support from the economy.
The selloff was broad. About 83% of S&P 500 stocks fell on the day, according to FactSet. This dynamics often reflects concern about how the market will perform without the Fed there to support it.
Now, it’s just a question of when tapering will begin. It’ “is going to be September or December,” said Dave Wagner, portfolio manager and analyst at Aptus Capital Advisors. “Everyone is focusing on Jackson Hole in my opinion,” he continued, referring to the conclave of central bankers that occurs later this month in Jackson Hole, Wyo.
Strangely, the bond market didn’t react all that much, with the 10-year Treasury yield closing at 1.27%, where it hovered for most of the day. The 2-year yield, which often moves higher when market participants see the Fed hiking short-term interest rates sooner, ended at 0.21%, lower than the 0.22% it hit in the morning.
“I don’t think we’ve learned anything new,” said Tom Graff, head of fixed income at Brown Advisory. Graff added that the consensus for a short-term interest rate hikes in 2022 or 2023 hasn’t changed.
A weak market, however, couldn’t keep some stocks down. For some, it was about earnings. Lowe’s (ticker: LOW) stock rose 9.6% after reporting a profit of $4.25 a share, beating estimates of $4.01 a share, on sales of $27.6 billion, above expectations for $26.9 billion. TJX ( TJX ) stock rose 6% after reporting a profit of 64 cents a share, beating estimates of 59 cents a share, on sales of $12.1 billion, above expectations for $11 billion.
Others were buoyed by analyst upgrades, with ViacomCBS (VIAC) stock rose 3.7% after getting upgraded to Overweight from Equal Weight at Wells Fargo, and BlackBerry (BB) stock gained 4.2% after getting upgraded to Hold from Sell at Canaccord Genuity.
Tilray (TLRY) stock rose 1.5% after the company bought senior secured convertible notes in marijuana company MedMen Enterprises. The notes would convert into an equity stake if cannabis is legalized in the U.S.
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