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US stocks drop as traders take in Fed minutes and reassess rate outlook

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Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., January 17, 2019.Brendan McDermid/Reuters

  • US stocks fell Wednesday as investors digested the Fed’s last meeting minutes.

  • Central bankers emphasized their 2% inflation goal, striking a slightly more hawkish tone.

  • Still, investors are anticipating a handful of rate cuts in 2024.

US stocks fell on Wednesday as traders took in the Federal Reserve’s December meeting minutes and reassessed their views on coming interest rate cuts in 2024.

The major indexes ticked lower, though stocks pared their deepest losses of the session. Investors digested the minutes from the Fed’s December FOMC meeting, where central bankers struck a mildly hawkish tone on the US economic outlook. Officials emphasized their commitment to returning inflation back to 2%, suggesting rates could remain higher-for-longer than markets are expecting.

“In light of the policy restraint in place, along with more favorable data on inflation, participants generally viewed risks to inflation and employment as moving toward greater balance,” central bankers said, adding that the Fed remained “highly attentive to inflation risks.”

Investors, though, still expect the Fed to enact rate cuts this year. Markets are pricing in a 33% chance rates will fall past 3.75% by the end of the year, up from just a 15% chance priced in a month ago, according to the CME FedWatch tool.

The 10-year Treasury yield fell by about four basis points in the afternoon, to 3.903%.

“Minutes from the December FOMC meeting are slightly hawkish but not enough to spook markets,” LPL Financial Chief Economist Jeffrey Roach said in a statement Wednesday.

Here’s where US indexes stood at the 4:00pm closing bell on Wednesday: 

Here’s what else happened today: 

In commodities, bonds, and crypto: 

  • Oil prices spiked. West Texas Intermediate crude oil jumped 3.8% to $73.08 a barrel. Brent crude, the international benchmark, edged up 3.5% to $78.57 a barrel.

  • Gold ticked lower 1.1% to $2,049.80 per ounce.

  • The 10-year Treasury yield fell four basis points to 3.903%.

  • Bitcoin tumbled 5% to $42,752.

Read the original article on Business Insider

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