Shares in the U.S. edged higher on Wednesday, albeit slightly, after minutes from the July meeting of the Federal Reserve policy officials came out. But the move in the stocks startled analysts because the minutes offered few clues about when the Fed might review interest rates.
“This is not normal,” quipped Mohit Bajaj of WallachBeth Capital. He wondered whether a fall in stocks was coming and when exactly the decline would start.
Some analysts such as Jonathan Bell of Stanhope Capital now say that the reason investors are bidding up stocks is that bonds have increasingly become less attractive. He noted that the combination of easing by central banks and historically low interest rates have suppressed returns on debt.
As such, investors are finding stocks are a bit more attractive compared to bonds despite mixed corporate earnings in the second-quarter. But Mr. Bell believes that stocks and bonds will likely fall when rates begin to rise.
How the major indexes performed
The Dow Jones Industrial Average 2 Minute (INDEXDJX:.DJI) rose 0.1% to 18573.94, while the S&P 500 (INDEXSP:.INX) edged up 0.2% to 2182.22. The NASDAQ Composite (INDEXNASDAQ:.IXIC) rose about 0.1% to 5228.66. The three indexes early this week closed at records on the same day after they did the same late last week for the first time since 1999.
In the S&P 500, Utility was the best-performing sector, rising 1.5%. But the broader index was rattled by declining consumer-discretionary stocks. Target Corporation (NYSE:TGT) pulled back 6.4% after reporting that sales from existing stores dipped in the second-quarter and offered downbeat guidance for the current year.
Lowe’s Companies, Inc. (NYSE:LOW) fell 5.6% after dimming its earnings outlook for the current year.
Uncertain rate review path
The Fed minutes largely confirmed the statement that the agency issued at the conclusion of its July meeting. The Fed said that near-term risks to the U.S. economy had subsided but hinted that it will keep a close eye on the quality of the economic data being reported in the period before its next policy meeting in September.
But recent downbeat economic reports have pushed back expectations of a near-term rate hike by the Fed.