U.S. stocks began Wednesday on a relatively flat trajectory but gained momentum throughout the day. Investors carefully examined the recent minutes from the Federal Reserve's policy meeting and anticipated upcoming data on consumer and producer price inflation to gain further insight into potential interest rate changes.
All the major indexes concluded the day on a positive note, with both the Dow and S&P 500 achieving new record highs. The Dow advanced by 431.63 points, or 1.03%, closing at 42,512.00. The S&P 500 rose by 40.91 points, or 0.71%, to end at 5,792.04, while the Nasdaq increased by 108.70 points, or 0.6%, settling at 18,291.62.
Notable companies, including Apple Inc, Amazon, JPMorgan Chase, Oracle Corporation, Costco Wholesale Corporation, Merck, IBM, Caterpillar, Qualcomm, and Texas Instruments, saw gains ranging from 1% to 3%. Additionally, Morgan Stanley, Amgen, Uber Technologies, Goldman Sachs, Honeywell International, and Palo Alto Networks ended the day with significant increases.
On the downside, Alphabet experienced a decline of 1.6% following the U.S. Department of Justice's potential move to compel Google to divest parts of its business, including the Chrome browser and Android operating system, to limit its search monopoly. Tesla also saw a decrease of 1.4%, while Meta Platforms, Advanced Micro Devices, Salesforce, and Adobe Inc. closed weaker.
The minutes from the Federal Reserve's September meeting revealed that officials agreed to cut interest rates, but debated the extent of the reduction. Ultimately, they decided on a half percentage point decrease to strike a balance between inflation confidence and labor market concerns. The minutes indicated a decision to approve a 50-basis-point rate cut, the first such move in over four years, while highlighting a divided outlook among members.
Some officials advocated for a smaller, quarter-percentage-point cut, expressing confidence that inflation was sustainably declining and voicing fewer worries about the employment situation. The approval of the larger cut was attributed to progress on inflation and the assessment of risks affecting the labor market. A significant majority of participants supported the more substantial move, although the minutes did not specify the opposition's size. The term "participants" implies the involvement of the full Federal Open Market Committee (FOMC), not merely the 12 voting members.
The minutes also mentioned that some members had favored a rate cut during the July meeting, which did not materialize.
In economic developments, the Commerce Department reported a decrease in the U.S. trade deficit, which fell to $70.4 billion in August from a revised $78.9 billion in July. Economists had projected a reduction to $70.6 billion from the initially reported $78.8 billion for the previous month. This narrowing of the deficit resulted from a 2.0% rise in import values to $271.8 billion, while export values decreased by 0.9% to $342.2 billion.
On the international front, Asian stocks delivered mixed results on Wednesday. The rally driven by China's stimulus initiatives lost steam amid ongoing Middle Eastern conflicts, as investors awaited the U.S. inflation data and the Federal Reserve's meeting minutes for guidance on interest rates. Chinese stocks took a notable hit, with the Shanghai Composite Index falling 6.6% to 3,258.86, as investors took profits following recent rallies and lingering doubts about the effectiveness of stimulus measures intended to boost the economy.
Meanwhile, European stocks closed higher on Wednesday as traders positioned themselves ahead of the Federal Reserve's policy meeting minutes release. The market sentiment was upbeat, fueled by hopes of additional fiscal stimulus from the Chinese government after an emergency briefing by the economic planning agency led to skepticism regarding the adequacy of previously announced measures. The pan-European Stoxx 600 increased by 0.66%, while the U.K.’s FTSE 100 climbed by 0.65%, Germany's DAX rose by 0.99%, and France's CAC 40 ended up by 0.52%.
