The Dow Jones Industrial average traded just shy of break even numbers, today, with Chevron and Walt Disney, surprisingly, contributing the most losses. The 30-stock matrix sat mostly at these levels following the Federal Reserve’s release of minutes from its June meeting.
In this record, Fed officials made it known a plan to continue raising interest rates, even as inflation levels remain muted. Furthermore, the Fed has also indicated that they consider this to be temporary and that inflation levels will, in fact, start to rise again in the long term. They expect a long run target of 2 percent. In addition, the minutes also showed that Fed officials think the central bank’s enormous $4.5 trillion balance sheet could be, possibly, reduced without greatly disturbing the financial markets.
According to LPL Financial senior market analyst, Ryan Detrick, “The big disappointment was the Fed gave no clue as to when the balance sheet unwind might start. There’s still a chance it starts in September, but the odds likely shifted to later in the year now.”
As such, US Treasury yields trading was mixed on Wednesday. The benchmark 10-year yield hit just above 2.3 percent with the two-year note yield resting around 1.41 percent.
Of course, Wednesday will mark the first full trading day on Wall Street with the New York Stock Exchange closing early on Monday and not reopening Tuesday because of the Independence Day holiday.
On the heels of lukewarm economic data, then, according to Manulife Asset Management senior managing director of asset allocation Marcelle Daher, “The biggest question for investors today is going to be an indication as far as timing is concerned for when the Fed is going to begin their balance sheet reduction plans. In general,” she continues, “they have indicated September, with the last rate hike for 2017 to fall in the December time frame, so anything that confirms or denies that assumption is going to be interesting for the market.”
Unfortunately, technology stocks have been somewhat—and surprisingly—volatile over the past few weeks. Typically stable, and a wise bet for investors, this instability might cause some to pull out. Still, Daher adds, “In a world of muted growth, tech stocks can still be attractive for delivering attractive rates of earnings growth. However, because of the positioning around tech, there is to be expected a period of consolidation.”