Stocks fell on Wednesday as the rally on Wall Street that has driven prices higher since mid-June appeared to peter out as traders weighed the latest retail data and Fed minutes.
The Dow Jones Industrial Average fell 171 points, or 0.5%, while the S&P 500 and Nasdaq Composite fell 0.69% and 1.15%, respectively.
Stocks were volatile as traders assessed the final minutes, showing that the Federal Reserve will continue its aggressive bull run until it can get inflation under control.
“Participants continued to anticipate that continued increases in the target range of the federal funds rate would be appropriate to achieve the Committee’s objectives,” the minutes read. “With inflation remaining well above the Committee’s target, participants felt that the shift to a restrictive policy stance was necessary to meet the Committee’s legislative mandate to promote maximum employment and price stability. “
At the same time, the central bank also signaled that it may slow the speed of its tightening soon, while acknowledging the dire state of the economy and the risk of slowing GDP growth.
“Participants felt that as the monetary policy stance tightens further, it would likely become appropriate at some point to slow the pace of policy rate increases while assessing the effects of cumulative policy adjustments on the ‘economic activity and inflation,’ the minutes read.
Meanwhile, traders continued to comb through corporate profits in the retail sector that started Tuesday with Walmart and Home Depot. Target shares fell after the retailer posted earnings that beat expectations as it grapples with excess inventory, while Lowe’s traded higher despite a mixed quarter.
Retail sales data released Wednesday remained unchanged in July amid falling auto sales and gasoline prices, although consumers increased their online spending.
“No surprise to see the market take a breather after the summer rally it has been following,” said Chris Larkin, managing director of trading at E-Trade Financial. “…The market is waiting for any signs that a slowdown in rate hikes, which apparently fueled the recent rise, is ahead. Investors should remain nimble and continue to expect volatility as we don’t we may not be out of the woods yet.”
Bond yields also rose on Wednesday, with the 10-year Treasury note lately rising more than 6 basis points to 2.88%, as recession fears and uncertainty over the rate hike path of the Fed persisted. The move sent growth stocks like technology plummeting.
Wednesday’s moves came after the Dow posted its fifth straight day of gains.