US Stocks Slip, Treasury Yields Rise Ahead Of Fed Minutes: What's Driving Markets Wednesday?

Stocks eased on Wednesday as investors took a more cautious stance prior to the release of the Fed minutes for the June 14 meeting.

The minutes are expected to reveal that the committee broadly agrees that additional interest rate hikes are required to combat inflation.

While June’s economic projections and Fed Chair Jerome Powell‘s most recent comments hint at two additional rate hikes in 2023, market participants only anticipate a single rate hike in July.

The yield on 10-year US Treasury bonds approached 3.9%, the highest level since March 10, effectively returning to levels prior to the collapse of Silicon Valley Bank.

Elsewhere, services PMIs pointed to the slowest pace of growth in China thus far this year and a bigger than-predicted loss of momentum for the eurozone.

Wednesday Recap: The S&P 500 Index slipped 0.2%, while the Dow Jones lost 120 points or 0.4%. The weakest link was in the small caps of the Russell 2000 Index, down 1%, while the Nasdaq 100 Index managed to hold flat for the day.

US Index Performance On Wednesday

Analyst Color:

Fundstrat's Tom Lee, who had a Street-high price target for the S&P 500 Index at the start of the year, nudged up his forecast in his midyear review. The analyst expects the index to end the year at 4,825, up from his earlier estimate of 4,750 and also exceeding the previous all-time high of 4,821.

The aggressive view, according to the analyst, is predicated on headline inflation downshifting to 3% in the second half, the Fed pointing to real progress and investors beginning to allocate a $5.5-trillion cash pile toward equity. He noted that S&P 500 earnings per share growth, excluding that of energy, inflected positive in the second quarter of 2023.

Wednesday’s Trading In Major US Equity ETFs: In midday trading on Wednesday, the SPDR S&P 500 ETF Trust SPY was 0.2% lower to $409.60, the SPDR Dow Jones Industrial Average ETF DIA fell 0.4% to $342.50 and the Invesco QQQ Trust QQQ was flat at $370, according to Benzinga Pro data.

Sectors were mostly in the red, except for the the Utilities Select Sector SPDR Fund XLU, up 1.4%, the Real Estate Select Sector SPDR Fund XLRE, up 1%, and the Communication Services Select Sector SPDR Fund XLC, up 0.7%.

Major losses were recorded by the Materials Select Sector SPDR Fund XLB, down 2.5%, and the the Energy Select Sector SPDR Fund XLE, down 0.8%.

Latest Economic Data:

The Commerce Department released factory goods orders report for May showing a 0.3% month-over-month increase, in line with the revised lower 0.3% increase in April but lower than the expected 0.8% surge.

The Federal Reserve is scheduled to release the minutes of the June Federal Open Market Committee meeting at 2 p.m. EDT. At the June meeting, the monetary policy setting arm kept the fed funds rate unchanged after raising it in successive meetings beginning in March 2023.

New York Fed Governor John Williams, a member of the FOMC, will speak at 4 p.m. EDT.

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Stocks In Focus:

• Semiconductors fell on rising geopolitical tensions between U.S. and China. Advanced Micro Devices Inc. AMD, Broadcom Inc. AVGO, QUALCOMM Inc. QCOM and Marvell Technology MRVL lost 1%, 1.5%, 2.2% and 1.9%, respectively.
• Fidelity National Information Services, Inc. FIS rose 4% on potential as the company’s Worldpay unit has attracted interest from private equity firms.
• BorgWarner Inc. BWA fell 12% following the spin-off of Phinia Inc. PHIN, which debuted today and rose 10%.
• Pegasystems Inc. PEGA rose over 14% after Wedbush Securities upgraded the software company From Neutral to Outperform and boosted the share price target from $50 to $65.

Commodities, Bonds, Other Global Equity Markets:

Crude oil rose 1.3%, with a barrel of WTI-grade crude trading at $72. The United States Oil Fund ETF USO was 1.9% higher to $64.90.

Treasury yields rose, with the 10-year yield up by 7 basis points to 3.93% and the two-year yield up by 3 basis points to 4.94%. The iShares 20+ Year Treasury Bond ETF TLT was 1% lower for the day. 

The dollar rose, with the U.S. dollar index, which is tracked by the Invesco DB USD Index Bullish Fund ETF UUP, up 0.2%. The EUR/USD pair, which is tracked by the Invesco CurrecyShares Euro Currency Trust FXE, was 0.2% lower to 1.0861.

European equity indexes closed in the red. The SPDR DJ Euro STOXX 50 Etf  FEZ fell 1.9%. 

Gold fell 0.2% to $1,921/oz. The SPDR Gold Trust GLD was flat at $178. Silver rose 1.2% to $23.18, with the iShares Silver Trust SLV up 1.3% to $21.30. Bitcoin BTC/USD was 1% lower to $30,470.

Staff writer Piero Cingari updated this report midday Wednesday.