The S&P 500 closed just below a new all-time closing high as the minutes from the latest FOMC meeting gave a few more clues as to what it’s looking for before it hikes interest rates for the first time since 2006.
First, the scoreboard:
- Dow: 16,980.09, +60.5, (+0.4%)
- S&P 500: 1,986.68, +5, (+0.3%)
- Nasdaq: 4,526.15, -1.1, (-0.02%)
And now, the top stories on Wednesday:
1. The minutes from the July 29-30 FOMC meeting were released at 2:00 pm ET on Wednesday, and offered a few more insights into the Fed’s thinking on when it might begin to raise interest rates. The Fed said that some members of the FOMC see the labour market improving faster than expected, moving closer to what some Committee members view as “normal” over the long run. The minutes also show that some Committee members believe that if labour markets and inflation continue moving closer to the Fed’s goals, “it might become appropriate to begin removing monetary policy accommodation sooner” than currently anticipated.
2. Following the minutes a number of Wall Street economists weighed in. Maury Harris at UBS said the minutes provided insight on what policy will look like once the Fed begins raising rates, noting that almost all FOMC members agree it would make sense to keep rates within a range. Interest rates are currently 0%-0.25%. Paul Dales at Capital Economics said the minutes are consistent with his view that “lift-off,” or the first increase in rates, will take place in March. Chris Rupkey at Bank of Tokyo Mitsubishi was more emphatic in his read of the minutes, writing: “[The Fed is] going to move, and it’s going to faster than you think. Bet on it.”
3. Also in central bank news, the Bank of England reported two members voted against keeping interest rates steady in its latest policy decision, more than the one dissent that was expected. This is the first additional split from the BoE since 2011.
4. Hertz shares were down more than 4% after the company withdrew its financial guidance for 2014 as the company faces continued uncertainty regarding some of its past financial statements. A late afternoon filing with the SEC showed that activist investor Carl Icahn has taken a more than 8% stake in the company, with Icahn saying he intends to have discussions with Hertz management.
5. Industrial giant Caterpillar reported 3-month rolling retail sales that continued to fall, with total machine sales falling 12%, 10%, and 9% for May, June, and July, respectively. This marks yet another decline in sales for the industrial bellwether, which is often seen as a proxy for growth in China. In its Asia/Pacific segment, Caterpillar reported sales fell 29% in July compared to the prior year.
6. The U.S. government is planning charges against former Countrywide CEO Angelo Mozilo, one of the most infamous characters from the financial crisis, reported Bloomberg. The report said charges against Mozilo are likely “months away.” Mozilo’s Countrywide was taken over by Bank of America, which has paid out billions to settle litigation tied to mortgages underwritten by the company ahead of the financial crisis.
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