The S&P 500 slipped 0.1%, erasing a marginal lead in the last half hour of trading. The technology-focused Nasdaq Composite Index climbed 0.1%, building on highs reached a day earlier. Smaller company stocks also rose moderately, with the Russell 2000 Index gaining 0.3 percent.
After U.S. central bank officials advanced their projections for the first post-pandemic one-year rate hike through 2023 last week, Fed policymakers acted quickly to allay fears of a mistake. policy that could derail the economic recovery.
“We have to make sure that our policies do not pivot in such a way as to give the impression that we are proclaiming victory prematurely,” Raphael Bostic, chairman of the Atlanta Fed, told National Public Radio on Wednesday.
Jay Powell, chairman of the Fed, said on Tuesday that the central bank would not act “preemptively” on “the possible appearance of inflation”.
The market rhetoric about inflation, which is eroding real returns on stocks and bonds, “was changing day by day,” said Fahad Kamal, chief investment officer at Kleinwort Hambros, “because the data itself lends itself to confusion. confusion “.
The service sector and manufacturing activity in the United States saw rapid growth in June, as a first reading of the IHS Markit Purchasing Managers Index showed, although the gauge fell by compared to the record level of the previous month. The index, where a reading of 50 separates expansion from contraction, fell to 63.9 from 68.7 in May as businesses suffered from inflationary pressures.
“Manufacturers continued to note rapid increases in raw material and fuel costs, while service providers pointed to higher payrolls to attract workers,” IHS said.
The eurozone version of the index hit a peak of 59.2 points in 15 years, although IHS also saw “a record increase in prices for manufacturers’ materials”, accompanied by “the largest increase in costs in the world. service sector since July 2008 ”.
The overall rise in consumer prices in the United States reached 5% in the 12 months to May, but Powell told Congress on Tuesday that the Fed would wait for “real evidence of real inflation” before tightening its policy. monetary.
‘Lukewarm moves’ in stock markets showed investors ‘crippled’ after Fed officials expressed divergent views on interest rates, said Savvas Savouri, chief economist at UK hedge fund Toscafund . Wall Street’s S&P 500 Index has only risen about 1% over the past month, as debate rages on when the Fed will withdraw support in the era of the pandemic.
Rather, larger swings have been observed in growth and value stocks, two styles of investing that have oscillated in popularity over the past year. Since early June, the S&P 500 growth index has risen 4%. And the valuations of nonprofit tech groups surged, with an index managed by investment bank Goldman Sachs that includes companies like Lyft and DoorDash up 12%.
In contrast, the S&P 500 stock index fell 2%.
The yield on the benchmark 10-year US Treasury bond edged up 0.03 percentage point to 1.49% on Wednesday.
The dollar index, which measures the greenback against other major currencies, rose 0.1%. The euro lost 0.1% against the dollar at $ 1.1925. The British pound rose 0.1% to $ 1.3959.
The region-wide Stoxx Europe 600 closed 0.7% lower, but remained close to its high.
Brent crude, the international benchmark for oil, rose 0.5% to $ 75.19, its highest level since October 2018, after demand recovered as oil-producing countries limited their supplies.
Additional reporting by David Sheppard in London and Eric Platt in New York