Dow, S&P 500, Nasdaq edge higher ahead of Thanksgiving amid reassuring Fed minutes

Ahead of a day off for the Thanksgiving holiday, stocks edged higher in Wednesday’s trading as the minutes from the latest Federal Reserve meeting suggested that the pace of interest rate increases could begin to slow.

The advance added to gains posted during the previous day, when the S&P 500 finished above the 4,000 mark for the first time since Sept. 12. With the markets closed on Thursday, Wednesday’s action came with light volume and limited participation.

The Nasdaq Composite (COMP.IND) closed +1.0%, the S&P 500 (SP500) finished +0.6% and the Dow (DJI) ended +0.3%.

Adding to a gain of more than 1% the previous day, the Nasdaq rose another 110.91 points to finish at 11,285.32. The S&P 500 climbed 23.68 points to close at 4,027.26, while the Dow Jones advanced 95.96 points to end at 34,194.06.

Ten of the 11 S&P sectors finished with gains. Communication Services, Consumer Discretionary and Utilities each rose more than 1%. Energy represented the lone decliner on the session, slipping by about 1.2% as crude prices (CL1:COM) dropped more than 4% to fall below $78 a barrel.

“The concern from the Fed seems to be centered around the magnitude and lag that interest rate increases might have on the underlying economy,” Daniel Jones, manager of Avaring Capital Advisors, told Seeking Alpha.

Jones argued that the recent tenor of incoming economic data presented “both good news and bad news.”

“It’s good news in the sense that the economy is robust, but bad news in the respect that some weakening on this front would help with the inflationary pressures and perhaps lead to lower interest rates in the long run overall,” he said. “On the whole, the market seemed to favor the prospect of slower interest rate increases in the near term over existing inflationary woes.”

The Fed released the minutes of its latest policy meeting, providing details about what central bank officials discussed as they decided to raise rates by 75 basis points for the fourth consecutive meeting.

“A substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate,” the minutes said. However, the notes of the meeting also indicated that “various” officials also predicted that the key rate would ultimately need to go higher than previously expected.

In the bond market, the 10-year Treasury yield (US10Y) slipped 5 bps to 3.71% and the 2-year yield (US2Y) retreated 2 basis points to 4.49%.

Looking at the latest economic data, durable goods orders rose more than expected in October, climbing by 1% for the month. This topped the 0.4% increase that economists were predicting. Core durable goods orders rose 0.5% compared to the 0.1% expectation.

“We expect substantial further gains over the next year as the backlog of demand, which has built up over the past couple years, finally can be met,” Pantheon Macroeconomics said of the durable goods figures.

On the labor front, weekly initial jobless claims climbed 17K to reach a three-month high to 240K. Economists had projected a figure of 225K.

“Initial and continuing claims are rising off of historically low levels. They can increase a lot before they’re at levels that suggest the labor market is really deteriorating,” Jefferies economist Thomas Simons stated. “We expect this will eventually happen, but it will be a gradual process that plays out over months.”

Elsewhere, new home sales advanced unexpectedly in October, rising by 7.5% compared to the previous month. The figure was still down 5.8% compared to the previous year.

Among active stocks, Tesla (TSLA) saw a significant snapback after hitting a 52-week low earlier this week. Shares rose about 8% on Wednesday amid improving sentiment on Wall Street.