U.S. Stocks Close Higher After Fed Minutes

Barry Adams
06 Jul, 2022
New York City

Late rally in U.S. stocks lifted major indexes higher after the release of Fed's latest minutes of meeting. 

The S&P 500 index increased 0.4% to 3,845.08 and the Nasdaq Composite Index rose 0.4% to 11,361.81. 

Futures of crude oil declined 1.0% to $98.56 a barrel and natural gas closed nearly unchanged at $5.54 a unit. 

Fears of accelerating inflation and elevated prices across a broad category of products and services drove policymakers to a large rate hike at its last meeting in June. 

The latest Fed's minutes of meeting held on June 14-15 and released today showed that policy members "agreed that inflation remained elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures."

The committee also held out for larger and faster rate increases if the economic conditions warrant and inflation remained elevated. 

Fed policy members also held out for a rate hike of 50 or 75 basis points at its next two-day meeting on July 26 and the committee members also favored a restrictive stance of policy. 

 The yield on 10-year Treasury notes increased to 2.93% after the release of the Fed minutes, reflecting a more aggressive central bank. 

Mortgage rates dropped for the second week in a row. 

Mortgage rates for 30-year fixed-rate mortgage loans declined to 5.74% from 5.84% in the previous week, according to data from the Mortgage Bankers Association. 

The origination and other fees rose to 0.65 percentage points from 0.64 for the loans with 20% down payment  in the previous week, the press release noted. 

The labor market conditions remained tight at the end of spring according to the latest employment situation report from the U.S. Department of Labor. 

The number of job openings decreased 6.9% to 11.3 million on the last business day of May, the U.S. Bureau of Labor Statistics reported today.

Total hires in May were nearly unchanged at 6.5 million and separations were also unchanged at 6.0 million in May. 

Hires totaled 78.4 million and separations totaled 72.0 million, yielding a net employment gain of 6.4 million, over 12 months to May.  

These totals include workers who may have been hired and separated more than once during the year.

Defensive stocks including utilities and healthcare sectors led the gainers. 

UnitedHealth Group and Cigna gained more than 2%, Constellation Energy increased 3%, Exelon increased 1.5%.  

Energy companies declined for the third day after oil fell and natural gas closed nearly unchanged. 

Amazon.com, Inc declined 0.7% to $112.84 after the company added one year free delivery from Grubhub.com for its prime members. 

Separately, the U.K. antitrust regulator is investigating the retailer if the company is offering an unfair advantage to its own sellers over third-party sellers. 

Microsoft increased 0.2% to $263.32 and the company's $68 billion acquisition of Activision Blizzard is facing an antitrust investigation from the U.K. regulator.  

 

European Markets Rebound

European markets rebounded after natural gas prices dropped after Norwegian workers called off strike for now. 

The DAX index increased 1.3% to 12,565.63, the CAC-40 index advanced 1.6% to 5,886.09, and the FTSE 100 index added 1.6% to 7,137.84. 

Oil and gas workers at Equinor called off strike after Norway intervened and proposed a mandatory arbitration. 

However, the union has not called off the proposed strike at other fields scheduled from July 9. 

The Gudrun, Oseberg South and Oseberg East fields have started run-up of production and are expected to reach full production of 89,000 equivalent barrels of oil in two days. 

Natural gas prices eased to 169.05 euros per megawatt after rising as much as 177 euros in the previous session. 

 

Eurozone Retail Sales Rebound Slows

Eurozone retail sales rose at a slower than anticipated pace in May, the eurostat data showed on Wednesday. 

On a monthly basis, retail sales increased 0.2% in May from the revised 1.4% in April. 

Food, drinks and tobacco sales contracted 0.3% in May compared to a 2.3% fall in April.

On a yearly basis, retail sales growth eased to 0.2% in May from 4.0% in April. 

 

Foreign Orders Drive German Orders' Rise 

Germany's factory orders increased 0.1% in May after falling 1.8% in April, the destatis data showed on Wednesday. 

On a yearly basis, new orders declined 3.1% in May, slower than 5.3% fall in April, 

On a monthly basis, domestic orders declined 1.3% but foreign orders rose 1.6% after non-euro area orders increased 3.7%. 

 

Construction Activities in UK and Germany Drop

Construction activities in Germany declined for the third month in a row in June, the latest survey from S&P Global showed on Wednesday.

Rising building costs and higher interest rates dragged the activities in the sector. 

The construction Purchasing Managers' Index increased from a nine-month low of 45.4 in May to 45.9 in June.

Any reading below 50 indicates contraction. 

UK construction activities dropped to a nine-month low in June on rising materials cost and higher interest rates, the survey from S&P Global reported on Wednesday. 

The S&P Global/Chartered Institute of Procurement & Supply construction Purchasing Managers' Index fell to 52.6 in June from 56.4 in May. 

Home building was the weakest among all construction activities for the fourth month in a row and contracted for the first time since May 2020. 

 

France Plans to Nationalize EDF 

EDF SA soared 14.5% to 8.98 euros after French government announced its intention to nationalize the struggling utility company. 

French government said it plans to nationalize the financially strapped Electricite de France SA as the utility company racks up billions of euros in losses. 

France already controls 84% of the utility company and losses mounted after President Emmanuel Macron put price cap on utility prices and natural gas prices soared after the Russia's invasion of Ukraine. 

President Macron had proposed to nationalize the utility company and accelerate the shift to renewable and nuclear energy and make France energy independent. 

More than two thirds of electricity in France is provided by atomic power plants controlled by EDF.