Stocks Close Lower as Investors Review Fed Minutes

Barry Adams
17 Aug, 2022
New York City

Stocks lacked direction in early trading after advancing for five days in a row and investors focused on the latest batch of retail earnings. 

Federal Reserve policymakers are less likely to step away from hiking rates until inflation declined substantially, the latest minutes released for the meeting held in late July released today. 

The policymakers at the last Fed's meeting discussed the need to bring down inflation but some members also worried that the Fed may overshoot on its rate hike program hurting the economy. 

Policymakers noted that the recent decline in gasoline prices could not be relied on providing the basis for sustained inflation in the long run. as these prices could quickly rebound.  

"Participants agreed that there was little evidence to date that inflation pressures were subsiding. 

They judged that inflation would respond to monetary policy tightening and the associated moderation in economic activity with a delay and would likely stay uncomfortably high for some time. 

Participants also observed that in some product categories, the rate of price increase could well pick up further in the short run, with sizable additional increases in residential rental expenses being especially likely," the minutes noted. 

On another note, housing market turmoil is likely to continue for a while after mortgage applications dropped to a two-decade low. 

Total mortgage applications volume declined 2% in the last week from the previous week, according to the Mortgage Bankers Association. 

Mortgage applications declined 1% from the previous week and dropped 18% from a year ago as more buyers walk away from home contracts or drop out of the housing market. 

Mortgage applications are running at a 22-year low. 

The average contract interest for 30-year fixed-rate mortgages declined to 5.45% from 5.47% in the previous week but higher than 3.0% from a year ago. 

The loan origination fee fell to 0.57 points from 0.80 points a year ago for loans with 20% down payment. 

Retail sales adjusted for seasonal factors but not for price variations were flat in July compared to June but increased 10.3% from a year ago, the Census Bureau reported Wednesday. 

Futures of crude oil edged up 76 cents to $87.29 a barrel and natural gas decreased 14 cents to $9.18 a thermal unit.  

The S&P 500 index fell 0.7% to 4,274.09 and the Nasdaq Composite index declined 1.3% to 12,938.12. 

The yield on 10-year Treasury notes increased to 2.90% and 2-year yield notes advanced to 3.28%. 

Target Corporation declined 2.7% to $175,34 after the retailer reported a sharp decline in earnings after the company marked down items to clear excess inventories. 

Second quarter revenues increased 3.5% to $26.0 billion from $25.2 billion a year ago. 

Net income in the quarter plunged to $183 million from $1.82 billion a year ago. Diluted earnings per share dropped to 39 cents from $3.65 a year ago. 

Target reiterated its prior guidance for full-year revenue growth in the low- to mid-single digit range, and an operating margin rate in a range around 6% in the second-half of the year.

Lowe's Companies increased 0.6% to $215.75 after the home improvement retailer said second quarter revenues decreased to $27.5 billion from $27.6 billion a year ago. 

Second quarter net income was flat at $3 billion and diluted earning per share increased to $4.68 from $4.27 a year ago.