S&P 500, Nasdaq aim for record close as investors gauge likely timeline for Fed slowing stimulus

What did major indexes do?

• The Dow Jones Industrial Average DJIA, +0.30% rose 104.42 points, or 0.3%, to end at 34,681.79.
• The S&P 500 SPX, +0.34% advanced 14.59 points, or 0.3%, finishing at 4,358.13, its 37th record close of 2021, after also touching an intraday record high at 4,361.88.
• The Nasdaq Composite Index COMP, +0.01% rose 1.42 points, or less than 0.1%, closing at 14,665.06, its 22nd record close of the year, after establishing a fresh intraday record early in the session at 14,755.33.

On Tuesday, the Dow fell 208.98 points, or 0.6%, to close at 34,577.37. The S&P 500 ended the day down 0.2%, snapping a string of seven consecutive record closes — the longest such run since an eight-day streak ended in 1997. The Nasdaq Composite edged up 0.2% for its 21st record finish of 2021.

What drove the market?

Investors were focused on how soon extremely supportive monetary policies might begin to be scaled back by the Federal Reserve after the release of its mid-June rate-setting meeting minutes.

Several Fed officials said conditions may be ripe to taper the central bank’s large-scale asset purchases sooner than expected, starting first with fewer monthly mortgage bond purchases.

See: Fed dived into taper debate at June meeting, but nothing seems imminent, minutes show

At the Fed’s earlier June 15-16th meeting, policy makers moved up their forecasts for a policy interest rate increase and began talking about when it would be appropriate to discuss the unwinding of its asset purchases of $120 billion a month, which could be a drag on Treasury rates.

Importantly, the June minutes showed the Fed’s “substantial further progress” target for the economic recovery generally had yet to be met.

“We certainly heard the message that the Fed hasn’t seen its goals realized around employment,” Kristina Hooper, Invesco’s chief global market strategist, told MarketWatch. “I think that is important.”

But Hooper also said the minutes show “logistics around tapering” being discussed at the Fed. “So that really does, I think, tee up the fall for a tapering story.”

Investors have heard from virtually every Fed official since the meeting, leaving the market with a good sense of where the central bank stands, some analysts have said. The Fed has signaled it wants to see a series of good monthly employment reports before scaling back its large-scale purchases of Treasurys and mortgage-backed securities or raising interest rates, which currently stand at a range between 0% and 0.25%.

Read: June jobs report bolsters case for Fed to start slowing down bond-buys this year

A Labor Department report Wednesday showed job openings in the U.S. rose to a record 9.21 million in May, reflecting a rising demand for labor as the economy fully reopens and businesses scramble to keep up with soaring sales for their goods and service.

“Hiring is still a problem though as they fell by 85,000 in May and after a sharp jump in the two prior months of 609,000, the number of quitters fell by 388,000,” wrote Peter Boockvar, chief investment officer at Bleakley Advisory Group, in a daily note.

Bottom line, we’ll of course see how these numbers mesh in coming months as kids go back to school, enhanced unemployment benefits expire and the vaccine gets further rolled out, but of course at a sharply slowing pace, he said.

The report on job availability has set a record for three straight months and may be starting to shake the confidence of investors anticipating a robust economic bounceback from the COVID-19 pandemic.

The Dallas Federal Reserve said the U.S. economy may be as little as one month away from full employment in a new research report, arguing that the labor-market should be measured by a “neutral” standard, not pre-pandemic levels.

Even so, concerns about the recovery have been reflected, at least partly, in a recent slump in longer-dated bond yields.

The decline in Treasury yields, with the 10-year Treasury note TMUBMUSD10Y, 1.318% falling to 1.321% on Wednesday, its lowest since Feb. 18, continuing a decline that had emboldened buyers in yield-sensitive segments of the stock market, like companies in the technology-heavy Nasdaq Composite and growth stocks. However, markets may be growing concerned that buying government bonds implies that some investors harbor doubts about long-term growth in the U.S., and the stock market’s ability to deliver further record rallies.

Bank shares were mixed, with Goldman Sachs GS, -0.59% stock ending 0.6% lower and those of JPMorgan Chase JPM, +0.12% advancing 0.1%, as investors consider the possibility of lower bond yields hurting the financial sector’s profitability.

Separately, crude-oil futures CL.1, -1.91% pivoted to a sharp decline from a modest gain in the wake of a disagreement within the Organization of the Petroleum Exporting Countries and their allies — a group known as OPEC+ — on raising output. WTI crude touched a six-year high briefly on Tuesday before retreating. 

See: What the OPEC standoff means for oil prices and financial markets

Investors also have grown wary about COVID variants, including as the world watches the Delta variant spread.

Chinese technology companies listed on U.S. markets also have emerged as a concern, as Beijing tightens its control over the country’s largest tech companies. Didi Global Inc. DIDI, -4.64% fell 4.6% Wednesday, after tumbling 19.6% on Tuesday in the wake of last week’s New York IPO.

Which companies were in focus?

• AMC Entertainment AMC, -9.79% and GameStop Corp. GME, -4.46% shares ended lower Wednesday, extending losses into a 4th day in a row.
• Authentic Brands Group, which owns teen retailer Forever 21, has filed to go public. It plans to trade on the New York Stock Exchange under the ticker “AUTH.”
• Planet Labs Inc. is set to go public through a merger agreement with special-purpose acquisition company, or SPAC, dMY Technology Group Inc. IV  DMYQ.UT, +2.23%  in a deal that values Planet at about $2.8 billion. 
• Shares of Coinbase Global Inc. COIN rose 7% Wednesday, after Oppenheimer analyst Owen Lau said he was a little more bullish on the cryptocurrency trading platform, citing expectations of strong second-quarter results.
• Chobani announced Wednesday that it has filed a confidential draft registration statement for a proposed initial public offering with the Securities and Exchange Commission. 
• Shares of Moderna Inc. MRNA fell 4.9% Wednesday after the company said it began dosing patients in a Phase 1/2 clinical trial evaluating an experimental seasonal flu vaccine. 
• Shares of Biohaven Pharmaceutical Holding Co. Ltd. BHVN shot up 13.6% Wednesday after the company said its new migraine treatment brought in $93 million in sales in the second quarter of 2021.

How did other assets trade?

• The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six major rivals, was up 0.2%.
• The U.S. oil benchmark CL00 fell 1.6% to end at $72.20 a barrel on the New York Mercantile Exchange. Gold futures GC00 rose 0.4% to settle at $1,802.10 an ounce.
• European equities closed higher, with London’s FTSE 100 UKX up 0.7% and the Stoxx Europe 600 index SXXP up 0.8%, landing its second-highest finish ever.
• In Asia, the Shanghai Composite SHCOMP rose 0.7%, while Hong Kong’s Hang Seng Index HSI fell 0.4% and Japan’s Nikkei 225 NIK lost 1% on the session.

William Watts contributed reporting