S&P 500 is little changed as Fed reaffirms commitment to bringing down inflation

U.S. stocks were relatively flat on Wednesday as investors pored over the latest minutes from the Federal Reserve.

The Dow Jones Industrial Average dipped 64 points, or 0.2%. The S&P 500 and Nasdaq Composite each slipped about 0.1%

Stocks held their ground after the Federal Reserve released the minutes from its June meeting, showing that the central bank was committed to bringing down inflation. Fed members said the July meeting likely also would see another 50- or 75-basis point move, the minutes showed. A basis point is one one-hundredth of 1 percentage point.

“In discussing potential policy actions at upcoming meetings, participants continued to anticipate that ongoing increases in the target range for the federal funds rate would be appropriate to achieve the Committee’s objectives,” the minutes stated. “In particular, participants judged that an increase of 50 or 75 basis points would likely be appropriate at the next meeting.”

Energy stocks were some of the worst performers, as oil prices continued their recent slide. Shares of Chevron and Diamondback Energy each fell about 3%.

Investors appeared to be drifting back into defensive stocks on Wednesday. The top performers in the Dow were UnitedHealth Group and Cisco Systems, each rising about 1.2%.

Wednesday’s moves follow an intraday reversal in the previous session. The S&P 500 rallied back from a 2% loss in the final hours of trading on Tuesday and finished the day up 0.2%. The tech-heavy Nasdaq Composite outperformed, jumping 1.75%. The Dow lost 129 points, but was down more than 700 points at one point.

Investors continued to worry about whether the economy is falling into a recession after the benchmark 10-year U.S. Treasury yield fell below the 2-year yield. The so-called yield curve inversion historically has been a warning sign that the economy may be falling or has already fallen into recession.

Some Wall Street analysts say a recession could be mild. On Tuesday Credit Suisse said it sees the U.S. dodging a recession as it slashed its year-end S&P 500 target to reflect the effect of higher capital cost on stock valuations.

“We’re seeing a game of chicken right now, with growth and inflation barreling … toward each other to see which one is going to flinch first. Ultimately, they’re both going to turn over, but which one turns over first is going to be the most critical for the path forward,” said Chris Osmond, the chief investment officer at Centura Wealth Advisory.

NewEdge Wealth chief investment officer Cameron Dawson said that the market could be getting closer to its bottom.

“Do we have a kind of drawdown that looks to be in that 30% range, which is the average for recessions, or something that looks closer to down 50%, which is what we saw back in the early 2000s and 2008 where we had two debt crises?” she said. “We don’t see a debt crisis. We think that we could start to find some value around that 3,400-3,500 level because that’s what gets us back to the pre-Covid highs.”

There are no major earnings reports scheduled for Wednesday, but there were a slew of economic reports coming out.

Mortgage demand fell week over week even as rates declined, according to the Mortgage Bankers Association. The Institute for Supply Management services PMI data came in better than expected, but did show a slight slowdown in growth. Job openings also came in higher than expected, at more than 11 million.