Stocks edge higher as investors await latest Fed minutes

Stocks edged higher Wednesday, a day after the S&P; 500 snapped a seven-day winning streak. Investors are watching the bond market, where yields have tumbled sharply in the last couple of days despite strong economic data.

The S&P; 500 index was up 0.2% as of 12:47 p.m. Eastern. The Dow Jones Industrial Average rose 29 points, or 0.1%, to 34,606 and the Nasdaq Composite rose 0.1%.

Technology and industrial Industrial stocks were the biggest gainers. Apple rose 1.3 and Otis rose 2.2%. Energy stocks lagged the broader market as oil prices slipped 1.8%.

Bond yields have moved steadily lower the past month, with a particularly steep drop the past two days. It’s an unusual occurrence for the bond market given there’s been no economic data to imply an economic slowdown or deflation. In fact, the data for several weeks has shown the opposite — an economic growing quickly out of the pandemic, and inflation tied to demand for raw materials and workers.

The benchmark 10-year Treasury note was trading at 1.31%, down from 1.37% the day before. A month ago, the 10-year note was trading at around 1.62%. The last time bond yields moved lower so quickly was in March 2020 when the pandemic effectively shut down the U.S. economy.

Lower bond yields can be good for many parts of the economy, however. Mortgage rates are tied closely to bond yields, and government borrowing costs fall when the cost of issuing bonds decreases.

Stocks that are heavily influenced by interest rates, particularly banks, slipped in early trading but mostly recovered.

Investors were concerned for much of the year about rising inflation and whether higher rates were going to be temporary and tied to the growing economy or longer lasting. The Federal Reserve has said it expects any bump to be short-term and investors seem to be less fearful about a post-pandemic economy with higher inflation.

“There’s a fundamental reset going on right now where investors are looking beyond 2021 and 2022,” said Katie Nixon, chief investment officer at Northern Trust Wealth Management. “Once we get beyond the recovery, the next normal is probably going to look like the last normal.”

Investors will get minutes from the Federal Reserve’s June meeting at 2 p.m. Eastern. Wall Street will be looking for additional clues about the Fed’s thinking on interest rates and inflation. After the last meeting, Fed policymakers said they planned to raise interest rates as soon as 2023, which was sooner than the market expected.

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