Market Wrap: Stocks Advance for Third Day, Despite Fed Minutes

Markets Rise Sharply
Spencer Platt/Getty Images

NEW YORK -- The stock market rose for a third straight day Wednesday despite a report from the Federal Reserve that showed a growing chorus of central bank officials willing to raise interest rates sooner rather than later.

In the bond market, prices fell and yields rose as investors prepared themselves for higher interest rates.

The Dow Jones industrial average (^DJI) rose 59.54 points, or 0.4 percent, to 16,979.13. The Standard & Poor's 500 index (^GPSC) rose 4.91 points, or 0.3 percent, to 1,986.51, less than two points away from its late-July record close of 1,987.98. The Nasdaq composite (^IXIC) was mostly unchanged on the day, falling 1.03 points, less than 0.1 percent, to 4,526.48.

The majority of Fed policymakers believe the U.S. economy is improving enough that the bank should start considering how it's going to start raising interest rates, according to minutes from the bank's latest meeting.

The debate on when the Fed should raise interest rates, which have been near zero since 2008, has intensified in recent months as the central bank winds down its other economic stimulus.

The Fed has been winding down its bond-buying program since December, and is expected to end it completely before the end of the year. Despite worries that the Fed's exit might be a net negative for the market, stocks have remained resilient. The S&P 500 is up 7.5 percent this year.

Jonathan Corpina, a floor trader at the New York Stock Exchange with Meridian Equity Partners, said investors are prepared to see the Fed raise interest rates.

"We've been talking about raising interest rates for so long, I don't think the Fed is going to surprise anybody when they finally do it," Corpina said.

The Fed's key short-term interest rate influences the prices of a huge array of investments, including Treasuries, other kinds of bonds and stocks. If the Fed were to raise interest rates, investors would demand higher yields on bonds.

The Fed minutes prompted some investors to sell bonds. The yield on the U.S. 10-year Treasury note rose to 2.43 percent from 2.40 percent the day before. Bond yields rise when prices fall.

Trading has been quiet this week as the summer winds down and with many traders on vacation. Tuesday was the third-slowest trading day of the year and Wednesday was 12th-slowest day.

On Friday, Fed Chair Janet Yellen will give a speech at the bank's annual conference in Jackson Hole, Wyoming. The speech is often a venue where the leader of the Fed lays out major policy decisions.

"Janet Yellen's speech in Jackson Hole will most likely guide the markets [now that] earnings season is winding down," Doug Cote, chief market strategist with Voya Investment Management, said.

Benchmark U.S. crude for September delivery rose $1.59 to $96.07 a barrel New York. Oil rose after a report showed U.S. supplies dropped sharply last week as refineries kept busy.

In metals trading, gold fell $1.50 to $1,295.20 an ounce, silver rose 9 cents to $19.50 an ounce and copper rose nine cents to $3.18 a pound.

In individual stocks:

• J.M. Smucker (SJM) fell $1.03, or 1 percent, to $102.42. The food products company, which also owns coffee brands such as Folgers, cut its full-year sales outlook. The company also said higher coffee prices were impacting the company's profit margins.

• PetSmart (PETM) rose 82 cents, or 1 percent, to $70.52 after the company said it was exploring a sale. The pet supply retailer had been under pressure from activist investors to consider a deal or a major restructuring.

• Hertz (HTZ) fell after the rental car company withdrew its full-year profit forecast, citing numerous "operational challenges" related to auto recalls and accounting irregularities. The company said the Ford (F) and GM (GM) recalls hurt its ability to have cars available for customers. Hertz also said its purchase of Dollar Thrifty was not saving as much money as originally hoped. The stock fell $1.23, or 4 percent, to $30.33.

What to Watch Thursday:
  • The Labor Department releases weekly jobless claims at 8:30 a.m. Eastern time.
  • At 10 a.m., Freddie Mac releases weekly mortgage rates; the National Association of Realtors releases existing home sales for July; the Federal Reserve Bank of Philadelphia releases its survey of manufacturing conditions in the Mid-Atlantic region; and the Conference Board releases leading indicators for July.
These major companies are scheduled to release quarterly financial statement:
  • (WUBA)
  • Brocade Communications Systems (BRCD)
  • Dollar Tree (DLTR)
  • Intuit (INTU)
  • GameStop (GME)
  • Gap (GPS)
  • Hormel Foods (HRL)
  • Marvell Technology Group (MRVL)
  • Nordson (NDSN)
  • Patterson Cos. (PDCO)
  • Ross Stores (ROST)
  • (CRM)
  • Sears Holdings (SHLD)

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Yes. We are doing better than dismal Europe, but for how long? I feel like
singing several choruses of "Happy Days Are Here Again." This market is
an illusion and a very dangerous bubble.

August 21 2014 at 4:49 AM Report abuse rate up rate down Reply

The Federal Reserve has been doing this since 1917... They have been spreading rumors about raising interest rates since 2012 when the recession first ended (a year and a half after it was supposed to).....

The Federal Reserve always does the same thing... spread rumors about raising interest rates after a recession till the market doesn't react negatively, then they start jacking up rates by .25% or .50% every quarter till they get over 3%.. Then they wait for the next recession for deleveraging.

It's all predictable... They will raise interest rates in the holiday season while everyone is not paying much attention. The markets will go limp volume wise in November when those rich boy bankers all pull up from the Hamptons and head for the Caribbean to spend the winter.

August 21 2014 at 2:43 AM Report abuse -2 rate up rate down Reply
1 reply to socioeconomist1's comment

Back in 2012 the Fed was saying there is no end in sight to low rates.

Have you not been listening, or are you just unable to comprehend

August 21 2014 at 8:47 AM Report abuse rate up rate down Reply

Yes, it is all so predictable.... The fed spreads a rumor to see if the market will react in a negative way and when it doesn't, then it is time to start jacking up interest rates .25% or .50% every quarter for the next few years till it gets up over 3% and our next recession is primed.

August 21 2014 at 2:35 AM Report abuse -1 rate up rate down Reply

Somebody needs to explain to Yellen that monetary policy mismanagement doesn't offset fiscal policy mismanagement. And then explain to someonedumb what that means.

Of course, it's questionable as to whether Yellen is capable of comprehending. And 100 percent certain someonedumb is incapable of comprehending.

August 20 2014 at 8:07 PM Report abuse rate up rate down Reply
2 replies to truu.liberal's comment

Good luck with that.

August 20 2014 at 9:00 PM Report abuse +1 rate up rate down Reply
1 reply to gee.effwye's comment

I didn't mean to imply the suggested explanations would result in comprehension. As the old saying goes, "for some no explanation is necessary, while for others none is possible.". But it's always damn fine theater to watch the dunce's empty coconut spin as if he's attempting to obtain liftoff.

August 20 2014 at 9:56 PM Report abuse rate up rate down

Yellen is nothing.... the FOMC and the Fed board have more say than she does. She is just the face of the real power players.

August 21 2014 at 2:34 AM Report abuse -1 rate up rate down Reply