US Stocks little changed after Fed minutes; Transports down 1%

U.S. stocks traded sideways Wednesday following a record close on the Dow, remaining little changed as investors digested the Fed meeting minutes.

The major averages tried holding mild gains after fluctuating around the flatline. The Dow transports briefly fell more than 1.5 percent, hitting a 7-month low, as airline stocks declined. Southwest dipped more than 8.5 percent to lead laggards after the company said it expects a decline in passenger revenue per available seat mile for the quarter.

The Fed minutes showed policymakers mostly brushed aside the wobbly start the U.S. economy has had in 2015, attributing the lack of growth to “transitory” factors that will abate soon. Only a few policymakers supported a June rate hike.

Treasury yields and the U.S. dollar were little changed from morning levels after the release of the Fed minutes.

The Federal Reserve Open Market Committee was scheduled to release the minutes from its April meeting at 2 p.m. The statement from that month removed all calendar references to the timing of a short-term interest rate hike.

Chicago Fed President Charles Evans said in Munich on Wednesday that a rate hike is not likely to be appropriate until early 2016, Reuters reported.

Investors are also looking ahead to a Friday speech from Fed chief Janet Yellen for possible new clues on when the central bank may start raising interest rates.

Yellen is scheduled to speak Friday at the Greater Providence Chamber of Commerce Economic Outlook Luncheon at 1 p.m. She is not expected to take questions.

The Dow Jones industrial average closed at a record for the second day in a row on Tuesday, ending below and intraday high of 18,351.36 set earlier that session. The S&P ended mildly lower after closing at a record on Monday.

U.S. Treasury yields fell with the 10-year near 2.25 percent, remaining within the 2.2 and 2.3 percent range.

The dollar held gains against the euro, trading at $1.109

Oil prices pared gains after government data showed weekly oil inventories fell more than expected but not as much as a Tuesday industry report indicated.

“Stability in these large macros and housing improving may be the driver, but the real significance is the financials (taking over market leadership on Tuesday),” said Art Hogan, chief market strategist at Wunderlich Securities. He noted that investors are rotating into the banking sector partly on the idea that “over the long term interest rates are going to be higher, not lower.”

Financials was among the laggards on Wednesday but remains the second-best performing sector in the S&P 500 month-to-date.

The financial sector was the greatest advancer in the S&P on Tuesday, with the regional banking index KRE closing up 1.09 percent. The index fell 0.60 percent on Wednesday.

Authorities on Wednesday fined JPMorgan Chase, Citigroup, Barclay’s, RBS and UBS a total of more than $5.5 billion for rigging rates, the U.S. Department of Justice said on Wednesday. The U.S. Federal Reserve fined all five banks and also Bank of America.

Charles Schwab upgraded financials on May 7 in “anticipation of the fine phase winding down,” Frederick said.

The Dow Jones Industrial Average traded down 31 points, or 0.17 percent, at 18,281, with Coca-Cola leading gains and JPMorgan Chase the greatest laggard.

The S&P 500 traded down 2.5 points, or 0.12 percent, at 2,125, with telecommunications leading four sectors higher and industrials the greatest laggard.

The Nasdaq traded down 1 point, or 0.02 percent, at 5,069.

The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 13.

Decliners were a step ahead of advancers on the New York Stock Exchange, with an exchange volume of 337 million and a composite volume of nearly 1.7 billion as of 1:40 p.m.

Crude oil futures for July delivery gained 83 cents to $58.81 a barrel on the New York Mercantile Exchange. Gold futures gained $1.90 to $1,208.60 an ounce in afternoon trade.

Major earnings before market open included Lowe’s, Hormel Foods, Staples, Target. After the bell, L Brands, Salesforce.com and American Eagle Outfitters are due to report.

Lowe’s–The home improvement retailer missed estimates by four cents with quarterly profit of 70 cents per share. Revenue missed forecasts, and same-store sales rose less than expected. JPMorgan Chase analyst Chris Horvers told CNBC that rival Home Depot has an advantage over Lowe’s in both execution and store location.

Hormel Foods reported quarterly profit of 67 cents per share, five cents above estimates, although revenue was shy of forecasts. Hormel does say that its Jennie-O turkey business could be “significantly challenged” due to the impact of the bird flu outbreak in the U.S. However, Hormel did reaffirm its full-year earnings forecast

Staples matched estimates with adjusted quarterly profit of 17 cents per share, but revenue fell short and sales fell more than anticipated. Staples is in the process of merging with rival Office Depot, just two years after acquiring OfficeMax.

Target reported earnings of $1.10 a share, beating estimates of $1.03 a share, and raised the low end of its forecast range for the year. Same-store sales rose 2.3 percent, matching expectations from Consensus Metrix, Reuters said.

Yahoo gained more than 3 percent. The stock came under pressure late Tuesday on concern that possible U.S. tax law changes could affect the company’s planned spinoff of its Alibaba stake. However, Yahoo issued a statement saying it understands that the latest IRS statement on the matter is not specific to the planned move.

Time Warner Cable could be in play once again today, with French telecom company Altice announcing a deal to buy Suddenlink Communications of the U.S., and reportedly having held talks to buy TWC, according to Reuters.

European equities managed to close higher on Wednesday, but struggled to hold momentum from the previous day’s strong gains as concerns about Greece weighed.

The Greek government’s parliamentary speaker said on Wednesday that Athens will not make the June 5 payment unless it has reached a deal with its creditors, Reuters reported.

The European Central Bank raised its emergency funding cap for Greek banks by 200 million euros to 80.2 billion euros ($89.1 billion), Dow Jones reported.

Source: CNBC