Stocks broke modestly higher on Wednesday after the Federal Reserve's September meeting minutes showed a "reasonable argument" for both an interest rate hike and no change at all.
The S&P 500 was up 0.3%, the Dow Jones Industrial Average gained 0.24%, and the Nasdaq climbed 0.07%. Stocks had started the day in the red and wavered throughout much of the session.
"It was noted that a reasonable argument could be made either for an increase at this meeting or for waiting for some additional information on the labor market and inflation," according to the meeting minutes. "A couple of members emphasized that a cautious approach to removing accommodation was warranted given the proximity of policy rates to the effective lower bound, as the Committee had more scope to increase policy rates, if necessary, than to reduce them."
The majority of Federal Open Market Committee members voted to keep rates unchanged near crises levels at the September meeting, though there were three dissenters to that decision. One of those was Kansas City Fed President Esther George who noted that "that with the unemployment rate and inflation at or near their longer-run levels, removing some accommodation was warranted."
George, Cleveland Fed President Loretta Mester and Boston Fed President Eric Rosengren each called for a 25-basis-point rate hike in September. A few members referred to previous times in which the unemployment rate fell below a normal level and that monetary tightening in those instances had been followed by recession.
"We remain where we were: market still betting Chair Yellen wants a hike in December," said Quincy Krosby, market strategist at Prudential Financial. "Mark your calendar for December 13-14 to see if Yellen sticks to the message she's been telegraphing since Jackson Hole."
A rate hike in December currently has a 60% chance, according to CME Group fed funds futures. Chances of a year-end hike increased after the Federal Open Market Committee punted on the September rates hike and said the case for an increase has strengthened.
U.S. inflation remains on track and is "well-anchored" compared to problematic price pressures seen in Europe and Japan, New York Fed President Bill Dudley said on Wednesday. Dudley pointed out that "slack" in the labor market was reason for caution from the Fed.
"The best thing that could happen for the U.S. economy (is) to grow at a moderate rate for the next five to 10 years and the unemployment rate to stay around 5% or lower," Dudley told the Business Council of New York State on Wednesday. "I think we're at a point where the economic expansion has plenty of room to run."
Dudley added to the swirl of Fedspeak in recent weeks that has led to uneasiness over how and when the central bank will make a move on interest rates.
Crude oil prices fell Wednesday as major oil producers increased production. The Organization of Petroleum Exporting Countries reported an increase in output in September to its highest level since 2008 even as members were flirting with a production freeze. OPEC increased output to 33.39 million barrels per day in September, up 220,000 barrels. OPEC members agreed to a production freeze at a meeting late last month.
West Texas Intermediate crude oil was down 1.2% to $50.18 a barrel on Wednesday.
Job openings fell to 5.443 million in August, down from 5.831 million, according to the latest Job Openings and Labor Turnover Survey. Openings hit an all-time high in July so a small retreat was to be expected. The labor market remains a bright spot of the U.S. economy.
Global markets were slightly lower, following a selloff in U.S. equities on Tuesday. European markets, including the FTSE 100 in London and Germany's DAX, edged lower as British Prime Minister Theresa May eased her rhetoric over the impending exit of the United Kingdom from the European Union. May offered lawmakers a voice in the Brexit process. The pound sterling rose more than 1% against the U.S. dollar after crumbling to a 31-year low last week.
U.S. stocks sold off on Tuesday after Alcoa (AA) - Get Report made a disappointing start to the third-quarter earnings season. S&P 500 companies are expected to report a 0.8% decline in aggregate third-quarter operating earnings, according to S&P Global Market Intelligence. Another drop would mark the fifth quarter in a row of earnings declines, a recession not seen since 2009. Excluding energy, earnings growth would likely be 2.5%.
Stanley Black & Decker (SWK) - Get Report rose 3% on Wednesday after agreeing to acquire Newell Brands' (NWL) - Get Report tools business. The all-cash deal, worth $1.95 billion, is expected to close in the first half of 2017 and should add an adjusted 15 cents a share to Stanley Black & Decker's earnings in the first year. Newell Brands' shares jumped 1.7%.
Fortinet (FTNT) - Get Report slid 12% after weak sales and macro-economic issues in Latin America and the U.K. pressured its third quarter. The cybersecurity company slashed its third-quarter adjusted earnings guidance to 15 cents to 16 cents a share, down from a forecast of at least 17 cents a share. Consensus was for 18 cents.
Humana (HUM) - Get Report fell 7% after raising its earnings forecast, but warning of a potential hit to future sales after a negative rating in a measure of Medicare quality. The Center for Medicare and Medicaid Services reported four-star and higher ratings membership for Humana's plans in July had reduced to 37% from 78% a year earlier.
Barracuda Networks (CUDA) rose 9% after topping second-quarter earnings and sales estimates. The company earned an adjusted 21 cents a share, more than double a year earlier, and above estimates of 13 cents a share. Sales increased 12% to $87.9 million, above consensus of $85.3 million.
Advanced Micro Devices (AMD) - Get Report was upgraded to neutral from underperform at Credit Suisse. The firm said the company has near-term momentum and guidance appears conservative for the second half of the year.