Stocks lost highs late Wednesday after the minutes from the Federal Reserve's most recent meeting revealed the central bank was committed to reducing its balance sheet in 2017.
The S&P 500 was down 0.21%, the Dow Jones Industrial Average fell 0.1%, or 24 points, and the Nasdaq slid 0.5%.
The Fed committed to reducing its balance sheet during its March meeting, including the possibility of ending its policy of reinvesting principal payments. Reducing the balance sheet could have the same impact on the markets as a rate hike. The Fed currently holds $4.5 trillion in bonds on its balance sheet.
"Most market participants anticipated that, once a change to reinvestment policy was announced, reinvestments would most likely be phased out rather than stopped all at once," according to the meeting meetings. "Most participants anticipated that gradual increases in the federal funds rate would continue and judged that a change to the Committee's reinvestment policy would likely be appropriate later this year."
Members also saw a gradual rate of interest rate hikes, though several said they wanted a faster pace. Members of the Federal Open Market Committee also said meaningful fiscal stimulus from the Trump administration would not be felt until 2018. Many Fed officials have yet to include fiscal policy in their predictions for economic growth, though some had said there was upside risk to their forecasts.
The central bank decided to raise the federal funds rate for the third time since 2008 in a near unanimous call during its meeting in March. The FOMC also forecast two more rate hikes this year.
A strong reading on private payrolls foreshadowed a solid U.S. jobs number for March. The private sector added 263,000 jobs in March, according to the ADP National Employment report. The reading blew past estimates of 190,500 jobs.
"While this is one of many signals for investors to process, it certainly contributes to the perception that the economy is sure-footed, especially when coupled with the solid first-quarter corporate earnings growth expected by many street analysts," Mike Loewengart, vice president of investment strategy at E*TRADE, wrote in a note. "Despite a prolonged bull market and continued geopolitical uncertainty, many can argue the bull still has further to run."
The official jobs report for March, one of the most closely watched monthly datum, will be released on Friday. Analysts anticipate no drop in recent strength in the labor market with a target of 174,000 jobs expected to have been added to U.S. payrolls last month. The unemployment rate is anticipated to have held at 4.7%, while monthly wages should rise 0.3%.
Crude oil prices pared gains Wednesday after a reading from the Energy Information Administration showed an unexpected rise in domestic inventories over the past week. The EIA said crude stocks increased by 1.6 million barrels compared to estimates of a drop of 440,000 barrels. A separate measure from the American Petroleum Institute showed a decrease of 1.8 million barrels in crude oil inventories over the past week.
West Texas Intermediate crude added 12 cents to $51.15 a barrel on Wednesday, coming off gains of more than 1% earlier in the day. Major oil companies remained higher, though including Exxon Mobil (XOM - Get Report) , Chevron (CVX - Get Report) , Total (TOT - Get Report) and Royal Dutch Shell (RDS.A - Get Report) , while the Energy Select Sector SPDR ETF (XLE - Get Report) increased 0.7%.
Non-manufacturing index activity in the U.S. slowed in March at a faster pace than expected. The ISM non-manufacturing index for March declined to 55.2 from 57.6 in February. Analysts anticipated a decrease to 57.
Donald Trump and China's President Xi Jinping are scheduled to meet on Thursday and Friday at Mar-a-Lago in Florida in what are expected to be a highly charged discussions. Trump had been highly critical of China, accusing the country of currency manipulation and stealing U.S. jobs. Trump had previously proposed a high tariff on U.S. imports of Chinese-made products. North Korea also will presumably be an important topic of conversation.
Panera Bread (PNRA shot 14% higher on Wednesday after securing a deal to be purchased by JAB for $7.5 billion. Privately held JAB will purchase the bakery chain for $315 a share in an all-cash deal that values Panera at a 30% premium to its 30-day average at the end of March, before deal talks influenced stock prices. The deal is expected to close in the third quarter.
Monsanto (MON added 1.5% after blowing past profit and sales estimates. Adjusted earnings of $3.19 a share came in higher than a target of $2.79. Sales rose 12% to $5.07 billion and exceeded consensus of $4.73 billion. The agricultural chemicals company is currently undergoing a $66 billion buyout from Bayer.
Walgreens (WBA - Get Report) declined by 2% after falling short of earnings and revenue estimates over its fiscal second quarter. The pharmacy chain earned adjusted profit of $1.36 a share, a penny below estimates. Sales fell 2.4% to $29.45 billion and missed targets of $30.26 billion.
Syngenta (SYT rose 0.7% on Wednesday after the European Union gave approval to ChemChina for its $43 billion acquisition of the agricultural chemicals company. The U.S. gave regulatory approval a day earlier. The EU said ChemChina must divest a "significant part" of its Adama pesticide business and some of Syngenta's pesticide units as a condition of the approval.
PPG Industries (PPG - Get Report) urged Akzo Nobel (AKZOY again to engage in discussions of a potential merger. Paints company PPG had previously made advances two times in March, though Akzo Nobel has declined to participate in talks. PPG said it believes the combined companies would present significant benefit to stakeholders.
Plug Power (PLUG - Get Report) rose 71% after Amazon (AMZN - Get Report) acquired the right to buy up to 23% of the hydrogen fuel cell maker and said it would use the technology to speed up work in its warehouses.