Gains on Wall Street went from negligible to modest on Wednesday after Federal Reserve minutes showed a central bank comfortable with moving rates higher again.
The S&P 500 rose 0.2% to close at a record 2404.39, the Dow Jones Industrial Average added 0.35%, and the Nasdaq grew 0.4%. The S&P 500 has risen for five sessions in a row, a winning streak not seen since mid-February.
In minutes from their May meeting, "most" members of the Fed's monetary policy committee showed a willingness to hike interest rates again "soon" despite leaving them unchanged at a range of 0.75% to 1% at that gathering. The pace of subsequent rate hikes appears a point of debate, though, with several members backing a faster pace, while a few supported slower increases.
"Most participants judged that if economic information came in about in line with their expectations, it would soon be appropriate for the committee to take another step in removing some policy accommodation," the minutes noted.
Most members also supported a plan to gradually reduce the Fed's $4.5 trillion balance sheet, a process that should begin this year. Members agreed to continue discussions on the committee's reinvestment policy at its June meeting. Tighter monetary policy is seen as the Fed's vote of confidence in the health of the economy.
"Absent of a material slowdown in the economy, Federal Reserve officials, acknowledging support from strengthening global growth, appear poised to stay on track towards interest-rate normalization," said Quincy Krosby, Chief Market Strategist at Prudential Financial. "The unwind in the Federal Reserve's balance sheet holds Chair [Janet] Yellen's signature gradual approach; she will not allow a quick unwind, nor anything that surprises markets."
Markets already have high expectations for an interest rate increase at the next meeting of the Federal Open Market Committee, the second of three expected hikes this year. Wall Street has priced in an 83% chance of a 25-basis-point increase to the federal funds rate when the FOMC meets June 13-14, according to CME Group fed funds futures.
Existing home sales, which are likely to figure into that calculation, declined in April as tight supply continued to choke demand. Sales of previously owned homes fell 2.3% in April from March's 10-year highs, coming in at a seasonally adjusted annual rate of 5.57 million. Inventory dropped 9%.
Crude oil prices fluctuated on Wednesday after a weekly inventory reading from the Energy Information Administration showed a larger-than-expected decline. Domestic crude inventories fell by 4.4 million barrels, nearly double consensus and a sharp acceleration from a decline of 1.8 million barrels a week earlier. Gasoline and distillates stockpiles also declined. Stockpiles have fallen for seven weeks in a row.
A joint committee comprising the Organization of Petroleum Exporting Countries and non-OPEC producers recommended a nine-month extension to an output-cut agreement. An extension to the deal will be the main point of conversation when the 13 OPEC member countries meet in Vienna on May 25. The current agreement, established last November, is set to expire at the end of June.
"An agreement to extend production cuts by nine months should help to reduce global oil stocks," Fawad Razaqzada, market analyst at Forex.com, wrote in a note. "Any short-term weakness in oil prices -- say, as a result of profit-taking -- may very well be short-lived."
West Texas Intermediate crude oil dropped 0.3% to $51.33 a barrel on Wednesday.
In fixed-income markets, Moody's lowered the credit rating for China, the world's second-largest economy, amid concerns about rising debt levels and slowing growth. Moody's clipped China's rating by one notch, taking it to A1 from a previous grade of Aa3, marking the country's first downgrade in nearly 30 years.
The credit agency said the new rating outlook is stable and that the country remains resilient to negative shocks, with growth likely to remain relatively strong in the near-term. However, Moody's said, the downgrade "reflects the expectation that China's financial strength will erode somewhat over the coming years, with economy-wide debt continuing to rise as potential growth slows."
Over on our premium site for investors, Real Money, Brian Sozzi questions why the markets barely reacted to China's downgrade. Get his insights with a free trial subscription to Real Money.
Intuit (INTU - Get Report) increased 6.7% after exceeding analysts' estimates on the top- and bottom-line over its third quarter. Earnings of $3.90 a share came in 3 cents above estimates. Revenue increased 10.4% to $2.54 billion and exceeded consensus by $40 million. Adjusted fourth-quarter earnings are expected to come in at 16 cents to 18 cents a share.
Container Store (TCS - Get Report) rocketed 33% higher after earnings came in nearly double expectations. Net income of 17 cents a share beat estimates of 9 cents, while revenue of $221 million came in $8 million above consensus. The retailer also announced restructuring plans and layoffs, which are expected to save $12 million to $15 million this fiscal year.
Tiffany & Co. (TIF - Get Report) tumbled 8.7% after reporting a surprise decline in same-store sales over its recent quarter. The jewelry retailer reported a 3% decline in worldwide same-store sales, a surprise to analysts looking for a 1.6% increase. Earnings of 74 cents a share exceeded consensus by 4 cents, while revenue of $899.6 million fell short of an analyst target of $914.7 million.
Lowe's (LOW - Get Report) declined 3% after falling short of earnings and revenue estimates in its most-recent quarter. Adjusted earnings of $1.03 a share grew from 87 cents a year earlier, though came in below analysts' expectations for $1.06 a share. Revenue of $16.86 billion narrowly missed estimates of $16.95 billion. Same-store sales increased 1.9% over the quarter.
Buffalo Wild Wings (BWLD) added 8% after Institutional Shareholders Service recommended two activist nominees put forth by activist investor Marcato Capital Management to serve on the wing chain's board. ISS has backed Marcato founder Mick McGuire and former Pizza Hut CEO Scott Bergren. Marcato had also put forth former chief development officer at TGI Fridays, Lee Sanders, though ISS did not back his nomination.
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