Stocks closed higher after the Federal Reserve’s meeting minutes signaled a commitment to raise interest rates

US stocks rose on Wednesday after many retail traders offered investors some optimism about this year’s sales, and the release of the minutes of the Federal Reserve’s latest policy meeting indicated few changes in the central bank’s anti-inflation plan.

After opening briefly lower, stock indices turned green in early trading. The benchmarks rose after 2 p.m. ET, when the minutes of the Federal Reserve’s meeting earlier this month were released.

The Standard & Poor’s 500 Index rose 37.25 points, or 0.9%, to 3,978.73 points. The Nasdaq Composite Index rose 170.29 points, or 1.5%, to 11,434.74, a reversal from a sharp sell-off in technology shares the previous day. The Dow Jones Industrial Average rose for the fourth day in a row, adding 191.66 points, or 0.6%, to 32,120.28.

Consumer discretionary stocks led the S&P 500 gain, rising 3.4%. Several retail companies, including Nordstrom and Express, raised their forecasts for 2022, while others such as Dick’s Sporting Goods indicated that business was not getting worse. The brighter outlook for investors provided a welcome change from last week, when Target and Walmart reported disappointing results.

“Some investors were expecting retail Armageddon,” said Matt Byron, director of research at Janus Henderson Investors. The narrative was that this could be another bruising week. And now the market is seeing a comfortable recovery around the consumer segment.”

Stocks had a bumpy start to the week, as they were wracked by concerns about the Federal Reserve’s tightening of monetary policy to combat high inflation and how much slowdown it could cause. The S&P 500 is down 17% from its last record high in January and briefly fell into bear market territory last Friday before paring losses.

“It’s been really volatile, to say the least. That’s related to the question of a recession, whether that’s coming or not. That’s what the market is really pushing and pulling,” said Fahad Kamal, chief investment officer at Kleinwort Hambros.

Minutes of the Federal Reserve’s May 3-4 meeting, released on Wednesday, showed that officials discussed the possibility of raising interest rates to levels high enough to deliberately slow economic growth as the central bank races to combat high inflation. US durable goods orders for April rose 0.4%, a slower pace than economists had expected.

Philip Toews, CEO of Toews Asset Management, said the Fed meeting minutes offered few, if any, surprises to officials’ thinking. Wednesday’s rally, which gained steam during the afternoon, may reflect more than anything else the feeling that many stocks have already fallen far enough – at least for the time being. “I think we might be in a slight bear market here,” he said.

Stocks enter a bear market when an index like the S&P 500 drops at least 20% from its recent high. On Friday, this indicator came close to ending in a bear market before a late session rally.

Stocks tumbled in 2022 as investors adjust to higher consumer prices and the Fed’s response. With prices rising and the economic outlook waning, shares of many companies have looked expensive, at least relative to their earnings, said Sean O’Hara, chief distributor of Pacer ETFs.

“When one goes up,” O’Hara said, “the other has to go down.”

The yield on the benchmark 10-year Treasury fell to 2.746% from 2.758% on Tuesday. It has fallen during five of the past six trading sessions. Yields decrease when prices rise.

The market is widening for the slowdown that will eventually come from Fed tightening. Inflation is also expected to slow in 2023 to more reasonable levels,” said Antonio Cavarero, head of investments at Generali Insurance Asset Management.

Government debt tends to perform well during periods of slower economic growth, which has stabilized the bond market in recent days.

When the markets are trending lower, some investors try to make a profit using a strategy known as buy on the dip. WSJ’s Gunjan Banerji tells us why this approach is risky in today’s volatile market, even though it may be tempting. Illustration: Rashad Malakzai

Oil prices rose with global benchmark Brent crude rising 47 cents, or 0.4%, to $114.03 a barrel. Reuters reported that the US Energy Secretary said the Biden administration has not ruled out a ban on oil exports to tame domestic fuel prices.

In individual stocks, Snap shares rose $1.37, or 11%, to $14.16. Snapchat’s stock plunged 43% on Tuesday after it issued an earnings warning, citing macroeconomic conditions that deteriorated faster and more than expected.

“Obviously there has been a reassessment of technical assessments. It is impossible to know how far they will go, but some of this is a higher quality business and much cheaper than what has been circulating recently.” Kamal said. “If you’re a long-term investor, that’s going to be an important thing.”

Retailer Nordstrom jumped $2.90, or 14%, to $23.58 after raising its guidance for full-year revenue growth. Clothing company Express jumped 16 cents, or 6.7%, to $2.54 after posting a smaller-than-expected loss and raising sales guidance. Dick’s rose $6.90, or 9.7%, to $78.14.

Homebuilder Toll Brothers Inc. rose $3.55, or about 8%, to $48.09 after it posted revenue and earnings that beat analysts’ expectations.

The technology-focused Nasdaq Composite Index closed down 2.3% on Tuesday.


Pictures:

Justin Lin/Shutterstock

Offshore, the Stoxx Europe 600 continental index was up 0.6%.

In Asia, the main criteria were mixed. The Shanghai Composite Index is up 1.2% while the Hang Seng Index in Hong Kong is up 0.3%. Japan’s Nikkei 225 is down 0.3%.

—Ryan December contributed to this article.

Write to Anna Hirtenstein at anna.hirtenstein@wsj.com and Justin Baer at justin.baer@wsj.com

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