Stocks Struggle to Find Direction – The Wall Street Journal

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U.S. stocks wobbled Wednesday as investors awaited notes from the Federal Reserve’s last policy meeting for clues on how officials view inflation and the pace of economic recovery.

All three major U.S. stock indexes swung between gains and losses as stocks struggled to find direction. In recent trading, the broad benchmark S&P 500 edged down less than 0.1%, while the Dow Jones Industrial Average lost about 65 points, or 0.2%. The technology-heavy Nasdaq Composite fell 0.1%.

Despite Wednesday’s market fluctuations, markets have kicked off the second quarter on a high note, as recent data has shown clear signs of an economic recovery. On Monday, enthusiasm over the March jobs report propelled the S&P 500 and the Dow to fresh records. Meanwhile, technology stocks have been showing signs of recovery after trailing the broader market for portions of this year.

That optimism has widened the stock market’s rally. Nearly 95% of companies in the S&P 500 are now trading above their 200-day moving average, according to Dow Jones Market Data, the highest figure since May 2013. On Wednesday alone, stocks ranging from Amazon.com to Carnival to Hess all gained 1.3% or more.

“We had been expecting the data to improve about this time, and early signals are that the recovery is absolutely on track,” said Hugh Gimber, global market strategist at J.P. Morgan Asset Management. “This is the period where the forecast of a strong recovery in growth is starting to look more like the fact of a strong recovery in growth.”

Still, some investors remain nervous that the easing of Covid-19 restrictions, coupled with pent-up consumer demand, could drive up inflation and prompt the Fed to raise interest rates sooner than expected.

“When you have all this money that has been pumped into the system and into people’s pockets, but that hasn’t been spent yet, then you know inflation is going to come at some point,” said Brian Walsh Jr., senior financial adviser at Walsh & Nicholson Financial Group.

Investors are awaiting minutes from the central bank’s March meeting, set to be released at 2 p.m. ET. Policy makers at that time raised their forecasts for growth and inflation and reiterated that loose monetary policies would remain in place for some time.

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Bond yields have stabilized in recent days, after climbing sharply from the start of the year. The yield on the benchmark 10-year U.S. Treasury note ticked down to 1.645%, from 1.656% on Tuesday. Earlier this year, the yield on the 10-year Treasury note surpassed 1.7%.

The recent slip in yields has provided some respite for technology stocks, which had come under pressure from the higher borrowing costs. But many investors continue to bet that it will be the economically sensitive sectors such as banks and energy that stand to benefit most from a reopening.

“The value play is still very much on the table as the economy expands,” said Mr. Walsh. “For the last 10 years, everything was about growth stocks, and now we are seeing a changing of the guard.”

In commodity markets, Brent crude, the international oil benchmark, fell 1.2% to $62.02 a barrel.

Overseas, the pan-continental Stoxx Europe 600 gauge ticked down 0.2%.

In Asia, most major stock indexes were mixed. Japan’s Nikkei 225 edged 0.1% higher, while Hong Kong’s Hang Seng fell 0.9%. In mainland China, the Shanghai Composite Index dropped 0.1%.

The front facade of the New York Stock Exchange, March 29, 2021.

Photo: brendan mcdermid/Reuters

Write to Will Horner at William.Horner@wsj.com and Caitlin McCabe at caitlin.mccabe@wsj.com

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