US close: Stocks edge up as Fed minutes confirm division

US stocks recouped mid-session losses to finish slightly higher on Wednesday as the Federal Reserve’s meeting minutes showed a continued reluctance to jump to any conclusions about the state of the economy.

Having earlier slipped around 75 points, the Dow Jones Industrial Average closed almost 22 points or 0.12% higher at 18,573.94, while the S&P 500 ended the session up just over four points at 2,182.22 and the Nasdaq composite concluded just a point and half higher at 5,228.66.

Minutes from the Fed’s minutes of its 26-27 July policy meeting delivered past the midway point of the session showed policymakers divided on pace of rate hikes needed, indicating a September move is unlikely.

The minutes stated that, regarding the near-term outlook, members of the Federal Open Markets Committee "generally agreed that the prompt recovery in financial markets following the Brexit vote and the pickup in job gains in June had alleviated two key uncertainties about the outlook that they had faced at the time of the June meeting”.

But while the rate setters were willing to acknowledge these positives, the committee was not ready to declare an “all clear” for the next rate hike.

In particular, Barclays economists noted, some committee members remain concerned about the path of inflation.

"These participants see little evidence that inflation is responding to tighter labor markets and suggested that NAIRU [non-accelerating inflation rate of unemployment] may be even lower than currently estimated," Barclays wrote.
Moreover, several rate-setters suggested the committee would have "ample time to react" if inflation rose more quickly than currently anticipated.

This group preferred to defer another increase in the federal funds rate "until they were more confident that inflation was moving closer to 2% on a sustained basis".

Earlier in the day New York Fed head William Dudley said markets were being complacent about how much tightening would be needed over the coming year.

Oil prices warmed up after a flat start, boosted by a better than expected weekly update on the level of crude inventories in the States from the EIA, overriding reports Saudi Arabia could boost oil output to a new record in August.
West Texas Intermediate crude edged up 0.7% to $46.92 per barrel and Brent gained 1.2% to $49.81.

On the corporate front, Lowe’s shares slumped after reporting quarterly earnings and revenues that fell short of analysts’ estimates and lowering its full year guidance.

Staples was also in the red after the office supplies retailer forecast its 15th consecutive quarter of falling sales. It also reported a worse-than-expected drop in second quarter sales.

Target declined as it posted a drop in second quarter earnings and cut its sales estimate for the rest of the year due to a “difficult retail environment”.

Cisco Systems was weaker following a report the company is planning to axe 20% of its workforce.

Biotech company StemCells tumbled following strong gains in the previous session on news it was planning to merge with Israel’s Microbot Medical.