US close: Stocks weaker as Fed lays out wind-down plans

Wall Street stocks closed in negative territory on Wednesday, as traders sifted through the minutes from the latest Federal Reserve two-day policy meeting, released late in the session.

At the close, the Dow Jones Industrial Average was down 0.42% at 34,496.51, as the S&P 500 lost 0.97% to 4,481.15 and the Nasdaq Composite slid 2.22% to 13,888.82.

The Dow closed 144.67 points lower on Wednesday, extending losses recorded on Tuesday as market participants continued to digest a recession warning from the bond market and news on the Ukraine-Russia war.

Minutes from the Federal Open Market Committee’s (FOMC) March meeting were released on Wednesday afternoon, with the central bank laying out its much-anticipated plans to roll back its balance sheet.

While officials reiterated no decisions had been finalised, they said they were ready to start winding down the Fed’s $8.5trn balance sheet from as soon as May, taking three months to reach sell-downs of $95bn per month.

That would consist of $60bn in Treasury notes, and $30bn in mortgage bonds, the minutes said.

“No decision regarding the committee’s plan to reduce the Federal Reserve’s balance sheet was made at this meeting, but participants agreed they had made substantial progress on the plan and that the committee was well placed to begin the process of reducing the size of the balance sheet as early as after the conclusion of its upcoming meeting in May,” the FOMC minutes read.

The central bank’s balance sheet doubled through the Covid-19 pandemic, with the Fed needing to shrink it in a bid to put a lid on demand and reign in red-hot inflation.

Elsewhere in the minutes, the Federal Reserve left the prospect of a 50-basis point hike in interest rates on the table, if inflation continued to run as high as it has been.

“The minutes from the March policy meeting reflect policymakers’ great discomfort with the rapid pace of inflation, which continues to outpace expectations,” noted Oxford Economics.

“Many FOMC members are in favour of one or more 50 basis point rate increases in coming meetings, especially if inflation remains elevated.

"We look for a 50 basis point hike at each of the May and June policy meetings.”

Oxford said policymakers saw that, with the economy strong and the labour market running hot, it was appropriate to "move the stance of monetary policy towards a neutral posture” rapidly.

“The Fed estimates the neutral fed funds rate is 2.4% - we see it lower at 2%.

“And there is a good chance the policy rate needs to rise higher to a restrictive level.”

Oxford Economics said it saw policymakers raising the fed funds rate another 175 basis points this year, as the year-on-year pace for PCE prices remained “well above” 4% in the fourth quarter, and wage growth “buoyant”.

Market participants also had one eye fixed on the latest headlines coming out of Eastern Europe, with Russia's invasion of neighbouring Ukraine raging on.

Both the European Union and the US were hitting Moscow with another round of sanctions, after evidence of war crimes allegedly committed by Russian forces was leaked.

Energy prices, which had surged since the war in Ukraine broke out, were in the red at the end of the day.

West Texas Intermediate futures were below the $100 level on NYMEX, falling 4.92% to $96.94 per barrel, and the Brent crude quote on ICE was 4.59% lower at $101.74.

On the macro front, US mortgage applications fell 6.3% in the week ended 1 April, according to the Mortgage Bankers Association of America, pushing the index to its lowest since March of 2019, as interest rates continued to march higher.

April's decline followed a 6.8% slump in the previous month and marks the fourth straight week of falls.

The refinancing index sank 9.9% and applications to purchase a home went down 3.4% as the average contract interest rate for 30-year fixed-rate mortgages increased to 4.9% from 4.8%, the highest since December 2018.

In the corporate space, jeans giant Levi Strauss closed down 1.52%, but was in the green in after-hours trading as it released its latest numbers after the closing bell.

Twitter slipped 0.4%, although its weekly gains so far were still sitting just under 30%, after it emerged Tesla chief Elon Musk had taken a 9.2% stake in the social network, as well as a board seat.

Low-cost airlines were in focus after JetBlue Airways announced its interest in Spirit Airlines, describing its bid as the “most compelling” for the no-frills airline.

Spirit announced plans to merge with similarly ultra-low cost domestic carrier Frontier Group earlier this year.

JetBlue shares descended 8.72%, while Spirit was off 2.38% and Frontier tumbled 10.99%.

Dow Jones - Risers

Unitedhealth Group Inc. (UNH) $531.75 2.70%
Johnson & Johnson (JNJ) $182.23 2.60%
Walmart Inc. (WMT) $154.99 2.32%
Amgen Inc. (AMGN) $249.93 2.20%
Walgreens Boots Alliance, Inc. (WBA) $44.31 1.89%
Merck & Co. Inc. (MRK) $84.97 1.49%
Procter & Gamble Co. (PG) $156.83 1.43%
McDonald's Corp. (MCD) $251.46 1.19%
Coca-Cola Co. (KO) $63.10 1.01%
3M Co. (MMM) $150.30 0.94%

Dow Jones - Fallers

Salesforce.Com Inc. (CRM) $200.82 -4.44%
Microsoft Corp. (MSFT) $299.50 -3.66%
Visa Inc. (V) $219.01 -3.13%
Nike Inc. (NKE) $128.36 -2.98%
Dow Chemical Co. (DOW) $61.63 -2.87%
Goldman Sachs Group Inc. (GS) $315.93 -2.38%
Walt Disney Co. (DIS) $132.57 -2.25%
Boeing Co. (BA) $178.72 -2.15%
Home Depot Inc. (HD) $298.54 -2.07%
Apple Inc. (AAPL) $171.83 -1.85%

S&P 500 - Risers

Eli Lilly and Company (LLY) $305.84 4.56%
NRG Energy Inc. (NRG) $39.21 4.23%
Dollar General Corp (DG) $238.10 4.20%
Philip Morris International Inc. (PM) $99.02 3.51%
CMS Energy Corp. (CMS) $73.56 3.45%
Extra Space Storage (EXR) $212.37 3.36%
AbbVie Inc (ABBV) $168.93 3.35%
Public Storage (PSA) $408.58 3.25%
Pfizer Inc. (PFE) $52.87 3.18%
Alliant Energy Corp. (LNT) $65.16 2.97%

S&P 500 - Fallers

Norwegian Cruise Line Holdings Ltd (NCLH) $20.68 -6.80%
Arista Networks Inc. (ANET) $132.01 -6.42%
Carnival Corp. (CCL) $18.93 -6.38%
Nvidia Corp. (NVDA) $244.07 -5.88%
Macerich Co (MAC) $14.05 -5.64%
Travel + Leisure Co (TNL) $51.57 -5.55%
United Rentals Inc. (URI) $325.47 -4.89%
Expedia Group Inc. (EXPE) $181.46 -4.71%
MGM Resorts International (MGM) $39.74 -4.61%
Mattel Inc. (MAT) $21.81 -4.51%

Nasdaq 100 - Risers

Regeneron Pharmaceuticals Inc. (REGN) $708.36 2.44%
Vodafone Group Plc ADS (VOD) $16.91 2.24%
Amgen Inc. (AMGN) $249.93 2.20%
Walgreens Boots Alliance, Inc. (WBA) $44.31 1.89%
Henry Schein Inc. (HSIC) $88.71 1.80%
Gilead Sciences Inc. (GILD) $60.82 1.79%
Costco Wholesale Corp. (COST) $584.79 1.65%
O'Reilly Automotive Inc. (ORLY) $701.14 1.54%
Paychex Inc. (PAYX) $141.30 1.47%
Incyte Corp. (INCY) $81.87 1.45%

Nasdaq 100 - Fallers

Nvidia Corp. (NVDA) $244.07 -5.88%
Expedia Group Inc. (EXPE) $181.46 -4.71%
Marriott International - Class A (MAR) $166.17 -4.50%
Mercadolibre Inc. (MELI) $1,163.97 -4.45%
Paypal Holdings Inc (PYPL) $112.49 -4.39%
QUALCOMM Inc. (QCOM) $139.28 -4.25%
Tesla Inc (TSLA) $1,045.76 -4.17%
eBay Inc. (EBAY) $54.12 -4.04%
Workday, Inc. (WDAY) $230.14 -4.00%
Meta Platforms Inc. (FB) $223.30 -3.68%